Income Taxation of Fiduciaries and Beneficiaries, 2008

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CCH, Jun 20, 2008 - Business & Economics - 2352 pages
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Income Taxation of Fiduciaries and Beneficiaries provides step-by-step guidance on the taxation of fiduciary income. This comprehensive guide for practitioners advising fiduciaries and beneficiaries in federal and state income tax matters covers the broad range of complex issues from charitable remainder trusts to nexus rules and their effect. Providing expert practical advice, Income Taxation of Fiduciaries and Beneficiaries helps the practitioner obtain the most advantageous outcomes for his/her fiduciary and beneficiary clients. Key feature: 35 case studies with filled-in forms 1041 and accompanying documents.
  

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Contents

Overview of the Fiduciary Entity
1-1
103 Bifurcated Ownership Aspects 104 Elements of a Trust or Estate
1-5
105 Probate Estate 106 Revocable Trusts
1-8
107 Irrevocable Trusts 108 Classification of a Trust for Income Tax Purposes
1-10
109 Existence of a Fiduciary Entity
1-12
110 IRS Issues Warning That Abusive Trust Arrangements Will Be Ignored
1-17
111 Commencement of Fiduciary Entity for Tax Purposes
1-30
112 How Long Does the Fiduciary Existence Continue?
1-33
Formation to Termination 901 Overview 902 Changes in Planning Approaches Under Recent Legislation 903 Behavioral Change in Trustees Activities
9-1
910 Division or Splitup of Trusts
9-5
911 Election to Tax a Former Revocable Trust as Part of an Estate
9-6
Formation to Termination
9-9
904 Simple Trusts
9-12
905 Complex Trusts
9-16
906 Tax Treatment of Funding Distributions with Appreciated Assets
9-67
907 Assignment or Purchase of Beneficiary Interest
9-73

113 Summary
1-36
114 Comprehensive Example
1-37
Legislation
1-38
116 Trust and Estate Income Tax Rates
1-39
The Fiduciary Trust Accounting Concept Total Return
2-1
205 Uniform Principal and Income Act Finalized Revisions on Allocation of Receipts and Disbursements 206 Specific Allocation RulesInvestments S...
2-2
207 Other Allocation and Apportionment Rules
2-3
208 The Other Total Return ApproachUnitrust Determination of Income
2-4
202 Importance of Fiduciary or Trust Accounting Income and Relationship to IRC Definitions of Income
2-5
Table of Internal Revenue Code Sections
2-56
Principles of Federal Income Tax for Fiduciaries 301 The Controlling Relationship of Fiduciary Accounting Income FAI or TAI to Fiduciary Income...
3-1
306 Other Items That May Affect DNI 307 Special Situations 308 Trust DNI May Arise from Informal Financial Arrangements with Estate 309 Separ...
3-2
Principles of Federal Income Tax for Fiduciaries
3-3
317 Pooling of Assets for Investment Converts Trust Form into Entity Taxable as a Corporation
3-52
Taxable Receipt or Not? 320 Surviving Spouse as an Heir Had No Claim Under State Law to Delayed Income from Sale or Appreciation Realized by ...
