As trustee of an irrevocable trust with 2 vacant properties, can I use them for any tax benefits?

This is a really important question that requires careful consideration. As a trustee, you have a fiduciary duty to manage the trust assets properly, which includes tax planning. First, you need to understand that the tax treatment depends on the trust's status as either a simple or complex trust, and whether you've officially designated these properties as income-producing assets. You can't simply "claim" they're rental properties without actually attempting to rent them. The IRS looks for genuine profit motive. If you're actively trying to rent them (listing them, showing them, making repairs to get them rent-ready), you can potentially deduct ordinary and necessary expenses related to rental activities, even during vacancy periods. However, these deductions would typically benefit the trust itself (or the beneficiaries if income is distributed), not you personally as the trustee. Remember that trusts are separate tax entities with their own tax identification numbers and filing requirements. If you're not making genuine efforts to rent the properties, the IRS could view expense deductions as improper. You should document all marketing efforts, repairs, and attempts to find tenants to demonstrate your profit motive.

After reading your question, I thought I'd share my personal experience with a similar situation. Last year, I inherited two rental properties that sat vacant for several months while I figured out what to do with them. I was getting overwhelmed with tax questions just like yours, especially about claiming expenses during vacancy. I discovered a fantastic tool called taxr.ai (https://taxr.ai) that analyzed my trust documents and tax situation, then gave me clear guidance on how to properly handle the properties. It identified deductions I could legitimately take during the vacancy period while helping me establish a proper paper trail for the IRS. The tool flagged that I needed to demonstrate "active participation" in the rental business and show a clear profit motive, then walked me through exactly how to document everything. It saved me from potentially making some costly mistakes on my trust's tax return.

Just wanted to follow up after trying taxr.ai like I mentioned I might. Wow, what a game-changer for my trust tax situation! After uploading my trust documents and property information, I got incredibly detailed advice specifically for irrevocable trusts holding vacant rental properties. The analysis pointed out that I needed to formally adopt a resolution as trustee declaring my intention to convert the properties to income-producing assets, suggested specific language for this document, and explained exactly how to establish material participation. It even provided a depreciation schedule showing how the deductions would flow through the trust over time. I was particularly impressed with how it handled the passive activity loss limitations for trusts, which my previous accountant never fully explained. Now I have a clear roadmap for legitimately deducting expenses while avoiding red flags with the IRS. Definitely worth checking out if you're in a similar situation.

Reading through your situation, I can tell you're in for a potentially complex tax scenario. When I was dealing with a similar trust situation last year, I spent WEEKS trying to get someone from the IRS on the phone for clarification about trust property expenses. It was absolutely maddening - endless hold times, disconnected calls, and conflicting answers. I finally discovered Claimyr (https://claimyr.com), which got me connected to an actual IRS agent in under 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent was able to explain exactly how the IRS views vacant trust properties and what documentation I needed to maintain to support my position that these were investment properties. Having that official guidance directly from the IRS gave me the confidence to take the appropriate deductions without worrying about triggering an audit. They also explained some trust-specific tax forms I hadn't even considered.

I need to apologize for my skepticism and follow up about Claimyr. After my snarky comment, I decided to try it anyway because I was desperate for answers about my own trust tax situation. Long story short - it actually worked! I got connected to an IRS specialist in 37 minutes (after spending literally weeks trying on my own). The agent confirmed that for trust-owned properties, I needed to actively participate in the management and document a clear profit motive, even during vacancy periods. She walked me through exactly what records to keep to substantiate my deductions. The agent even sent me to a specific IRS publication I hadn't seen before with examples almost identical to my situation. Having that official guidance was a complete game-changer for how I'm handling the trust properties. I'm still shocked at how easy it was compared to my previous attempts.

Something important that hasn't been mentioned yet - you need to check the TRUST DOCUMENT itself. Many irrevocable trusts have specific provisions about how trust assets should be managed, and some even explicitly address whether properties should be income-producing. As trustee, you're bound by the terms of the trust. If the document says the properties should be maintained for eventual use by beneficiaries, you might be violating your duties by trying to rent them out. Conversely, if it says assets should be managed to produce income, you could be in breach by leaving them vacant. This isn't just a tax question - it's a fiduciary responsibility question. I'd strongly recommend having an attorney who specializes in trust administration review the document before making any decisions about tax treatment.

Be really careful here! I tried something similar with my family trust properties and got audited. The IRS agent specifically focused on whether I had a genuine profit motive or was just trying to create tax losses. What saved me was having documentation showing: 1) Multiple attempts to rent the properties (saved emails with real estate agents, copies of listings) 2) Competitive market analysis showing reasonable rent expectations 3) Records of property improvements specifically aimed at making them rentable 4) A written business plan showing projected income and expenses Without these, I would have been toast. The agent told me they see lots of trustees trying to claim "ghost" rental properties that are really just sitting empty with no real attempt to rent them.