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| | {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=Since the cash must be distributed to the charitable beneficiaries, the charitable bequest will be paid out of income. I see no reason to issue separate checks for the amount paid out of income.}} | | {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=Since the cash must be distributed to the charitable beneficiaries, the charitable bequest will be paid out of income. I see no reason to issue separate checks for the amount paid out of income.}} |
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| | + | {{ForumReplyPost|UserID=Riley2|Date=8 September 2009|Text=The capital loss should be allocated to the beneficiary who bore the burden of the loss. Apparently, that would be the charitable beneficiaries.}} |
Revision as of 00:33, 8 September 2009
Discussion Forum Index --> Advanced Tax Questions --> Trust's Charitable Deduction
Discussion Forum Index --> Tax Questions --> Trust's Charitable Deduction
Quirk (talk|edits) said:
| 1 September 2009
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| Do I have the correct interpretation here? I have a living trust wherein the grantor has passed away. His only stipulation for distribution of assets was that 50% was to be given to one charity and 50% to another. All residual property (non cash) would go to a named beneficiary. After selling the stock and investments, the resulting cash is approximately $120,000. Total income is $39,517 and after expenses, generates a tax of $9,652. I understand that a charitable deduction is limited to the income, so I believe that I can take a deduction up to the income amount and distribute the remainder to the charities without a deduction? Secondly, should this be accomplished with separate checks? Two for the amount of the deduction and two for the remainder?
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Kevinh5 (talk|edits) said:
| 1 September 2009
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| wow - how did they get a profit last year when the market was going down? Or was this post-March 09?
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Quirk (talk|edits) said:
| 1 September 2009
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| Kevin5 The income is $4,375 of interest, and $38,142 taxable distribution from an annuity. Otherwise, the sale of the other investments resulted in a $5,140 Capital loss.
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Kevinh5 (talk|edits) said:
| 1 September 2009
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| OK, now what did the document say to do with the income?
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Riley2 (talk|edits) said:
| 1 September 2009
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| Assuming that the noncharitable beneficiary did not share in the income, I believe that you can either claim a deduction or show a distribution to the charitable beneficiaries.
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Quirk (talk|edits) said:
| 1 September 2009
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| Kevin5 & Riley2 Sorry about the delay. Apparently we did not have all the documents. Trust instrument only states that 50% of remaining estate after paying all expenses is to go to one charity and 50% to charity number two. Since there is no specification about payment out of income or corpus, I assume that I can take a deduction for the amount up to the amount of income and then distribute the rest simply as distribution of the rest of the trust with no deduction. Agree?
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Dennis (talk|edits) said:
| 2 September 2009
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| Sort of. Better seen in the case you first describe. When the residual estate is split, each part is entitled to its respective share of the income earned under administration. That will not change, regardless of how distribution is effected, such that only half of the income would be allowable as a charitable deduction.
Reg. 1.663(c)-1
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Riley2 (talk|edits) said:
| 2 September 2009
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| Quirk, I am a little confused. In the OP, you indicated that there was 1 noncharitable beneficiary and 2 charitable beneficiaries. I also got the impression that the noncharitable beneficiary would share in the residue, but now I am getting the sense that the noncharitable beneficiary was entitled to only certain specific bequests, in which case all of the income would be alllocated to the charities.
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Quirk (talk|edits) said:
| 7 September 2009
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| Riley2 Thanks. The problem arose from the fact that the attorney had not given my client all the pages from the trust, most notably the page describing income distribution. However, my question is still valid. The instructions state that all the cash ($246,650)is to be split between two separate charities and any remaining items such as furniture, personal effects. etc will go to a non-charitable beneficiary. The trust generated $4,375 of interest income, 38,142 of annuity income and $5,140 of capital loss. With roughly $8,838 of expenses, the result would be a tax of about $9,652 not counting the charitable distributions. Since there is no specific wording that the income of the trust is to be distributed to the charities, I assume that I can contribute and claim up to $9,652 of the $246,650 as a charitable deduction even though that is more than the income? Therefore, we would issue two checks for $4,826 to the two charities for the charitable deduction and two checks for the balance? Secondly, I am not sure what to do with the capital loss. The reglations state that on the final return any capital loss goes to the beneficiaries. Seems like a waste since I don't think charities can use "losses" on their returns. The regulations are not very clear on either of these two situations. Am I thinking correctly?
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Quirk (talk|edits) said:
| 7 September 2009
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| Actually, I misspoke. What I meant to say was to take a charotable deduction to zero out the income and the rest then would be a distribution.
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Riley2 (talk|edits) said:
| 8 September 2009
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| Since the cash must be distributed to the charitable beneficiaries, the charitable bequest will be paid out of income. I see no reason to issue separate checks for the amount paid out of income.
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Riley2 (talk|edits) said:
| 8 September 2009
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| The capital loss should be allocated to the beneficiary who bore the burden of the loss. Apparently, that would be the charitable beneficiaries.
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