okay for this video I wanted to go over a simple example of a form 1041 for 2022 and specifically this is for a grantor type truss so I've got a couple of pieces in front of us obviously the return itself here which we'll go through and then as far as supporting documents we do have a 1099 a Consolidated 1099 that was uh so a brokerage account that was open for the trust we do have a profit and loss statement for an LLC that's owned by the trust so we'll get into all these pieces later and then I do have one slide here just some background on the reporting and then the fact pattern that we're going to be working with so what are we going to cover so again this is a 1041 tutorial for a trust formed in Florida and it is a revocable grantor trust right there's a lot of different types of trusts out there in this one when we talk about grantor trust reporting on 1041s it has to be a grantor type trust right so we have a revocable grantor type trust so the pages that we're going to go over what you'll see is that the trust return itself is relatively simple and this is because a lot of the or so all of the income and expense rather is ultimately report on the grantors tax return and not this trust return itself so what are some of the basics on grantor trust reporting so grantor trust is a trust that can be revoked or amended by the grantor at any time for any reason without anyone's consent that's really how it works now because the grantor would change control over all these assets under federal tax rules any income earned in that trust or any expenses incurred are going to be reported directly on the grantor's federal tax return right so the trust in contrast that we have a a non-grantor trust let's say all of that income uh would be reported on the 1041 maybe you would pay taxes at the trust level there might be some distributions to beneficiaries we have schedule k1's all that all that kind of stuff comes into play not with grantor trust reporting so a revocable grantor trust typically doesn't have its own tax ID number right and this is because again because it's a grantor type trust the grantor that sets up the accounts they just use their personal tax ID so if I set up a revocable Grant or trust when I open accounts like a bank account or a brokerage account I would open it in the trust name but I would just give the bank or the broker my personal tax ID I would give them my social security number and all the 1099 nines would be reported under my SSN however doesn't always have to be that that case right a grantor Trust even though it's going to be a grant or trust or federal tax purposes it can apply for its own tax ID number so it can open an EIN for the grantor of trust and you can use this Ein when opening accounts instead of the SSN of the owner right now the reason this changes the reporting is because if we have a grantor trust with its own eim it now has to file a 1041 as a grantor trust and provide a grantor schedule showing all the income and expenses that need to be reported on the grantors tax return and the reason why we need to do this is that basically this last sentence here right so now that we have an EIN open for a trust we have to let the IRS know that this is a grantor type trust so if the IRS is getting 1099s in the trust name and eim instead of seeing a separate tax return reporting all that income and expense and paying tax at the trust level directly we're telling the IRS that all of this this is going to be reported on the grantor's tax return so that's why when we take a closer look at the 1041 you'll see that most of it is really blank right there's not a lot of information reported but again we still have to do this to let the IRS know that it's a grantor of trust so the fact pattern we have here we have John in a taxpayer he opens a revocable Grant towards trust in Florida on February 15 2022 and instead of just using his personal tax ID number as the tax ID for the trust he applies for a separate Ein that's an employer identification number for the trust so the trust has its own tax ID now after forming the trust the the trust opens an LLC in Florida so the LLC is John taxpayer Furniture Sales LLC and 100 of those LLC units are owned by the revocable trust now John is going to serve as the manager of the LLC so he's actively running the business and the business is going to be running a furniture store now in addition to the LLC John also opens a brokerage account in the name and the Ein of the trust and the brokerage account he has some cash invested in there he buys some stocks bonds and so there's some dividends in interest income earned during the 2022 tax year so if we start to take a look at the 1041 itself now some of the basics on a grantor type trust reporting so the first thing you'll notice here is in in box a we indicate that this is going to be a grant or type trust right so very very important there uh letting again letting the IRS know what type of trust this is going to be that we're filing on the 1041. the other elements here so the the Tom name of the trusted cells so we've got fake grantor trust under agreement dated Feb 15 2022 and then name entitled The fiduciary so the trustee in this case is John taxpayer right again it's a revocable grantor trust so John is his own trustee in this in this capacity the tax ID number for the trust itself the date The Entity was created and then a mailing address in this case because it's a first year return we are checking initial year return and then the rest of the form here on page one is blank so you notice that we what we're going to have is some income and expenses things like that but none of that is actually flowing through or being reported on page one all we have to do here is indicate that we are attaching a grantor statement right