If you received a 1099-C, the first question you ask is: ‘Do I have to include this in my taxable income?’ Well, the answer is ‘it depends’. Not what you want to hear but there is a lot of variables involved in answering this question.
Form 1041 is a trust tax return filed on an annual basis with the IRS identifying income related to certain types of trusts. Form 1041 informs the IRS of the trust’s earnings and distributions to the beneficiaries.
When an individual passes away, his/her will or trust identifies a representative to administer his/her estate. This representative is referred to as the executor (male) or executrix (female) and is generally approved or assigned by the local circuit court. The Internal Revenue Service tasks this representative to file a final personal return and information returns until the estate is completely transferred to the heirs.
A K-1 is a reporting tool to the Internal Revenue Service. It is used by Partnerships, S-Corporations and Trusts to report the taxpayer’s share of income, deductions, and credits. A K-1 is similar to Form W-2 or 1099 in that the information provided informs the taxpayer of what has been reported to the Internal Revenue Service.
A trust is an agreement for one party to care for the assets of another party for the benefit of a third party. In essence, it is a business agreement. The person creating or the original owner of the assets is referred to as the Grantor. The party that will take care of the assets is known as the Trustee. The third party to receive the benefits is referred to as the Beneficiary.