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.
Even what were previously simple trusts
can be caught by inheritance tax charges on property as a result of changes in recent years, says Kevin Lloyd James, CCH Tax Consultant.
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.
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.
See Exhibit 1 for a summary of the rules for simple trusts
, defined by the Internal Revenue Code as a trust that must distribute all income annually, comprised 7.
Nearly 748,000 Forms 1041 were filed by simple trusts
in 2004, a slight increase from the approximately 747,000 filed in 2003.
These changes will affect all simple trusts
, all complex trusts using trust income as a benchmark, and all qualified terminable interest property (QTIP) marital deduction trusts (1) in states that have adopted versions of the UPIA or (2) governed by the terms of a document that contains a power to adjust or a unitrust amount: They will also affect any charitable remainder unitrust (CRUT) in a state that has adopted a default unitrust definition of income (such as the New York proposal, before its recent amendment).
7 percent, though the percentage of deductions attributable to simple trusts
As in the case of simple trusts
, beneficiaries of complex trusts and estates must include in their gross income the amounts for which the trust or estate received a deduction for distributions.