Instructions for Form 1041-N |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Part I — General Information
Enter the year (or period) for which you are filing for the electing ANST.
Copy the exact name from the Form SS-4 used to apply for the employer identification number you are using to file Form 1041-N.
Line 3a—Name and Title of Trustee
Enter the name and title (if any) of the trustee. If a fiduciary relationship was created or terminated, be sure to file Form
56, Notice Concerning
Fiduciary Relationship.
If a fiduciary relationship was not created or terminated but the fiduciary had a change in name or another fiduciary's name
was entered, be sure
to check the “Change in fiduciary's name” box on line 6.
Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street
address and you
have a P.O. box, show the box number instead of the street address.
If you change your address after filing Form 1041-N, use Form 8822, Change of Address, to notify the IRS.
If a different address from the prior year was entered and Form 8822 was not filed, be sure to check the box on line 6 for
“Change in fiduciary's
address.”
Be sure to check all the boxes that apply. Also, see the line 3a and 3b instructions above for information regarding a change
in the fiduciary's
name and for information on changes to the fiduciary's address.
Part II — Tax Computation
Line 2a—Total Ordinary Dividends
Report the total of all ordinary dividends received during the tax year.
Line 2b—Qualified Dividends
Enter the ANST's total qualified dividends on line 2b and use Part IV of Schedule D to figure the ANST's tax. Qualified dividends
are eligible for
a lower tax rate than other ordinary income. Generally, these dividends are shown in box 1b of Form(s) 1099-DIV. See Pub.
550 for the definition of
qualified dividends if you received dividends not reported on Form 1099-DIV.
Exception.
Some dividends may be reported as qualified dividends in box 1b of Form 1099-DIV but are not qualified dividends.
These include:
-
Dividends received on any share of stock that the ANST held for less than 61 days during the 121-day period that began 60
days before the
ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of
a stock is not entitled to
receive the next dividend payment. When counting the number of days the ANST held the stock, include the day you disposed
of the stock but not the day
you acquired it.
-
Dividends attributable to periods totaling more than 366 days that the ANST received on any share of preferred stock held
for less than 91
days during the 181-day period that began 90 days before the ex-dividend date. Preferred dividends attributable to periods
totaling less than 367 days
are subject to the 61-day holding period rule above.
-
Dividends on any share of stock to the extent that the ANST under an obligation (including a short sale) to make related payments
with
respect to positions in substantially similar or related property.
-
Payments in lieu of dividends, but only if you know or have reason to know that the payments are not qualified dividends.
Line 3—Capital Gain or (Loss)
Enter the gain from Schedule D, line 11; or the loss from Schedule D,
line 12.
Note:
Report capital gain distributions on Schedule D (Form 1041-N), line 7.
List the type and amount of income not included on lines 1a through 3. List the type and amount on an attached schedule if
the ANST has more than
one item.
Allocation of Deductions for Tax-Exempt Income
Generally, no deduction that would otherwise be allowable is allowed for any expense that is allocable to tax-exempt income,
such as interest on
state or local bonds.
Exception.
State income taxes and business expenses that are allocable to tax-exempt interest are deductible.
Expenses that are directly allocable to tax-exempt income are allocable only to tax-exempt income. A reasonable proportion
of expenses indirectly
allocable to both tax-exempt income and other income must be allocated to each class of income.
Limitations on Deductions
Generally, the amount an ANST has "at risk" limits the loss it can deduct in any tax year. Also, section 469 and its regulations
generally limit
losses from passive activities to the amount of income derived from all passive activities. Similarly, credits from passive
activities are generally
limited to the tax attributable to such activities.
For details on these and other limitations on deductions, see Deductions in the Instructions for Form 1041.
Line 9—Other Deductions Not Subject to the 2% Floor
Attach a schedule listing by type and amount all allowable deductions that are not deductible elsewhere on the form. No deduction
is allowed for
distributions to beneficiaries.
Line 10—Allowable Miscellaneous Itemized Deductions Subject to the 2% Floor
These are deductible only to the extent that the aggregate amount of such deductions exceeds 2% of adjusted gross income (AGI).
Among the miscellaneous itemized deductions that must be included on line 10 are expenses for the production or collection
of income, such as
investment advisory fees.
