Grantor Retained Annuity Trust Form For Income Tax
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How to fill out Grantor Retained Annuity Trust?
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FAQ
If a trust is a grantor trust, then the grantor is treated as the owner of the assets, the trust is disregarded as a separate tax entity, and all income is taxed to the grantor.
A GRAT is treated as a grantor trust, which means that all income, gains, and losses will flow through to the grantor and be included on the grantor's personal income tax return.
Tax Implications of the GRAT During the term of the GRAT, the Donor will be taxed on all of the income and capital gains earned by the trust, without regard to the amount of the annuity paid to the Donor.
In general, every trust must file Form 1041, U.S. Income Tax Return for Estates and Trusts (Reg. §1.641(b)-2). Grantor trusts are not recognized as separate taxable entities for federal income tax purposes because the grantor has not relinquished complete dominion and control over the trust.
With respect to income taxes, the grantor is treated as the owner of the assets during the GRAT term and reports all income earned by the GRAT on his individual income tax return. To avoid having to file its own fiduciary income tax return, the GRAT should not apply for a separate taxpayer identification number.