Instructions for Form 5227 |
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.
Use Form 5227 to report the financial activities of a split-interest trust described in section 4947(a)(2); and to determine
whether the trust is
treated as a private foundation and is subject to certain excise taxes under Chapter 42.
A charitable remainder annuity trust or unitrust is exempt from federal income tax for any tax year if it:
-
Was created after July 31, 1969, and
-
Has no unrelated business taxable income for the tax year.
Even though the trust is exempt from federal income tax, it must file Form 5227 each year.
All charitable remainder trusts described in section 664, pooled income funds described in section 642(c)(5), and charitable
lead trusts (see
Exception below) must file Form 5227.
Exception.
Generally, a split-interest trust created before May 27, 1969, is not required to file Form 5227. However, if any
amounts were transferred to the
trust after May 26, 1969, for which a deduction was allowed under any of the sections listed under section 4947(a)(2), Form
5227 must be filed for the
year of the transfer and all subsequent years regardless of whether additional transfers are made in subsequent years.
Charitable lead trusts and charitable remainder trusts whose charitable interests involve only war veterans' posts
or cemeteries described in
sections 170(c)(3) and 170(c)(5), respectively, are not required to complete Parts VI and VII of Form 5227.
Note.
Regulations section 1.6012-3(a)(6) references Form 1041-B. Form 5227 replaces Form 1041-B.
Split-interest trust.
A split-interest trust is a trust that:
-
Is not exempt from tax under section 501(a);
-
Has some unexpired interests that are devoted to purposes other than religious, charitable, or similar purposes described
in section
170(c)(2)(B); and
-
Has amounts transferred in trust after May 26, 1969, for which a deduction was allowed under one of the sections listed in
section
4947(a)(2).
A split-interest trust is subject to many of the same requirements and restrictions that are imposed on private foundations.
Recipient.
A recipient is a beneficiary who receives the possession or beneficial enjoyment of the unitrust or annuity amount.
Foundation manager.
A foundation manager is an officer, director, or trustee (or an individual who has powers or responsibilities similar to those of
officers, directors, or trustees). In the case of any act or failure to act, the term foundation manager may also include
an employee of the trust who
has the authority to act.
Disqualified person.
A disqualified person is:
-
A substantial contributor;
-
A foundation manager;
-
A person who owns more than 20% of a corporation, partnership, trust, or unincorporated enterprise, which is itself a substantial
contributor;
-
A member of the family of an individual in the first three categories; or
-
A corporation, partnership, trust, or estate in which persons described in 1, 2, 3, or 4 above own a total beneficial interest
of more than
35%.
-
For purposes of section 4943 (excess business holdings), a disqualified person also includes:
-
A private foundation which is effectively controlled (directly or indirectly) by the same persons who control the trust in
question,
or
-
A private foundation substantially all of the contributions to which were made (directly or indirectly) by the same person
or persons
described in 1, 2, or 3 above, or members of their families, within the meaning of section 4946(d), who made (directly or
indirectly) substantially
all of the contributions to the trust in question.
-
For purposes of section 4941 (self-dealing), a disqualified person also includes certain government officials. (See section
4946(c) and the
related regulations.)
If you have questions and/or need help completing this form, please call 1-877-829-5500. This toll-free telephone service
is available Monday
through Friday.
Other Forms You May Have To File
You may also be required to file one or more of the following forms.
-
Form 56, Notice Concerning Fiduciary Relationship.
-
Form 1041, U.S. Income Tax Return for Estates and Trusts.
-
Form 1041-A, U.S. Information Return—Trust Accumulation of Charitable Amounts.
-
Form 1041-ES, Estimated Income Tax for Estates and Trusts.
-
Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.
-
Form 8275, Disclosure Statement. Use this form to disclose items or positions (except those contrary to a regulation—see Form
8275-R,
below) that are not otherwise adequately disclosed on the tax return. The disclosure is made to avoid parts of the accuracy-related
penalty for
disregard of rules or substantial understatement of tax. Form 8275 is also used for disclosures relating to preparer penalties
for understatements due
to unrealistic positions or for willful or reckless conduct.
-
Form 8275-R, Regulation Disclosure Statement. Use this form to disclose any item on a tax return for which a position has
been taken that is
contrary to Treasury regulations.
-
Form 8822, Change of Address.
-
Form 8868, Application for Extension of Time To File an Exempt Organization Return.
-
Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts.
You can order forms and publications by calling 1-800-TAX-FORM (1-800-829-3676). You can also get most forms and publications
at your local IRS
office or online at
www.irs.gov.
Period To Be Covered by Return
File Form 5227 for each calendar year. This revision of the form is for the 2006 calendar year.
Trust income must be computed using the method of accounting regularly used in keeping the trust's books and records. Generally,
permissible
methods include the cash method, the accrual method, or any other method authorized by the Internal Revenue Code. The method
used must clearly reflect
income.
Unless otherwise allowed by law, the trust may not change the accounting method used to report income (for income as a whole
or for any material
item) without first getting consent on Form 3115, Application for Change in Accounting Method. See Pub. 538, Accounting Periods
and Methods, for more
details.
File Form 5227 for calendar year 2006 by April 17, 2007.
Extension of Time To File
Use Form 8868 to request an automatic 3-month extension of time to file. The request for an automatic extension must be filed
by the due date of
the return. After receiving an automatic 3-month extension, you can also use Form 8868 to apply for an additional (not automatic)
3-month extension.
The request for an additional 3-month extension must be filed by the extended due date of the return.
File Form 5227 at the following address:
Internal Revenue Service Center
Ogden, UT 84201-0027
Private delivery services (PDSs).
In addition to the United States mail, exempt organizations can use certain private delivery services designated by
the IRS to meet the “ timely
mailing as timely filing/paying” rule for tax returns and payments. These private delivery services include only the following.
-
DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day
Service.
-
Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and
FedEx
International First.
-
United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide
Express Plus,
and UPS Worldwide Express.
The private delivery service can tell you how to get written proof of the mailing date.
When you file the first return for a charitable remainder annuity trust or unitrust, include:
-
A copy of the trust instrument, and
-
A written declaration under penalties of perjury that it is a true and complete copy.
For sample forms of trusts that meet the requirements of a charitable remainder unitrust, see Rev. Procs. 2005-52 through
2005-59, 2005-34 I.R.B.
326, 339, 353, 367, 383, 392, 402, and 412.
For sample forms of a trust that meet the requirements of a charitable remainder annuity trust, see Rev. Procs. 2003-53 through
2003-60, 2003-2
C.B. 230, 236, 242, 249, 257, 262, 268, and 274.
Rounding Off to Whole Dollars
You may round off cents to whole dollars on your return and schedules. If you do round dollars, you must round all amounts.
To round, drop amounts
under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes
$3.
If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and
round off only the total.
If you need more space, attach separate sheets showing the same information in the same order as on the printed form. Show
the totals on the
printed form.
Enter the trust's name and employer identification number on each sheet. Also, use sheets that are the same size as the forms
and indicate clearly
the line of the printed form to which the information relates.
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