AGI is figured by subtracting from total income on line 5 the total of the administration costs on lines 7 through 9 (to the
extent they are costs
incurred in the administration of the ANST that would not have been incurred if the property were not held by the ANST) and
line 11.
A trust whose governing instrument requires all income to be distributed currently is allowed a $300 exemption, even if it
distributed amounts
other than income during the tax year. All other trusts are allowed a $100 exemption.
If the ANST does not have a net capital gain or qualified dividends and has an amount greater than zero on line 13, check
the first box on line 14,
multiply the amount on line 13 by 10%, and enter the result on line 14.
Schedule D.
If the ANST had net capital gain (or qualified dividends) and any taxable income, complete Part IV of Schedule D (Form
1041-N), enter the tax from
line 30 of Schedule D on line 14, and check the “ Schedule D” box.
Specify the type of credit being claimed or form number and attach any required credit forms. If you are claiming more than
one type of credit,
attach a schedule listing the type and amount of each credit claimed. See the Instructions for Form 1041 for details on the
credits that may be
claimed.
If the ANST owes any additional taxes (e.g., recapture taxes, etc.), include these taxes on line 16. To the left of the entry
space, write the type
and amount of the tax. Also attach to Form 1041-N any forms required to figure these taxes. See the Instructions for Form
1041 for more details on
additional taxes that may apply.
Include on line 17 any:
-
Estimated tax payments made for the tax year,
-
Tax paid with a request for an extension of time to file,
-
Federal income tax withheld (e.g., backup withholding), and
-
Credit for tax paid on undistributed capital gains. Also attach copy B of Form 2439, Notice to Shareholder of Undistributed
Long-Term
Capital Gains.
You must pay the tax in full when the return is filed to avoid interest charges and possible penalties. Make the check or
money order payable to
“United States Treasury.” Write the EIN, the tax year, and Form 1041-N on the payment. Enclose, but do not attach, the payment with Form 1041-N.
Part III — Other Information
If you answered “Yes” to this question, attach a schedule with the following information for each asset received from the sponsoring ANC:
-
A description of the asset,
-
The date the asset was distributed to the ANST, and
-
The asset's fair market value on that date.
The ANST may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain
Foreign Gifts, if:
-
It directly or indirectly transferred property or money to a foreign trust. For this purpose, any U.S. person who created
a foreign trust is
considered a transferor.
-
It is treated as the owner of any part of the assets of a foreign trust under the grantor trust rules.
-
It received a distribution from a foreign trust.
Note:
An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A, Annual Information
Return of Foreign
Trust With a U.S. Owner.
Check the “Yes” box and enter the name of the foreign country if either 1 or 2 below applies.
-
At any time during the year the ANST had an interest in or signature or other authority over a bank, securities, or other
financial account
in a foreign country.
Exception. Check “No” if either of the following applies to the ANST:
-
The combined value of the accounts was $10,000 or less during the whole year, or
-
The accounts were with a U.S. military banking facility operated by a U.S. financial institution.
-
The ANST owns more than 50% of the stock in any corporation that owns one or more foreign bank accounts.
Get Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, to see if the ANST is considered to have an interest
in or signature or other
authority over a bank, securities, or other financial account in a foreign country.
If you checked “Yes” for Question 3, file Form TD F 90-22.1 by June 30 of the year following the ANST's tax year with the Department of the
Treasury at the address shown on the form.
Form TD F 90-22.1 is not a tax return, so do not file it with Form 1041-N. You may order Form TD F 90-22.1 by calling 1-800-829-3676
(1-800-TAX-FORM).
To make the section 643(e)(3) election to recognize gain on property distributed in kind, check the box and see Section 643(e)(3)
Election on
page 5.
Schedule D—Capital Gains and Losses
Use Schedule D to report gains and losses from the sale or exchange of capital assets by an ANST.
To report the sale or exchange of property used in a trade or business, involuntary conversions (other than casualties and
thefts), and certain
ordinary gains and losses, see Form 4797 and related instructions.
If property is involuntarily converted because of a casualty or theft, use Form 4684.
Section 1256 contracts and straddles are reported on Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.