so the income and expense is reported on the grantor statement and the grantor is the one that's going to use that information and to report all of those elements on their uh personal tax return right the income and expense isn't being reported here on page one because again this is a grantor trust this is not a non-grantor type trust okay so let's look at the 1099 first so this is the 1099 that was provided by the broker and it was provided to John taxpayer as the trustee but the account is open in the name of the trust so fake grantor trust under agreement dated that 15th and the 1099 is issued in the trust tax ID so the eim the tax ID on the account is for for the trust itself remember it's not in John taxpayer's social security number okay so you can see not too much income activity here right so he's got some dividends uh ordinary dividends qualified some capital gain distributions and then on the 1099 int we have some interest income so taxable interest income and then nine dollars a tax exempt interest income so when we look at the grantor statement that's included with the 1041 we can see down here uh this is the attachment that goes along with the 1041 and and then it's also provided to The Grand Tour so the name of the trusts here at the top the grantor John taxpayer and then we do indicate John taxpayers Social Security numbers so there's a social security number and then we include all the information about the income and expense and the trust and then John uses this to report on his personal tax return so you can see down here the interest income information and dividend income information so we've got the name of the brokerage account the amount of interest on the account twenty four dollars and then the amount of tax exempt interest is nine and then the dividend income information again the name of the brokerage account uh uh total ordinary dividends 106 qualified portion is a hundred capital gain distribution to 50. now when John is doing his personal return he's going to enter this information directly right so on his schedule B for example he's going to indicate dividend income from fake brokerage Company Inc and then he's going to enter these elements here right same thing for the interest now remember in this example the grantor trust also owns a hundred percent of the membership units in an LLC right so John taxpayer Furniture Sales LLC and then there's some income and expenses that were incurred within that LLC now you can see here uh this statement in and of itself is isn't too helpful because it's just the totals of income the totals of expenses and the net profit are loss from the business so in addition to providing this summary schedule the trust should should also be preparing a pro forma Schedule C so the Schedule C this this certainly looks familiar if you're if you're preparing your your personal 1040 right Schedule C goes through your 1040 it's used to report the profit and loss uh from sole proprietorships or if you have a single member LLC disregarded as an entity you would report that information on Schedule C as well so if we look at the profit and loss that John prepared for his furniture sales business he has his furniture sales up here at the cost of goods sold on those sales so couches chairs some tables his various expenses here so he's got an advertising costs contract labor insurance and so on and then he has a Reconciliation here for his inventory right so his cost of goods sold on the inventory or inventory at the start of the Year obviously zero because it was a first year operation so he has his purchases here the cost of goods sold on those furniture sales and then is ending inventory numbers and so it's on Schedule C we're John ultimately or the trust rather reports all this information first and then John would take this information and complete his own schedule C so we have a grantor information uh entered on the top here so against John taxpayer that's his social security number and then the name of the owner right in this case is the grantor trust so we have grantor trusts under agreement dated February 15th the principal business is furniture sales and then the separate legal entity name of the business and the actual legal entity that's conducting the business is this disregarded loc right so John taxpayer Furniture Sales LLC and then the Ein for the LLC okay so again not real eim but you would enter the Ein for the business itself and then enter all the additional information down here in part one and two on the increment expenses so we can see there is gross receipts the cost of goods sold and then the various expenses and then because John does have an inventory he does complete part three as well so his cost of goods sole reconciliation here his purchases the inventory at the end of the year is nine thousand and so his cost of goods sold for the period is sixteen thousand dollars okay so that covers it for this example I hope that was helpful again remember that the concept here is when we have a grantor of trust uh the trust itself has to file a separate tax return but all of the income and expenses although they might be reported on the 1041 uh and be filed with the IRS ultimately all of this has to be reported on the grantors federal income tax return and what you also notice is that the grantor in this context just gets a statement with all these supplementary schedules they don't get an actual K1 so schedule k1s are not provided to grantors in this context it's just all the flow through information that's occurring within the grantor trust okay so again that covers it um I hope that was helpful if you have any questions please feel free to leave me any comments below happy to answer any questions I can and I look forward to seeing you again on the next video thank you