on a revocable living trust
I am transferring my stock holding from my individual brokerage
account to an account owned by my revocable living trust. Do I have
to report any gains made by the account owned by my revocable living
trust on my personal income tax return? Do I file a separate tax
return on capital gain on my trust? Thanks.
A revocable living trust allows an individual
to transfer property at his or her death without having to go through
probate proceedings. Since your last will and testament would be
a public record in a probate proceeding, a trust affords you certain
privacy as to your final wishes. For tax purposes, a revocable living
trust is ignored as a separate entity and the income of the trust
is reported by you on your individual tax return.
When you open bank or brokerage accounts for the trust,
you provide the institution (on Form W-9) your name and Social Security
number for purposes of reporting the income of the accounts to the
IRS. The account would be titled as, for example, "Ika Jones
under trust agreement Ika Jones Living Trust dated Nov. 18, 2005."
The trust should not apply for a separate tax identification number,
as this will unduly complicate reporting.
When you retitle the property
in your individual brokerage account, you need to specify to the broker that you
want to transfer the assets of your individual account to that of the trust account.
You do not want to sell the assets to fund the trust account, as this will obviously
be a taxable event. All future gains and losses of the trust account, including
dividend and interest income, will continue to be reported on your individual
return as if the trust did not exist for tax purposes. No tax return will be required
for the living trust.