Discussion:Grantor Charitable Lead Trust - 1041 Required?

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Revision as of 22:06, 31 March 2007

Discussion Forum Index --> Tax Questions --> Grantor Charitable Lead Trust - 1041 Required?

Mikelim (talk|edits) said:

31 March 2007
I have a client who set up a Charitable Lead Trust (Grantor) by contributing 10% of his existing LLC. Up to this point, I was convinced by the literature (and my review of the posts on tax almanac) that he did not have to file a 1041 for the trust - just file a grantor letter with the return, and report income and expense amounts.

Then I realized that, because of the way it was structured, the trust owns 10% of the LLC and is a member. Therefore, it receives 10% of biz income, and other items, etc.

To top it off, he may consider selling the LLC this year, which means the Trust would receive 10% of the gain on sale of the business.

I think the safe thing to do would be to file the 1041 so that the K-1 generated by the LLC has somewhere to go (especially next year, when he may have sold the biz). But I don't want to create the entity so that those amounts can be taxed at trust rates.

As I've know, trusts are complex, and most CPA's (including me) do not have much experience in them. Does anyone have any thoughts or authoritative guidance on this one?

I've checked the board, but it appears that the situations are slightly different than mine...

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