6l deyo Incometaxation r区 estates
1 Chapter 14: Income Taxation of Trusts & Estates
NCOME TAXATION OF trusts EStates Fiduciary taxation Basic concepts and definitions Trust taxable income Distributable net income(DNI) Simple trusts Complex trusts Income in respect of a decedent 2
2 INCOME TAXATION OF TRUSTS & ESTATES Fiduciary taxation Basic concepts and definitions Trust taxable income Distributable net income (DNI) Simple trusts Complex trusts Income in respect of a decedent
Fiduciary Taxation Trusts and estates are separate taxpayers Deductions permitted for distributions to beneficiaries Distributed income from trust retains its character in hands of beneficia Limited personal exemption available and no dependent exemptions 3
3 Fiduciary Taxation Trusts and estates are separate taxpayers Deductions permitted for distributions to beneficiaries Distributed income from trust retains its character in hands of beneficiary Limited personal exemption available and no dependent exemptions
Basic Concepts and Definitions (1 of 5) Estate comes into existence upon death of person whose assets are being administered Trust is a legal entity created while a person is allve or under direction of a will following a persons death Testamentary trust receives assets from estate of decedent
4 Basic Concepts and Definitions (1 of 5) Estate comes into existence upon death of person whose assets are being administered Trust is a legal entity created while a person is alive or under direction of a will following a person’s death Testamentary trust receives assets from estate of decedent
Basic Concepts and Definitions (2 of 5) Principal or corpus Initial assets transferred by grantor plus certain additions/deductions required by provisions of trust instrument Income Earnings derived from principal but certain gains, losses or deductions may be considered adjustments to principal 5
5 Basic Concepts and Definitions (2 of 5) Principal or corpus – Initial assets transferred by grantor plus certain additions/deductions required by provisions of trust instrument Income –Earnings derived from principal but certain gains, losses or deductions may be considered adjustments to principal