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Client had a revocable living trust with about $1,000,000 at his death in 2005. Form 706 was not required for his estate. 20% of the trust goes to decedent's cousin and the other 80% stays in trust for discretionary distributions of income and/or principal to IRC tax exempt charitable organizations. During 2006 the trust settled up the decedent's affairs, paid 20% of the net trust income and principal as of the termination date to the cousin, and transferred the remaining assets to a new account to be used for future charitable distributions.
My initial concern was that this might be a tax-exempt entity, private foundation, or an entity subject to special self-dealing rules. Since no charitable deduction was ever taken for the trust and no tax-deductible contributions are expected to be received in the future, my thinking now is that Form 1041 will continue to be filed for the trust, with taxable income (hopefully none after annual charitable distributions) computed and taxed in the normal manner, and none of the special filings/rules applicable to other tax exempt organizations.
This is my first time for a client making a charitable contribution in this fashion, so I'd appreciate any of the members' thoughts on this.
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Member
 
Group: Forum Members
Last Login: 1/3/2012 10:46:42 AM
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I think if this entity is expected to continue, the IRS would say the Private Foundation rules apply. OTOH, if the trust is to pay out its corpus and dissolve within a year or two, it could be treated as a trust.
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