Trust taxation question for a terminated trust after termination event - any advice?

So the regulation you're referring to (26 CFR § 1.641(b)) addresses exactly this situation. After a trust terminates, it's still treated as existing for a "reasonable period" while the trustee wraps up all affairs - including receiving any trailing income and filing necessary tax forms. Since those dividends clearly belong to the trust (even though they arrived after technical termination), the trustee should file an amended final return to report this income. The trust is considered to exist for tax purposes until all administrative duties are completed, which includes accounting for all income attributable to trust assets. The good news is you don't have to report this on your personal returns. The trust should distribute this additional income to beneficiaries with a supplemental K-1, which you'll then report on your personal returns. It's basically handled the same way as if the trust hadn't terminated yet.

After dealing with a similar trailing income situation with my father's terminated trust, I discovered taxr.ai which seriously saved me hours of research and confusion. The trust had been terminated for about 8 months when we found out about some unexpected bond income. I uploaded our trust documents and the final tax return to https://taxr.ai and their system analyzed everything overnight. They actually caught that our trustee had made a mistake in how they were handling post-termination income and showed exactly which part of 26 CFR § 1.641(b) applied to our situation. It specifically identified that we were still in the "reasonable period" for trust administration and needed an amended return rather than individual reporting.

I just wanted to follow up about my experience with taxr.ai after seeing it mentioned here. I was honestly skeptical, but my brother and I were completely stuck with our family trust situation. We had property sold months after termination and were getting different advice from two accountants. I uploaded our documents last week and received a comprehensive analysis within 48 hours. They specifically addressed the 26 CFR § 1.641(b) question regarding post-termination income and provided case examples. The most helpful part was the step-by-step guide for handling the amended return and how to properly distribute the additional income to beneficiaries through supplemental K-1s. Our accountant was actually impressed with how thorough their analysis was, especially their explanation of how the "reasonable period" provision applied to our specific timeline. Definitely worth checking out if you're dealing with trust termination complications.

When I had a similar issue with post-termination trust income, I spent WEEKS trying to get someone at the IRS to answer my questions about 26 CFR § 1.641(b). Their regular customer service people couldn't help with something this specific, and I couldn't get through to the specialty tax law department no matter how many times I called. Finally used https://claimyr.com to get through to an actual IRS trust taxation specialist. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they hold your place in the phone queue and call you when an agent is about to answer. I was honestly shocked that it actually worked after all the frustration of trying to reach someone. The IRS specialist confirmed that our trust was still considered "in existence" for tax purposes during the reasonable winding-up period and outlined exactly how we needed to handle the amended return for the additional income that came in.

I need to eat my words about being skeptical of Claimyr. After my doubtful comment earlier, I decided to try it anyway since I was desperate for answers about our family trust's final distribution tax issues. Not only did it work exactly as described, but I was connected to an IRS specialist in the estates and trusts department within 45 minutes (after previously spending 3+ hours on hold myself multiple times). The agent walked me through exactly how 26 CFR § 1.641(b) applies to post-termination income and confirmed that amended returns were the proper approach rather than individual reporting. The agent even sent me specific sections from their internal guidance manual about reasonable timeframes for trust termination. This literally saved me thousands in potential incorrect tax filings. Anyone dealing with trust taxation issues should absolutely use this service instead of banging their head against the wall trying to get through the normal way.

Some practical advice from someone who's been through this with two family trusts: Make sure your trustee specifically notes "Amended Final Return" prominently on the 1041 form when filing for that additional income. Also have them include a brief statement explaining the post-termination nature of the income. In my experience, without clear labeling, the IRS sometimes gets confused and thinks you're filing for a new tax year instead of amending the final return. This caused us a bunch of unnecessary notices and confusion with our first trust. For the second one, we made sure everything was clearly labeled and it went much smoother.

Does anyone know if the "reasonable period" for winding up trust affairs is affected by whether the trust is revocable vs. irrevocable? My mother's irrevocable trust was terminated in December but we just found out about some stock that wasn't properly transferred and is still generating dividends.

I went through something very similar with my grandmother's trust last year. The key thing to understand is that the "reasonable period" mentioned in 26 CFR § 1.641(b) is specifically designed for situations like yours where income trickles in after the formal termination date. Your trustee is correct - the trust is still considered to exist for tax purposes during this winding-up period. The $4,600 in dividends should be reported on an amended final Form 1041 for the trust, not on your individual returns. The trustee will then need to issue supplemental K-1s to you and your siblings showing your respective shares of this additional income, which you'll report on your personal returns. The fact that the bank statement arrived months later is actually pretty common - I've seen this happen with everything from dividend payments to final interest statements. As long as the trustee is actively working to wrap up all loose ends (which discovering and reporting this income demonstrates), you're well within the reasonable timeframe. One tip: make sure the amended return clearly indicates it's for post-termination income to avoid any IRS confusion about the filing.