Any luck requesting Form 1041 as remainder beneficiary

Technical topics regarding tax preparation.
#1
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I have read that a remainder beneficiary can request a copy of the 1041's from the IRS under §6103(e)(1)(F).

We have a case where the income beneficiary trustee (corporate trustee) is paying all of the taxes at the trust level even though we know the beneficiary is receiving monthly distributions far in excess of the income being generated. Every year the trustee is telling us that the taxes are related to the capital gains.

We actually get the Marital Trust accountings and can see this is not the case. We can recreate the gains and the tax being is 3 to 4 times the max capital gain rate even with no deductions.

Client has sued in the past for copies of tax returns but judge said annual trust accounting is enough.

Has anyone tried to get copies from the IRS? Is it a simple process or are we wasting our time.
 

#2
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My initial reaction is bad. The idea that the trustee would refuse to reveal the trust tax returns to a beneficiary strikes me as odd, at best, and perhaps reason to be suspicious. I'm confused as to why you don't get an accounting for this trust, but do get one for the Marital Trust. What's the difference in the beneficiary's status?

I'd also note that the story about trust income and capital gains strikes me as odd. While it's true that the trust would normally pay tax on capital gains, that would mean that capital gains are not considered income. So the gains can't be part of the distributions of income which you say exceed the income.

I'm thinking one could normally figure out what's happening from the accountings. If not, then there is reason to complain.

I feel like I'm missing something and that perhaps you should provide more facts.

And I'm sorry I don't know the answer to whether the IRS would provide a copy of the 1041.
Steve
 

#3
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We do get the marital trust accountings and can calculate the gains. But even with that info, the corporate trustee tells us all taxes are related to cap gains and we know that is 100% false.

There have been lawsuits but judge says no tax returns needed
 

#4
JAD  
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When I was trustee (which I will never do again) atty told me not to provide returns to beneficiaries.
 

#5
Dennis2  
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Note that there are for example differences between taxable income from a partnership and accounting income from that entity.
 

#6
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This marital trust is very straightforward. Blue chip stocks, bonds and strip mall type of commercial property.

Contentious from the start as we have second wife as income beneficiary and adult children from first marriage as remainder beneficiaries.

Widow sought out corporate trustee who would allow excess disributions. So even though market has been booming marital trust value continues to decline.
 

#7
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You said there was litigation. Why were the 1041s not turned over in response to a request to produce?

And I still don't see how it's possible that a simple trust could be liable for capital gains tax while including capital gains in fiduciary accounting income. But a corporate trustee is probably technically correct, so I assume I am missing something...
Steve
 

#8
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Are the extra distributions principal distributions under a HEMS standard? If so, and I'd have to check to be sure, I suspect they carry LTCG with them.

How is it that the surviving spouse got to pick the corporate trustee?
Steve
 


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