Can Sch. E be used for a Form 1041 Grantor Trust tax return just for the purpose of tracking Depreciation/Amortization?

Forum|Forum|4 years ago
March 23, 2022
2 replies
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I am filing a Form 1041 for a Grantor Trust.  I have selected only the "Grantor type trust" box in the top section A of the 1041.  I understand that the 1041 is for informational purposes only, and the data for the trust will be reported in a Grantor Letter, which I will include as an attachment to the returns.

I want to use the Asset Entry Worksheet to calculate depreciation/amortization amounts and track accumulated figures.    However, as soon as I fill out a worksheet, the depreciation amount carries to the Schedule E and I get an error on Form 1041 at the 'Grantor type trust' box stating, "Form 1041: Grantor trust box is the only 'Entity Type' box checked.  If the entire return is a grantor type trust, do not report dollar amounts on Form 1041."

The 1041 itself actually does not show any dollar figures, but the program is apparently triggering on the depreciation amount that is populating on the Sch. E, as I have entered no income and no other expenses.

Is it possible to utilize the Asset Entry Worksheets for managing Depreciation/Amortization items without generating and submitting the Sch. E, or a way of using the Sch. E so that it does not carry over income/loss data to the 1041?  I would prefer to maintain as much data within ProSeries as possible, rather than keeping up offline docs and attaching them as attachments.

ProSeries Professional

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ERIC J 11

Level 4

I just had the same scenario. I dont have the PS Fixed Asset module to track depreciation, so I did this: . I drafted a 1041 as usual "as if" it were a non-grantor trust. Then I "Saved as" this file as the file that became my filing copy - in this new file, I changed the type of trust to a Grantor trust and populated the Grantor worksheet using the data generated by the first file, which became my "dummy file" for tracking depreciation going forward. As long as I remember not to file my dummy file with the IRS I should be OK - Ha!

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swongtax

Level 5

Please help if you can answer this question:

I am working on a taxpayer's tax return who is a grantor of a Grantor Trust (with EIN) with a rental property that should be reported on the Taxpayer's tax return.

Question: The Grantor Trust Form 1041 is blank, with a statement attached to report rental Schedule E income and deductions on the Grantor's income tax return. However, there is no depreciation on Schedule E (Form 1041), but the trust statement is instructing me to report the depreciation on the taxpayer's Schedule E. On the state trust tax return schedule E, the depreciation number is appearing on that schedule E (as a federal/state difference item). Am I supposed to include the depreciation number on the taxpayer's individual income tax return Schedule E? Why is the Trust Fed schedule E not showing the depreciation number and Trust state Schedule E showing the the deprecation number?

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davetodd11Author

Level 5

For a Grantor Trust, the 1041 should be blank except for that statement on p.1. I've always had trouble with this in ProSeries, because if I populate the Schedule E and Grantor Letter, ProSeries pulls that info over to the 1041. I've resorted to doing the Schedule E, Grantor Letter, and depreciation schedule manually offline and then just including the Sch E and Grantor Letter as .pdf attachments to the return. Haven't had any issues with the IRS accepting the returns.

It shouldn't work this way, but I haven't found how to keep the 1041 from getting the data and didn't get any resolution when I posted a similar question to yours. Hope this helps.

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swongtax

Level 5

Thank you for your response!

The Grantor trust that I have been handed with a statement and a Schedule E, specifically the Schedule E needs to go on the Grantor/Taxpayer's individual income tax return. This Grantor trust was created as one of the grantors passed away, so in doing this trust, the FMV of the rental was stepped up 100% (as I was told). My question is the CPA omitted the Depreciation figure from the Schedule E, but on the statement to the Grantor, it does say to include the Depreciation number on the Grantor/taxpayer's return. This point is confusing me. I looked at the State Grantor trust tax return, and the state one does have the big depreciation number on the state schedule E. I am confused as to why the CPA would leave out the Depreciation on the schedule E attached right behind the statement of the Grantor Trust. Any ideas/advice?

Thank you!

SW

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