For these purposes, two general categories of trusts apply: simple trusts
and complex trusts.
The rest of this article will focus on simple trusts
, since those are more common.
With simple trusts
, the distributions are made as often as the trust documents require them to be.
Since 2003, the IRS has allowed certain foreign partnerships, foreign simple trusts
, and foreign grantor trusts to become WPs/WTs and take over chapter 3 and chapter 61 reporting/ withholding with respect to certain partners/beneficiaries.
are those that are required to distribute all income in the tax year in which it is earned; that neither distribute nor reserve any money for charitable purposes; and that do not distribute amounts from the corpus of the trust.
Furthermore, simple trusts
and grantor trusts are also likely to be exempt.
Non-grantor trusts can be classified as simple trusts
or complex trusts.
(5) Also, in most cases the investment income tax does not apply to simple trusts
or grantor trusts.
are required to distribute all income, but are not permitted to distribute from corpus or make charitable contributions.
are required to distribute all current income and are, by definition, prohibited from making charitable contributions.
, defined by the Internal Revenue Code as a trust that must distribute all income annually, comprised 7.3 percent of total assets given.
Complex and simple trusts
were also relatively common filers.