3-54
321 Summary
3-55
Itemized Deductions
4-1
404 Deductibility of Taxes
4-11
405 Deductibility of Interest
4-13
406 Business Expenses
4-14
407 Administration Expenses
4-16
408 No Double Deduction of Administrative Expenses
4-17
409 Allocation of Deductions
4-21
410 The 2 Percent Floor on Miscellaneous Itemized Deductions
4-24
411 Depreciation Depletion and Amortization
4-31
412 Charitable Deductions
4-56
413 RelatedParty Loss Disallowance Rules
4-65
414 Net Operating Loss Deductions
4-66
415 Net Capital Loss Deductions
4-71
416 Theft Loss Deductions for Excessive Professional Fees Not Returned
4-73
417 Deductions and Excess Deductions in the Year of Termination
4-75
418 Passive Activity Loss Limitations
4-80
419 Deduction by Trust Beneficiary of CourtOrdered Payments Based on Objection to Trustees Accounting 420 Summary
4-81
Distributions 501 Overview 502 Introduction to the Distribution System
5-1
Distributions Involving Constructive Receipt and Properly Paid
5-2
503 Simple Trusts Scheme
5-4
Distributions
5-5
504 Complex Trusts and Estates
5-10
505 The Specific Sum Exception to Distribution Rules
5-12
506 Trust Expenses to Maintain Realty Are Not Distributions
5-14
507 The Tier System
5-18
508 Distribution Must Be Properly Paid or Credited
5-20
509 Election to Treat Distributions as Relating Back to Preceding YearThe 65Day Rule
5-22
510 Distributions Triggering Income to the Fiduciary
5-24
Capital Gains and Alternative Minimum Taxes Accounting
6-1
601 Capital Gains TaxationIn General
6-2
602 The Regular Tax Calculation and Credit Offsets
6-6
603 Overview of Other Tax Calculations 604 AMT in General
6-9
605 Multiple Trusts May Be Combined to Compute
6-23
606 Tax Years of Fiduciaries
6-24
607 Who Is the Taxpayer?
6-28
608 Determining If Instrument Creates More Than One Trust
6-31
609 Preneed Funeral Trusts Can Elect to Be Taxable Entity
6-33
610 ShortLived ShortTerm Trusts
6-34
611 Proposed Legislation Not Enacted
6-37
612 Elections
6-38
Estimated Taxes 701 Overview 702 Methods of Calculating Required Payments 703 Current Year Alternative
7-1
704 Alternative Reflecting 100 Percent of Prior Years
7-4
705 Annualized Income Alternative
7-6
Estimated Taxes
7-7
706 Short Taxable Year
7-8
707 Excess Estimated Tax Payments
7-10
708 Methods of Paying Estimated
7-11
Passive Activity Loss Limitations
8-1
805 Excess Deduction of PAL on Trust or Estate Termination
8-28
Successor Fiduciary Reflects PAL Status of a Decedents Partnership Interest
8-29
807 Deemed Owner Reflects Passive Activity Results
8-31
808 The Problems in Trying to Apply Passive Loss Rules to Fiduciaries
8-32
809 The Challenge in Determining Activity Status
8-40
810 The Special Treatment Afforded Depreciation Incurred by Fiduciaries
8-44
811 Real Estate Investment Passive Activity Concerns
8-47
812 Phasein RulesInteraction with Alternative Minimum
8-53
813 The Interrelation of TAI DNI and Depreciation and Their Impact on Treatment by Fiduciary of Passive Income
8-56
814 The Complexities Resulting from Fiduciary Distributions of Partnership Interests
8-57
815 What Happens to an Underwater Passive Activity Held by Owner Until Death?
8-60
816 Likely Interpretative Positions 817 Planning Aspects
8-67
818 Administrative Aspects
8-71
819 General Fiduciary Responsibilities
8-72
908 Accumulation Distributions
9-80
909 Consequences of Merging Trusts
909
912 Exchange Fund Rules Apply to Trust Transfer 913 Constructive Receipt
912
914 Basis Where Testamentary Trusts Have Not Been Funded
914
915 Nature of Interest Incurred on Debt Distributed to a Trust Beneficiary
915
916 Income Tax Withholding Responsibility of Fiduciaries
916
917 Tax Basis of Beneficial Interest in a Trust or Estate
917
918 Tax Treatment on Gratuitous Disposition of Life Estate
918
Income Tax Consequences of Funding Gifts and Bequests with Appreciated or Depreciated Property in Kind
919
Charitable Remainder Trusts 1001 Overview 1002 SplitInterest Trusts
10-1
Charitable Remainder Trusts
10-10
1003 Charitable Remainder Trusts
10-14
1004 Charitable Remainder Annuity Trusts
10-27
1005 Charitable Remainder Unitrusts
10-31
1006 Actions to Remedy Funding or Distribution Errors
10-50
1007 Administrative Requirements and Qualification Strictures
10-51
Joint Contributors
10-57
1010 Allowable Settlors of CRTs Other than Individuals
10-59
1011 Income Taxation of Charitable Remainder Trusts and Beneficiaries
10-62
Does It Meet IRS Standards?
