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.
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