DULE37 TAXES: GIFT AND ESTATE

MO 651

A. An estate or trust must file US Fiduciary Income Tax Return Form 1041 if it has gross income of $600
or
more.
1. Return is due by the 15th day of the fourth month following the close of the estate or trust's taxable
year.

2. A trust must adopt a calendar year as its taxable year. An estate may adopt a calendar year or any
fiscal year.

3. For 2009, estate and trusts are taxed as follows:

a. First $2,300 of taxable income is taxed at 15%
a. Over $2,300 but not over $5,350 is taxed at 25%
b. Over $5,350 but not over $8,200 is taxed at 28%
b. Over $8,200 but not over $11,150 is taxed at 33%
c. Over $11,150 is taxed at 35%
4. The alternative minimum tax applies to estates and trusts and is computed in the same manner as for
individuals. The AMT exemption for an estate or trust is $22,500. '
5. Estates and trusts are generally required to make estimated tax payments using the rules applicable to
individuals. However, estates .do not have to make estimated payments for taxable years ending
within two years of the decedent's death.

B. Classification of Trusts
1. Simple trust is one that (1) is required to distribute all of its income to beneficiaries each year, (2)
cannot make charitable contributions, and (3) makes no distribution of trust corpus (i.e., principal)
during the year.

1. Complex trust is one in which (1) the trustee has discretion whether to distribute or accumulate its in-
come, (2) may make charitable contributions, and (3) may distribute trust corpus.

C. Computation of Estate or Trust Taxable Income

1. Gross income for an estate or trust is generally the same as for individual taxpayers.
a. Generally no gain or loss is recognized on the transfer of property to beneficiaries to satisfy
spe-
cific bequests.

a. Gain or loss is recognized on the transfer of property to beneficiaries in lieu of cash to satisfy
spe-
cific cash bequests.
2.Allowable deductions for an estate or trust are generally the same as for an individual taxpayer.
a, A personal exemption is allowed.
(1) $600 for estate

(2) $300 for simple trust (i.e., a trust required to distribute all income currently)
(3) $100 for a complex trust (i.e., a trust other than a simple trust)
b. Charitable contributions can be deducted without limitation if paid out of
income.
(1) Contributions are not deductible to the extent paid out of tax-exempt income.
(2) Only complex trusts can make charitable contributions.

b. Expenses incurred in the production of tax exempt income are not deductible.
c. Capital losses offset capital gains and a net capital loss of up to $3,000 can be deducted with
 the
remainder carried forward.

c. Medical and funeral expenses of a decedent are not allowed as deductions on estate's income tax

return Form 1041. However, if medical expenses are paid within twelve months of the decedent's
death, they are deductible on the decedent's final Form 1040, if the estate's executor waives the
deduction on the decedent's estate tax return.
d. Any unused capital loss and NOL carryovers from the decedent's final Form 1040 are not ail
owed'
as deductions.
3, An income distribution deduction is allowed for distributions of income to beneficiaries.