10-99
1013 UBTI Casues a Taxable Event 1014 Realization of Income Upon Funding a
10-125
1015 Special Distribution Rules
10-130
1016 Partitioning of Charitable Remainder Trusts
10-139
1017 Early Payment of CRAT Principal to Remainder Interest
10-144
1018 Private Foundation Strictures Not Applicable
10-145
1019 Donors Deduction for Gifts of Interests in Charitable Remainder Trusts and Pooled Income Funds
10-160
1020 Special Requirements and Rulings on Transactions
10-164
1021 Application of 2702 to Certain CRTs
10-169
1022 Pooled Income Funds
10-171
Charitable Lead Trusts 1101 Charitable Lead TrustsRequirements and Income Taxation
11-1
1102 Tax Treatment of Nongrantor Charitable Lead Trusts 1103 Allowable Creators of CLTs and Funding Considerations 1104 Possible Private Fou...
11-2
1105 Use of CLTs in Transfer Tax Planning Private Foundation Applications and How to Avoid 1106 Transactions PlanningIRS Ruling Interpretatio...
11-3
1107 Trust Solely for Charitable Recipients
11-49
1108 Sale of Assets by Estate or Revocable Trust Before Funding Bequest of Charitable Residuary
11-53
Affirmative Use of Grantor Trusts in Transactional Planning
12-1
1201 The Positive Role of Grantor Trusts Today
12-2
1202 Reducing Estate Buildup
12-6
1203 Important TaxFree Nonrecognition Actions Unimpeded by Grantor Trust Status
12-12
GRATs GRUTs and QPRTs
12-18
1205 Trust Ownership of S Corporation Stock
12-29
1206 Installment Sale to Grantor Trust Ignored for Income Taxes
12-36
1207 Trust as a Retirement Plan Beneficiary
12-40
1208 Mitigating Federal Taxes on Income Sourced to NonU S Settlors
12-41
1209 Business Use of Grantor Trust Status
12-42
1210 Use of Grantor Trusts in Corporate Takeover Battles
12-43
1211 Environmental Remediation Trust
12-45
Ownership of S Corporation Stock by TrustsEmphasizing Qualified
13-1
1304 Overview of Technical Requirements to Be a QSST Qualified Subchapter S Trust 1305 Qualified Subchapter S TrustsDetailed Requirements 13...
13-2
Common Uses of QSSTs in Estate Planning 1309 Importance of Trust Status for Valuation of S Corporation Stock Transfers
13-3
1310 Potential GenerationSkipping Transfer Problems
13-48
The IRS Viewpoint
13-49
1312 Voting Trusts
13-62
1313 Continuity of S Corporation Election After Death
13-63
1314 A New ApproachElecting Small Business Trusts ESBTs
13-68
1315 Taxation of the ESBT Portions
13-80
1316 ESBT Elections
13-90
1317 Conversion from a QSST to an ESBT and from an ESBT to a QSST
13-92
1318 Other Matters
13-96
1319 Examples of Taxing ESBTs and Trust Ownership of Other Assets
13-98
1320 Other Technical Provisions Related to S Corporations and All S Corporation Shareholders
13-101
1321 Unenacted S Corporation Proposals
13-104
Grantor Trust Rules 1401 The Legislative Purpose of Grantor Trust Status 1402 Trusts Subject to Grantor Trust Status
14-1
1403 Powers That Are Allowable
14-3
1406 Defective Trust Owning Partnership Interests
14-98
IRS Rulings
14-100
1408 Grantor Trust Rules Overridden for Alimony Trusts
14-115
1409 Absence of Party Related or Subordinate to Grantors May Affect Estate Includibility
14-117
1410 Summary
14-118
Foreign Trusts Treated as Grantor Trusts 1501 Overview 1502 Special Definitional Provisions 1503 Tax Impact from Foreign Trusts Given U S Gran...
15-1
1508 What Criteria are Used When Property is Transferred to a Foreign Trust for a Private Annuity?
15-2
Grantor Trust Rules
15-14
Special Commercial Trusts
15-20
1509 Information Reporting Related to Foreign Trusts Penalties for Failure to Report
15-30
1510 Withholding Tax Requirements 1511 Attempt to Change Foreign Trust to NonGrantor Status Denied
15-32
1512 Substance ControlsVarious Entities are Treated as Shams or Alter Ego of Transferor
15-33
1513 Application of Alter Ego Principles
15-35
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