- 5 - (2) the amount of his investment income as derived from his late mother’s trust, see sec. 32(i). Discussion3 For tax purposes, trusts are either “simple” or “complex”. See sec. 1.651(a)-1, Income Tax Regs. In order to be a simple trust, a trust must be required to distribute all income currently. See secs. 1.651(a)-1, 1.652(a)-1, Income Tax Regs. In contrast, a complex trust may distribute or accumulate income, or pay or set aside income for charitable purposes. Secs. 1.651(a)-1, 1.661(a)-1, Income Tax Regs. A simple trust acts as a conduit, with income flowing through the trust to the beneficiary. Therefore, for income tax purposes, a beneficiary of a simple trust is required to include in the beneficiary’s income the trust’s income that is required to be distributed to the beneficiary currently, whether the trust’s income is actually distributed or not.4 Sec. 652(a); sec. 1.652(a)-1, Income Tax Regs. The record in the present case demonstrates that the Ruth Irene Myers Irrevocable Trust was a simple trust. Sec. 651; sec. 1.651(a)-1, Income Tax Regs. Thus, all of the income that the trust was required to distribute in 2001, i.e., $14,412, is 3 We decide the issue in this case without regard to the burden of proof. 4 The conduit theory of trust taxation also instructs that the income received by a beneficiary retains the same character in the hands of the beneficiary as in the hands of the trust. Sec. 652(b).Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011