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CA resident married - Have joint assets and separate property trust - how do I report income from trust? |
I keep the separate property trust (revocable) in order to keep inheritance as separate asset from our community property. As mentioned below, income from a revocable trust is included on your 1040. Just because you file Married Filing Jointly, the tax filing status does not destroy the separate property nature of the corpus (assets) of the trust. You method of filing has no direct effect on California community property law. Instead of paying the tax out of joint funds you can easily allocate the tax to each of you using most tax software programs. Be sure to code joint income as J and your income as T or S. When the return is done recompute it as if you filed separately. Based on those refunds or taxes due you can then allocate the real joint taxes and pay your share separately. There is no way a revocable trust can pay tax - all income flows to your 1040. If you want to keep the income and the tax on it separate from your spouse you have to file married-separate. If you want to file joint return, all income from all sources has to be included on the return. The source of funds used to pay any tax liability is irrelevant. |
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