A trust’s treatment for tax purposes is determined by the Trust Agreement. This details specific requests of the originator or Grantor.
The following statements outline the taxation of Grantor trusts.
1. If the trust is a revocable trust, and the grantor is also the beneficiary, then a tax return (Form 1041) generally is not prepared. All income generated by the trust assets is reported on the Form 1040 of the grantor.
2. The taxable income of the trust is reported on the grantor's tax return.