Each item of property held by the ANST is a capital asset except:
-
Inventoriable assets or property held primarily for sale to customers;
-
Depreciable or real property used in a trade or business, even if it is fully depreciated;
-
Certain copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property;
-
Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale
of inventoriable
assets or property held primarily for sale to customers;
-
Certain U.S. Government publications not purchased at the public sale price;
-
Certain "commodities derivative financial instruments" held by a dealer (see section 1221(a)(6));
-
Certain hedging transactions entered into in the normal course of the ANST's trade or business (see section 1221(a)(7)); and
-
Supplies regularly used in the ANST's trade or business.
You may find additional helpful information in the following publications: Pub. 544, Sales and Other Dispositions of Assets,
and Pub. 551, Basis of
Assets.
Separate the capital gains and losses according to how long the ANST held or owned the property. The holding period for short-term
capital gains
and losses is 1 year or less. The holding period for long-term gains and losses is more than 1 year.
When you figure the length of the period the ANST held property, begin counting on the day after the ANST acquired the property
and include the day
the ANST disposed of it. Use the trade dates for the date of acquisition and sale of stocks and bonds traded on an exchange
or over-the-counter
market.
Section 643(e)(3) Election
For noncash property distributions, a fiduciary may elect to have the ANST recognize gain or loss in the same manner as if
the distributed property
had been sold to the beneficiary at its fair market value. If the election is made, the beneficiary's basis of such property
is its fair market value.
This election applies to all distributions made by the ANST during the tax year and, once made, may be revoked only with IRS
consent.
Note that section 267 does not allow an ANST to claim a deduction for any loss on property to which a section 643(e)(3) election
applies. In
addition, when an ANST distributes depreciable property, section 1239 applies to deny capital gains treatment for any gain
on property to which a
section 643(e)(3) election applies.
Enter either the gross sales price or the net sales price from the sale. On sales of stocks and bonds, report the gross amount
as reported to the
ANST on Form 1099-B or similar statement. However, if the ANST was advised that gross proceeds less commissions and option
premiums were reported to
the IRS, enter that net amount in
column (d).
Capital Loss Carryover Worksheet Keep for Your Records
Use this worksheet to figure the ANST's capital loss carryovers from the current tax year to the
following tax year if Schedule D, line 12, is a loss and (a) the loss on Schedule D, line 11, is more than $3,000, or (b) Form
1041-N, page 1, line 13 is a loss.
|
1. |
Enter taxable income (or loss) from Form 1041-N, line 13
|
1. |
|
2. |
Enter loss from line 12 of Schedule D as a positive amount
|
2. |
|
3. |
Enter amount from Form 1041-N, line 11
|
3. |
|
4. |
Adjusted taxable income. Combine lines 1, 2, and 3. If zero or less, enter -0-
|
4. |
|
5. |
Enter the smaller of line 2 or line 4
|
5. |
|
|
Note: If line 4 of Schedule D is a loss, go to line 6; otherwise, enter -0- on line 6 and go to
line 10. |
6. |
Enter loss from Schedule D, line 4, as a positive amount
|
6. |
|
7. |
Enter gain, if any, from Schedule D, line 10. If that line is blank or shows a loss, enter -0-
|
7. |
|
|
|
8. |
Add lines 5 and 7
|
8. |
|
9. |
Short-term capital loss carryover. Subtract line 8 from line 6. If zero or less, enter -0-.
Enter this loss on the short-term capital loss carryover line of next year's Schedule D
|
9. |
|
|
Note: If line 10 of Schedule D is a loss, go to line 10; otherwise, skip lines 10 through
14. |
10. |
Enter loss from Schedule D, line 10, as a positive amount
|
10. |
|
11. |
Enter gain, if any, from Schedule D, line 4. If that line is blank or shows a loss, enter -0-
|
11. |
|
|
|
12. |
Subtract line 6 from line 5. If zero or less, enter -0-
|
12. |
|
|
|
13. |
Add lines 11 and 12
|
13. |
|
14. |
Long-term capital loss carryover. Subtract line 13 from line 10. If zero or less, enter -0-.
Enter this loss on the long-term capital loss carryover line of next year's Schedule D
|
14. |
|
Column (e)—Cost or Other Basis
Generally, the basis of property acquired by gift is the same as the basis in the hands of the donor. If the fair market value
of the property at
the time it was transferred to the trust is less than the transferor's basis, then the fair market value is used for determining
any loss on
disposition.
