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Trusts and Reportable Income

As a general rule, income earned by an estate or trust is taxed only once, and in the same manner as it would be taxed to an individual. See IRC Section 641. However, estates and trusts may deduct charitable contributions without any limitation based on adjusted gross income, and may take exemptions that are not pro-rated for shorter tax years or phased out based on income thresholds. The exemption available to an estate is $600, while simple trusts may take a $300 exemption and complex trusts may take a $100 exemption....

By |June 5th, 2016|Uncategorized|Comments Off on Trusts and Reportable Income

If you have a trust Choosing a Taxable Year can be important

Trusts generally are required to report income on a calendar year basis. Just as with individual income tax returns, the Form 1041 is due April 15. A fiduciary may request a five-month extension to file the federal return by filing a Form 7004 (“Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns”). Note that this is a five month extension rather than the six month extension offered for individual filers. An extension to file the return does not provide an extension to pay taxes, and any tax that is believed to be due as of the original due date must be paid at that time in order to avoid applicable penalties and/or interest....

By |June 5th, 2016|Uncategorized|Comments Off on If you have a trust Choosing a Taxable Year can be important

Basic Types of Trusts for Income Tax Purposes and Filing Requirements

Trusts are classified as either grantor or non-grantor trusts. In the case of grantor trusts, income is taxed to the grantor during his or her lifetime and reported on the grantor’s Form 1040 (“U.S. Individual Income Tax Return”). A trust is considered to be a grantor trust when the grantor retains certain rights in the trust and trust property, such as a right to continuing dominion, control, or enjoyment of the trust property, a right to revoke the trust, or a right to receive income from the trust property. See IRC Sections 671-678....

By |June 5th, 2016|Uncategorized|Comments Off on Basic Types of Trusts for Income Tax Purposes and Filing Requirements

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