Must Irrevocable Grantor Trust File Tax Return for House Sale?

 In Irrevocable Trusts
grantor trust tax return

Photo by Max Williamson on Unsplash


I sold my house in December 2020. It was the only thing in my irrevocable grantor trust. Do I have to file a 1041 for 2020?


Technically, yes. Practically, perhaps not. Either way, since it was a grantor trust, the capital gains will ultimately flow through to you. Since it was is an irrevocable trust, it should have its own tax I.D. number and file a 1041 return to report any capital gains earned. That’s the technical answer. However, if your house was the only asset in the trust, you probably did not obtain a tax I.D. number prior to its sale, since if you were living in the house there would have been no rental income to report to the IRS. In that case, if the closing attorney was comfortable using your personal Social Security number and issued a 1099 to you personally, you probably don’t need to file a 1041. If the proceeds of the sale, however, are to remain in the trust, at that point it would have needed its own tax I.D. number in order to open an investment account, and 1041 tax returns will be due for 2021 and subsequent years.

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