If the property was transferred to the ANST and a gift tax was paid under Chapter 12, then increase the donor's basis as follows:
Multiply the
amount of the gift tax paid by a fraction, the numerator of which is the net appreciation in value of the gift (defined below),
and the denominator of
which is the amount of the gift. For this purpose, the net appreciation in value of the gift is the amount by which the fair
market value of the gift
exceeds the donor's adjusted basis.
Adjustments to basis.
Before figuring any gain or loss on the sale, exchange, or other disposition of property owned by the ANST, adjustments
to the property's basis may
be required. See Pub. 551 for additional information.
Column (f)—Gain or (Loss)
Make a separate entry in this column for each transaction reported on lines 1 and 5 and any other lines that apply to the
ANST. For lines 1 and 5,
subtract the amount in column (e) from the amount in column (d). Enter negative amounts in parentheses.
Add line 18 from the Unrecaptured Section 1250 Gain Worksheet and line 7 from the 28% Rate Gain Worksheet.
Unrecaptured Section 1250 Gain
Complete the Unrecaptured Section 1250 Gain Worksheet on this page if any of the following apply.
-
During the tax year, the ANST sold or otherwise disposed of section 1250 property (generally, real property that was depreciated)
held more
than 1 year.
-
The ANST received installment payments during the tax year for section 1250 property held more than 1 year for which it is
reporting gain on
the installment method.
-
The ANST received a Schedule K-1 from an estate or trust, partnership, or S corporation that shows "unrecaptured section 1250
gain"
reportable for the tax year.
-
The ANST received a Form 1099-DIV or Form 2439 from a real estate investment trust or regulated investment company (including
a mutual fund)
that reports "unrecaptured section 1250 gain" for the tax year.
-
The ANST reported a long-term capital gain from the sale or exchange of an interest in a partnership that owned section 1250
property.
Instructions for the Unrecaptured Section 1250 Gain Worksheet
Unrecaptured Section 1250 Gain Worksheet Keep for Your Records
If the ANST is not reporting a gain on Form 4797, line 7 (for 2004, or the comparable line for
the current tax year), skip lines 1 through 9 and go to line 10. |
1. |
If the ANST has a section 1250 property in Part III of Form 4797 for which you made an entry in Part I of
Form 4797 (but not on Form 6252), enter the smaller of line 22 or line 24 of Form 4797 (for 2004, or the comparable line for the current
tax year) for that property. If the ANST did not have any such property, go to line 4. If it had more than one such property,
see instructions
|
1. |
|
2. |
Enter the amount from Form 4797, line 26g (for 2004, or the comparable line for the current tax year), for
the property for which you made an entry on line 1
|
2. |
|
3. |
Subtract line 2 from line 1
|
3. |
|
4. |
Enter the total unrecaptured section 1250 gain included on line 26 or line 37 of Form(s) 6252 (for 2004,
or the comparable line for the current tax year), from installment sales of trade or business property held more than 1 year
(see instructions)
|
4. |
|
5. |
Enter the total of any amounts reported to the ANST on a Schedule K-1 from a partnership or an S
corporation as “unrecaptured section 1250 gain”
|
5. |
|
6. |
Add lines 3 through 5
|
6. |
|
7. |
Enter the smaller of line 6 or the gain from Form 4797, line 7 (for 2004, or the comparable line for the current tax year)
.
|
7. |
|
|
|
8. |
Enter the amount, if any, from Form 4797, line 8 (for 2004, or the comparable line for the current tax year)
|
8. |
|
|
|
9. |
Subtract line 8 from line 7. If zero or less, enter -0-
|
9. |
|
10. |
Enter the amount of any gain from the sale or exchange of an interest in a partnership attributable to
unrecaptured section 1250 gain (see instructions)
|
10. |
|
11. |
Enter the total of any amounts reported to the ANST on a Schedule K-1, Form 1099-DIV, or Form 2439 as
"unrecaptured section 1250 gain" from an estate, trust, real estate investment trust, or mutual fund (or other regulated investment
company)
|
11. |
|
12. |
Enter the total of any unrecaptured section 1250 gain from sales (including installment sales) or other
dispositions of section 1250 property held more than 1 year for which you did not make an entry in Part I of Form 4797 for
the year of sale (see
instructions)
|
12. |
|
13. |
Add lines 9 through 12
|
13. |
|
14. |
If the ANST had any section 1202 gain or collectibles gain or (loss), enter the total of lines 1 through 4 of the 28% Rate
Gain
Worksheet on page 8. Otherwise, enter -0-
|
14. |
|
|
|
15. |
Enter the (loss), if any, from Schedule D, line 4. If Schedule D, line 4, is zero or a gain, enter -0-
|
15. |
|
|
|
16. |
Enter the ANST's long-term capital loss carryover from Schedule D, line 9
|
16. |
( )
|
17. |
Combine lines 14 through 16. If the result is zero or a gain, enter -0-. If the result is a (loss), enter
it as a positive amount
|
17. |
|
18. |
Unrecaptured section 1250 gain. Subtract line 17 from line 13. If zero or less, enter -0-. Combine this
result with the result on line 7 of the 28% Rate Gain Worksheet, if any, and enter that result on Schedule D, line 23
|
18. |
|
Lines 1 through 3.
