Discussion:Correct type of trust
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Discussion Forum Index --> Advanced Tax Questions --> Correct type of trust
Discussion Forum Index --> Tax Questions --> Correct type of trust
Yt1300inHtown (talk|edits) said: | 7 July 2008 |
| Hello. My Mom has been given receivership of two bank accounts that are for a HOA and water utility company. Neither entity has ever properly incorporated and the neighborhood "owners" are now in court over use of funds. The attorney advised her to file the two entites on form 1041 since they are really nothing more than bacnk accounts she controls. The activities for the year result in net income and a tax liability.
Does this sound correct? Additionally, what "type" of trust is this? Simple? TIA YT | |
Taxcurmudgeon (talk|edits) said: | 7 July 2008 |
| You're in legal land. The attorney should have the answers. Hopefully, they are tax-savvy. | |
Yt1300inHtown (talk|edits) said: | 7 July 2008 |
| He is not...but he did provide me with his source docs for the "filing a trust return" assertion so I am OK with that.
I guess we're really stuck on "what kind of trust do we have"? | |
| 7 July 2008 | |
| READ THE TRUST DOCUMENTS! Then if you have any questions, complete your profile for an answer. This is not for DIYers to handle. Get a GOOD atty and a GOOD CPA or EA. | |
| 7 July 2008 | |
| The source is Reg. 1.6012-3(b){5). Basically the requirement to file return depends on the extent to which the receiver controls the assets. In many cases a 1041 is filed, but this will not be a trust as you understand it. Seek an accountant familiar with bankruptcy filings. | |
Yt1300inHtown (talk|edits) said: | 7 July 2008 |
| I am a CPA and my Mother is an EA. There are no trust documents. A judge just said "you're the receiver" and here we are.
I don't know what my profile hasd to do with that but thanks for your "input". | |
| 7 July 2008 | |
| I am a little confused by the way you present the facts. However, if the Attorney feels it is a trust then so be it. If it is not a trust then a 1120-H or 1120 would be filed. Is there enough income to even have to file a return? Look at minimum filing requirements based on the type of return that will be filed. | |
| 7 July 2008 | |
| Yt, the reason we ask you to complete your profile is that it helps us focus our responses to know something about your background and experience. Besides, this is a community of tax professionals, and we just like to get to know each other! So some personal information is welcome too. | |
| 7 July 2008 | |
| Go back to the beginning. How did they get bank accts without EINs. You may ask the bank for the info on how the accts were opened umteen years ago. They may well be corporations. | |
| 7 July 2008 | |
| Why is your mother the receiver? I assure you courts do not simply appoint individuals as receivers without some sort of reasoning. Please further elaborate. | |
| 7 July 2008 | |
| Note to the clueless. I see nothing that even vaguely suggests that the attorney said this was a trust. Bankruptcy, for example, is an estate. If a 1041 is necessary it rates to merely cover the underlying returns for each entity. | |
| 8 July 2008 | |
| The EINs would provide a clue. And Dennis is right, what leads you to the Trust label? The profile helps those who choose to respond know what experience level the audience (original poster) is. This site is a wealth of knowledge. Sometimes we are just mean though. Its called price paying for the info:). | |
| 8 July 2008 | |
| I don't think I will ever understand the emotional (or perhaps it's financial) need for a tax preparer regardless of credentials to barge ahead without the foggiest idea what is going on. The EIN's will provide a clue? Give me a break. Research into the nature of the dispute and the wording of the court order is where you have to go. Reg. 1.641(b)-2(b)
(b) The estate of an infant, incompetent, or other person under a disability, or, in general, of an individual or corporation in receivership or a corporation in bankruptcy is not a taxable entity separate from the person for whom the fiduciary is acting, in that respect differing from the estate of a deceased person or of a trust. See section 6012(b) (2) and (3) for provisions relating to the obligation of the fiduciary with respect to returns of such persons. will lead you to ยง6012. At this point you can sit down and have an intelligent discussion with the attorney. All Riley and I can tell from available information is you do not have a trust. | |
| 8 July 2008 | |
| Again, for those without a personality disorder, and the ability to read, the EIN applications will advise what type of entity was formed. | |
| 8 July 2008 | |
| And not even a thought to examining the prior years returns the entities involved filed...? | |
| 8 July 2008 | |
| If an 11020H could be filed, that could eliminate the tax liability issue. I would start there. If it cannot be done, it cannot be done. It deserves a look. Dennis, there is no need to accuse posters on this site of having emotional and financial problems. I am going to assess my need to be involved in posts, as I prefer not to be, and do not have to be talked to this way. I am unsure how the others in this thread feel. If the moderators allow this (and they obviously do), then this is not a forum I choose to be part of. Good luck. | |
| 8 July 2008 | |
| Lordy fellas, dont't get into a fight before I get in here and really screw it up.
