Table of Contents
What is the purpose of a 645 election?
Well, a §645 election allows the executor of an estate and the trustee of a revocable trust to elect to treat the estate and the trust as one for tax purposes. Generally, estates have the ability to elect a fiscal year end or a calendar year end, whereas trusts default to a calendar year end.
What happens when 645 election expires?
The 645 election period does not continue indefinitely. The election termination date is based on a complex set of rules and differs on whether or not an estate tax return (Form 706) was filed. Upon election termination, the electing Trust will have to begin filing a separate income tax return.
How long do you have to make a 645 election?
If an executor for the related estate is not appointed until after the trustee has made a valid section 645 election, the executor must agree to the trustee’s election, and the IRS must be notified of that agreement by the filing of a revised election form (completed as required by the instructions to that form) within …
How do I choose a fiscal year end for a trust?
Trust Return Due Date Some trusts must choose a calendar tax year ending Dec. 31. Other trusts can use a fiscal year with an ending date as far ahead as 11 months from the death. In this case, that would be June 14 of the following year.
Can you make a 645 election if there is no estate?
645 election allows the trustee and the executor to effectively combine a QRT and an estate into one tax return, filed as an estate. Further, even if there is no separate probate estate, this election can be used to file the trust return (or several separate QRTs) as though the trust were an estate.
Does an estate need an EIN for a 645 election?
Would I request the 645 election? How do I know if it is a qualified revocable trust? If you become successor trustee prior to the death of the grantor (due to incapacitation or disability), then you will not need to obtain an EIN (employer identification number) for the revocable living trust.
How do I make a 645 election?
The trustees of each qualified revocable trust (QRT) and the executor of the related estate, if any, use Form 8855 to make a section 645 election. This election allows a QRT to be treated and taxed (for income tax purposes) as part of its related estate during the election period.
Can estate elect to pay income tax?
By Mary Randolph, J.D. A deceased person’s estate is a separate legal entity for federal income tax purposes. If you’re the executor of someone’s estate, you may need to file an income tax return for the estate, as well as a final personal income tax return for the deceased person.
How do you make a trust for a 65 day election?
This election may only be made by filing Form 1041-T with Form 1041, or only Form 1041-T if the income tax return is not yet completed by 65 days after the year-end. The due date for filing the form is March 8, 2021 (because the due date is a Saturday) for calendar-year taxpayers.
What is the benefit of the 65-day rule?
The main advantage of this tax rule is that it may provide an opportunity for tax savings. An estate or trust pays income taxes at graduated rates similar to individuals, but for 2021 the top tax rate (37 percent) applies to income in excess of $13,050.
Is money inherited from a trust taxable?
If you inherit from a simple trust, you must report and pay taxes on the money. By definition, anything you receive from a simple trust is income earned by it during that tax year. The trustee must issue you a Schedule K-1 for the income distributed to you, which you must submit with your tax return.
What is a § 645 election for an estate?
Well, a § 645 election allows the executor of an estate and the trustee of a revocable trust to elect to treat the estate and the trust as one for tax purposes. Generally, estates have the ability to elect a fiscal year end or a calendar year end, whereas trusts default to a calendar year end.
What is an irrevocable election under IRC 645?
IRC §645 provides an irrevocable election to treat a qualified revocable trust as part of the decedent’s estate for federal income tax purposes. When the election is made by the executor and trustee, tax advantages available to an estate are available to the trust. Advantages of Making the Election
Can a trust make a §645 election without a personal representative?
Or, if there is no personal representative, for the first taxable year of the trust filing as an estate. If a trust does not meet the income tax filing requirements for an initial short year, but wants to make the §645 election, it still must make the election by the due date including extensions, for the short initial year.
How long does the 645 election period last?
The 645 election period does not continue indefinitely. The election termination date is based on a complex set of rules and differs on whether or not an estate tax return (Form 706) was filed. Upon election termination, the electing Trust will have to begin filing a separate income tax return.