If the ANST had more than one property described on line 1, complete lines 1 through 3 for each property on a separate
worksheet. Enter the total
of the line 3 amounts for all properties on line 3 and go to line 4.
Line 4.
To figure the amount to enter on line 4, follow the steps below for each installment sale of trade or business property
held more than 1 year.
Step 1.
Figure the smaller of (a) the depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller
of line 22 or line 24 of
the 2004 Form 4797 (or the comparable lines of Form 4797 for the year of sale) for that property.
Step 2.
Reduce the amount figured in step 1 by any section 1250 ordinary income recapture for the sale. This is the amount
from line 26g of the 2004 Form
4797 (or the comparable line of Form 4797 for the year of sale) for that property. The result is the total unrecaptured section
1250 gain that must be
allocated to the installment payments received from the sale.
Step 3.
Generally, the amount of section 1231 gain on each installment payment is treated as unrecaptured section 1250 gain
until the total unrecaptured
section 1250 gain figured in step 2 has been used in full. Figure the amount of gain treated as unrecaptured section 1250 gain for
installment payments received during the tax year, as the smaller of (a) the amount from line 26 or line 37 of the 2004 Form
6252, whichever applies
(or comparable lines for the current tax year), or (b) the amount of unrecaptured section 1250 gain remaining to be reported.
This amount is generally
the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section 1250
ordinary income recapture).
However, if you chose not to treat all of the gain from payments received after May 6, 1997, and before August 24, 1999, as
unrecaptured section 1250
gain, use only the amount you chose to treat as unrecaptured section 1250 gain for those payments to reduce the total unrecaptured
section 1250 gain
remaining to be reported for the sale. Include this amount on line 4.
Line 10.
Include on line 10 the ANST's share of the partnership's unrecaptured section 1250 gain that would result if the partnership
had transferred all of
its section 1250 property in a fully taxable transaction immediately before the ANST sold or exchanged its interest in that
partnership. If the ANST
recognized less than all of the realized gain, the partnership will be treated as having transferred only a proportionate
amount of each section 1250
property.
Line 12.
An example of an amount to include on line 12 is unrecaptured section 1250 gain from the sale of a vacation home previously
used as a rental
property but converted to personal use prior to the sale. To figure the amount to enter on line 12, follow the applicable
instructions below.
Installment sales.
To figure the amount to include on line 12, follow the steps below for each installment sale of property held more
than 1 year for which you did
not make an entry in Part I of Form 4797 for the year of sale.
-
Step 1. Figure the smaller of (a) the depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller
of line 22
or line 24 of the 2004 Form 4797 (or comparable lines of Form 4797 for the year of sale) for that property.
-
Step 2. Reduce the amount figured in step 1 by any section 1250 ordinary income recapture for the sale. This is the amount
from line 26g of
the 2004 Form 4797 (or the comparable line of Form 4797 for the year of sale) for that property. The result is the total unrecaptured
section 1250
gain that must be allocated to the installment payments received from the sale.
-
Step 3. Generally, the amount of capital gain on each installment payment is treated as unrecaptured section 1250 gain until
the total
unrecaptured section 1250 gain figured in step 2 has been used in full. Figure the amount of gain treated as unrecaptured
section 1250 gain for
installment payments received during the tax year, as the smaller of (a) the amount from line 26 or line 37 of the 2004 Form
6252 (or comparable
lines for the current tax year) whichever applies, or (b) the amount of unrecaptured section 1250 gain remaining to be reported.
