Legal Question in Tax Law in New York

Re: Business Accts Receivable deposited into Trust account.

I agree with John. The deposits were earned by your wife and should be reported in your personal return. You do not say how your wife's business is established (sole proprietorship, LLC or some oither form of business entity)? Sole proporietors and a one-person LLC file using Schedule "C" on a normal 1040 (personal) return, which shows income and business expenses. If she incorporated, a separate form is required (1120) to report the income and business expenses. I do not know why the "income" was deposited to the trust bank account unless it was somehow connected to the operation of the trust. If it was, the income and expenses are shown in the trust return (1041) along with other income and expenses of the trust. Interest paid on the trust account, from whatever funds are on deposit, are reportable by the trust in its return. Without complicating matters further, if the trust is a "Grantor Trust" which is usual to a revocable trust, a trust return might not be needed and the income of the trust is reported in the personal return of the Grantor. Some information is missing in your question, so a complete answer cannot be given at this time, but the general rules outlined above should guide you.

Re: Business Accts Receivable deposited into Trust account.

If the accounts receivable represents monies owed the business, this would be taxable to the business--regardless of the way it was "made out." I assume the business is a sole-proprietorship, which would necessitate the completion of a Schedule C with your personal tax return.

Depositing the monies into the trust bank account has no tax consequences. However, any income derrived from those monies, i.e. interest, would be taxable to the trust.

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