Land Trusts And The IRS


A few short weeks ago, the number one question from land trust clients was how to handle the filing of profits and losses for their properties held in land trusts- twas’ the season. At first, this would seem like a question requiring a long drawn out answer from a very sophisticated accountant; however, like most things simplified with the use of a land trust – it’s not.

A land trust is a fully revocable grantor trust, which is therefore considered a “pass-thru entity” or “disregarded entity” under the Internal Revenue Code meaning all profits and/or losses pass through to the beneficiary. All the tax advantages of individual ownership may be retained when a land trust is properly used to hold title to real property. So…if you want profits and losses to pass through to your individual tax return make yourself the beneficiary; if C-Corporation tax consequences are desired, place the beneficial interest of the trust in a C-Corporation, etc.


Simple.

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