A land trust is an agreement between the person who owns property (or properties) and the person they designate to have the property placed in their name. One reason for a land trust is to provide the property owner with privacy. This way the whole world won't be notified that you own property.
However, does a trust have to file a tax return? Start with our resources (What Is A Land Trust?), then keep reading for the answers you need.
If the land owner is deceased, this is one case where the beneficiary of the land will have to file a tax return on the estate as well as the trust. This is especially true for domestic estates that earned $600 or more for the year of the tax return and if the beneficiary of the estate is not a resident of the United States.
The beneficiary will have to file a tax return for a domestic trust in the case that they have made any income that is taxable for the year, made a gross income of $600 or more for the year even if it isn't taxable income, and, just as with the decedent's estate, if the beneficiary is not a legal resident of the United States.
Although the decedent's estate and the domestic trust do have to file a tax return if they meet the requirements stated, the only land trust that does not have to file a tax return is a revocable trust, or what they call a grantor's trust.
Since the decedent's estate and the domestic trust need to file a tax return if they have met the requirements stated, the following includes the steps to do so:
Now that this is done, you can wait for the IRS to respond. Make sure you used the Schedule K-1 which goes with form 1041. Also, be sure everyone involved with the land has received a copy of everything you filled out and sent to the IRS.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
Ready to know more than your attorney? Join our community platform where you'll get immediate FREE access to all our best educational resources for real estate investors. Including 8 Masterclasses, group mentoring replays, and much, much more.
Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!