On Dec 28, 8:59*am, Avrum Lapin <avrum...[at]verizon.net> wrote:
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Losses, Capital and otherwise, canot be distributed until the final
year of the trust.

ed

- quote -

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oldman[at]old.net wrote:
....

- quote -


What _has_ to happen to income in the trust is dependent on the terms of
the trust, not IRS rules.

Income inside the trust not distributed will be subject to the tax rates
from the appropriate 1041 however it is generated. Hence, if is normal
to distribute virtually all income to avoid the higher rates or to place
investments in non-(current)-income-generating investments to avoid
(delay) the tax burden. Consultation w/ estate planning professionals
and tax advisors is recommended; not a subject for usenet advice beyond
the rudimentary as too many variables and unknowns in the actual state
of affairs are present.

So, essentially, a repeat of the previous advice.

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In article <3ar8n3194foa3lb8brrvtk7om3hs84rcqd[at]4ax.com> , oldman[at]old.net
wrote:

Snip
- quote -

and in some states where the decedent's trust says that the income goes
to the survivor's trust the word income has been defined as only
interest and dividends. Other trusts may allow or require distribution
of Capital Gain (loss).

Note that this seems to be a controversial issue. I consulted a CPA, an
estate attorney who consulted another CPA and an attorney who practices
before the IRS (who consulted a 3rd CPA). The 1st CPA discussed the
matter with her colleagues and came out in favor "if it appears on lines
1-8 of the 1041 it is income to be distributed", the second sounded
wishy washy but favored the "interest/dividend only" approach, the 3rd
came out emphatically on the side of interest/dividend only" Since the
out of pocket wasn't much I opted for the majority opinion. Both
attorneys told me not to worry sine the trust was probably too small to
attract attention. Since no one sent me a bill, the advice may be worth
what I paid for

In any case when filling out the 1041 you enter the capital gain (loss)
and continue on Adjusted total income (loss) - line 17 on the 2006 form
and then you go on to Schedule B, figure out the Income distribution
deduction, enter that on line 18 and carry one. The end results in
Taxable Income or loss (line 22) . The instructions tell how to proceed

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I was reading the several post regarding Taxable income from Estate
planning trusts.

Here are my questions now which are an extension of those questions.

In a revocable trust you can buy, sell trade securities and report
income, capital gains and capital losses on the 1040. What happens
after an estate is split and there is a survivor trust and essentially
two residual trusts (one up to the limit of the decease's exemption
currently $2 million and then the part if any in excess of the $2
million.)

In the case of the survivors trust it continues to be handled as
before. However, in the case of the deceased residual trusts I know
all of the income passes to the survivor due to the favorable tax
rates vs the residual trusts (1041). What I would be interested to
know what happens in the residual trusts if any securities are sold
via a normal trade or if the companies are taken over via merger or
acquisition. In essence what happens to the capital gains or losses
in these transactions. Which of the funds remain in the residual
trusts and which must pass to the survivor.

If I am not making my self clear please request clarifications.

Oldman

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >