Jeffrey Michael Steingold - Page 4




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          2.   Trust Income                                                           
               The terms of the governing instrument and applicable local             
          law determine whether trust income is required to be distributed            
          currently (i.e., whether the beneficiary has a present right to             
          receive income).  See sec. 1.651(a)-2, Income Tax Regs.  If trust           
          income is currently distributable, and no other distributions are           
          made in a taxable year, the trust is a simple trust.  Tax                   
          treatment of a simple trust is governed by sections 651 and 652.            
          Section 651(a) allows the trust a deduction for income “required            
          to be distributed currently”.  Section 652(a) subjects the                  
          beneficiary to taxation on amounts “required to be distributed,             
          whether distributed or not.”                                                
               A trust not governed by the simple trust provisions is                 
          subject to the complex trust provisions.  “A trust may be a                 
          simple trust for one year and a complex trust for another year.”            
          Sec. 1.651(a)-1(b), Income Tax Regs.  Pursuant to sections 661              
          and 662, only that part of the trust income which is paid or                
          credited to the beneficiary during the year may be deducted by              
          the trust and taxed to the beneficiary.  The trustee of a complex           
          trust may have discretion to accumulate or distribute all, or               
          part, of the income to the beneficiary.  Thus, the Code assures             
          that income distributions will “appear in the fiduciary’s return,           
          if they are still his; in the beneficiary’s, only in case he has            
          become presently entitled to them, or received them.”                       






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