There fixin' to put the whole country in recievership, so we all need to bone up on this. These receiverships are a rare rascal to begin with. I'm sure the lady will regret being appointed before it's over. It is an Order in equity, she's managing a corpus [a body of property] under court order, and I'd make it fit on the 1041 (as I think Dennis alluded to). There's state law on receivership, which may be helpful once you blow the dust off it. She's acting in a fiduciary capacity (always sobering). If the investment(s) it holds are not prudent, make them prudent, but do it in a prudent way. So, stay within FDIC limits at one institution. Incredibly, banks are/will fail, I won't mention any names hehe. Write it in if there's not a box to check "XYZ Receivership". If there's nook or some treasure island of the IRC I'm overlooking, it's because I'm too lazy to look at the moment. My guess is that she would distribute all interest income to the unincorporated association, for redeposit in her account, lol. P.S. I had to remind myself: she's got two bank accounts (only) as receivership corpus, as I read it. | |
| 9 July 2008 | |
| Thanks Crow. But IRS position is clear and I make no apologies for my intolerance of incompetence, especially by members of the profile police. The existence of a receivership does not relieve the entities from the obligation to file their own returns. A Receiver will not be the one signing them. Examination of the EIN's will not help. (If the Receivership rises to the level of a taxable entity it will have its own.) I can't tell whether a 1041 is appropriate (My gut feeling is that it is unlikely). All I can do is point to the code sections that govern and items such as Revenue Ruling 82-177. If a 1041 is required I would expect the rules to be the same as a bankruptcy. | |
| 9 July 2008 | |
| You are too far up in the clouds Dennis. You say basically the same thing that others do yet chastise them for doing so. I'll hope for you that someday your feet will hit Mother Earth. Don't be frightened when they do, its a good thing. You need to make apologies for just being off the wall mean when it is not justified. I will not hold my breath. | |
| 9 July 2008 | |
| ps- this is very good information for free. Hope Yt is checking in for it. | |
| 9 July 2008 | |
| We are only given half the facts around here, so the hashing about comes in large part in our efforts to get the issue in focus.
This is a very interesting post, at least to me. Once I got it straight in my mind, I saw that the asso. would still have to file it's return. She's only got two accounts, which are likely interest bearing. The association itself likely got 1099's in the past for these accounts, and may continue to receive them, depending. Now, is she to change the titling of these accounts? Technically, one may say yes. If she does, then that might force a 1041 for this two account recievership estate. Regardless, the underlying entity (asso.) will have to continue file a return. BTW, Dennis, thanks for the Rev. Ruling. | |
| 9 July 2008 | |
| No problem, Crow. Pity Lance remains clueless, but as I started out by saying the requirement to file depends on the extent of control and the appointment of a receiver does not necessarily create an entity for tax purpose. In a bankruptcy there is an actual transfer of assets to the estate. In this case I think the best we can do is to provide the attorney with the proper information to make a determination. It's been a good 20 years since I did a bankruptcy estate and all my faulty memory recalls is that the carrybacks/forwards are unique and that there is a standard deduction equivalent to Married Filing Separate. | |
| 9 July 2008 | |
| Dennis- allow me to deflect your continued offensive and inappropriate remarks. I have no idea what you are talking about (clueless) and feel you probably have no idea. This destructive behavior on your part however does drive out the opportunity for participation in this thread. Also, things have probably changed in 20 years, you may want to brush up. Adios. | |
