Gary D. Myers - Page 6

                                        - 5 -                                         
          (2) the amount of his investment income as derived from his late            
          mother’s trust, see sec. 32(i).                                             
               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