This amount is
generally the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section
1250 ordinary income
recapture). However, if you chose not to treat all of the gain from payments received after May 6, 1997, and before August
24, 1999, as unrecaptured
section 1250 gain, use only the amount you chose to treat as unrecaptured section 1250 gain for those payments to reduce the
total unrecaptured
section 1250 gain remaining to be reported for the sale. Include this amount on line 12.
Other sales or dispositions of section 1250 property.
For each sale of property held more than 1 year (for which an entry was not made in Part I of Form 4797), figure the
smaller of (a) the
depreciation allowed or allowable or (b) the total gain for the sale. This is the smaller of line 22 or line 24 of Form 4797
(for 2004, or the
comparable line for the current tax year) for that property. Next, reduce that amount by any section 1250 ordinary income
recapture for the sale. This
is the amount from line 26g of Form 4797 (for 2004, or the comparable line for the current tax year) for that property. The
result is the total
unrecaptured section 1250 gain for the sale. Include this amount on line 12.
Complete the 28% Rate Gain Worksheet if lines 10 and 11 are both greater than zero and at least one of the following apply:
-
The ANST reports in Part II, column (f), a section 1202 exclusion from the eligible gain on qualified small business stock,
or
-
The ANST reports in Part II, column (f), a collectibles gain or (loss).
A collectibles gain or loss is any long-term gain or deductible long-term loss from the sale or exchange of a collectible
that is a capital asset.
Collectibles includes works of art, rugs, antiques, metals (such as gold, silver, and platinum bullion), gems, stamps, coins,
alcoholic beverages,
and certain other tangible property.
Also, include gain (but not loss) from the sale or exchange of an interest in a partnership, S corporation, or trust held
for more than 1 year and
attributable to unrealized appreciation of collectibles. For details, see Regulations section 1.1(h)-1. Also, attach the statement
required under
Regulations section 1.1(h)-1(e).
28% Rate Gain Worksheet Keep for Your Records
1. |
Enter the total of all collectibles gain or (loss) from items reported on line 5, column (f),
of Schedule D
|
1. |
|
2. |
Enter as a positive number the amount of any section 1202 exclusion reported on line 5, column (f),
of Schedule D
|
2. |
|
3. |
Enter the total of all collectibles gain or (loss) from items reported on Schedule D, line 6
|
3. |
|
4. |
Enter the total of all collectibles gain from capital gain distributions reported on line 7 of Schedule
D
|
4. |
|
5. |
Enter the long-term capital loss carryover from Schedule D, line 9
|
5. |
( )
|
6. |
If Schedule D, line 4, is a (loss), enter that (loss) here. Otherwise, enter -0-
|
6. |
|
7. |
Combine lines 1 through 6
|
7. |
|
Schedule K — Distributions to Beneficiaries
Use this schedule to report the type and amount of distributions that were made to each beneficiary. A copy of this schedule
must be furnished to
the sponsoring ANC. The sponsoring ANC, not the ANST, provides information to the beneficiaries regarding distributions.
Distributions for each year
are considered to have been made in the following order.
Tier I Distributions (Section 646(e)(l))
These are distributions from the ANST to the extent of the ANST's taxable income, reduced by any income tax paid by the ANST
on that income, and
increased by any tax-exempt interest income.
Tier I distributions are excluded from the gross income of the beneficiary.
Tier II Distributions (Section 646(e)(2))
These are distributions of amounts that would have been Tier I distributions in prior years (during which a section 646 election
was in effect),
but that have not, in fact, been distributed in any prior year.
Tier II distributions are excluded from the gross income of the beneficiary.
Tier III Distributions (Section 646(e)(3))
These are distributions considered to have been made by the sponsoring ANC with respect to its stock.
Tier III distributions are taxable to beneficiaries as dividends, to the extent of current or accumulated earnings and profits
of the sponsoring
ANC (after adjustment for distributions made by the sponsoring ANC during the year). Section 643(e) applies for purposes of
determining the amount of
a Tier III distribution of property (other than cash).
Tier IV Distributions (Section 646(e)(4))
These are distributions of any amounts that remain after applying the above rules. They are considered as amounts in excess
of distributable net
income for the year.
Tier IV distributions are excluded from the gross income of the beneficiary.
Previous | Index | Next
2006 Instructions Main | 2006 Tax Help Archives | Tax Help Archives Main | Home
|
|
|