Living Will Trust Funds
AB Trust – Partnership Rental Income?
I am widowed. My husband set up an AB Trust before his death. Now I have my living trust and his B trust. His B Trust owns two partnerships where rental income is generated from the properties. The rental income is reported on my 1040. His B trust is fully funded and disburses the required income from the B trust to my living trust.
I do need the income from the rental properties and would rather no have to deal with it. Can my living trust (family trust) buy the partnerships from his B trust? If so, will this eliminate my having to report the rental income on my tax return? If not, what can I do to eliminate the income from my return?
Additional Clarification: I don’t need the rental income that is being generated from the partnerships. I would rather sell the partnerships if I can. I don’t need the additional income. From a tax standpoint, is it better to sell the partnership or continue getting the rental income?
If you buy the rental properties, you will still report the income from them on your return because you will then own them directly. Not only that, the “B” trust will have to pay capital gains tax if the value of the properties exceeds the its basis in them.
It would help to know why you don’t want to report the income from these investments on your return.
If you don’t want real estate income on your return, you could sell the real estate and invest the proceeds in municipal bonds or some other type of investment that generated a type on income that you would not mind reporting on your return. However, a bond investment would not grow to keep pace with inflation, so that would be a mistake unless you are very old or on your deathbed.
Jim Kirby, CPA/PFS, CFP, CFS
BC Living Rivers Trust 2006 – 2009
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