《税收概述》（英文版） chapter 14: Income Taxation

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

Basic Concepts and Definitions (3 of 5) Grantor Party that transfers assets to the trust Trustee Party that administers the trust Income Beneficiary Party(or parties)who receives income when distributed by Trustee under provisions of trust instrument 6

6 Basic Concepts and Definitions (3 of 5) Grantor –Party that transfers assets to the trust Trustee –Party that administers the trust Income Beneficiary –Party (or parties) who receives income when distributed by Trustee under provisions of trust instrument

Basic Concepts and Definitions (4 of 5) Remaindermen Party(or parties) who eventually receives trust principal Same person may receive both income and principal Simple trust Must distribute all income annually Does not distribute any principal AND Makes no contributions to charities 7

7 Basic Concepts and Definitions (4 of 5) Remaindermen –Party (or parties) who eventually receives trust principal –Same person may receive both income and principal Simple trust – Must distribute all income annually –Does not distribute any principal AND – Makes no contributions to charities

Basic Concepts and Definitions (5 of 5)III Complex trust Any trust that is not a simple trust Personal exemption $300 if all income required to be distributed annually $100 if current income may be retained 8

8 Basic Concepts and Definitions (5 of 5) Complex trust –Any trust that is not a simple trust Personal exemption – $300 if all income required to be distributed annually – $100 if current income may be retained

Trust Taxable Income Gross Income Deductions for expenses Personal exemption Taxable income before distribution Distribution deduction Trust taxable income 9

9 Trust Taxable Income Gross Income - Deductions for expenses - Personal exemption = Taxable income before distribution - Distribution deduction = Trust taxable income

Distributable net Income (DNI)Mof DNI is maximum distribution deduction income reportable by beneficiaries No distribution deduction available for portion of distribution deemed to consist of tax-exempt income even though net tax-exempt income ncluded in dn 10

10 Distributable Net Income (DNI)(1of 2) DNI is maximum distribution deduction & income reportable by beneficiaries No distribution deduction available for portion of distribution deemed to consist of tax-exempt income even though net tax-exempt income included in DNI