Discussion:Real Estate Trust

As a preface, I am not an expert with respect to creating trusts, etc., and estate planning, so I thought I'd get some feedback on this question.

I have a client who owns a 4 unit rental building. Client has gifted 50% ownership of the building to his girlfriend. The original intent was that girlfriend would also assume 50% of the mortgage (which, when refinanced, would approximate 100% of the value of the building). Building is probably valued at $375k or so. Refinancing did not occur.

Client would like to put the building into a Real Estate Trust (assumed revocable) with 50%/50% of income and expenses going to both Client and girlfriend via a Trust K-1.

There are several questions I have here - first, what is the tax impact of gifting 50% of the building to girlfriend. Obviously, we can do a gift tax return and use up a portion of the unified credit...and pay 0 gift taxes. Second, the real estate trust - is it just as simple as starting to file a 1041 (with legal docs., new TIN, etc.) and have the basis in the real estate carry over?

Any thoughts, ideas are welcomed!

Thanks in advance.