Archive for Trusts
IRS Notice 2011-82 makes available the ability for taxpayers to pass along their unused estate & gift tax exclusion amounts to their surviving spouse if an estate tax return is filed. This new portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount ($5 million cap in 2011) to their surviving spouse,which in theory should eliminate the need to do silly things like re-title property etc.
It is expected that most estates of people who are married will want to make the portability election, including people who are not required to file an estate tax return for some other reason. The only way to make the election is by properly and timely filing an estate tax return on Form 706. As bizarre as this seems, there are no special boxes to check or statements needed to make the election. The estate tax return is due nine months after the date of death. Estates unable to meet this deadline can request an automatic six-month filing extension by filing Form 4768. Estates of those who died before 2011 are not eligible to make this election. Stay tuned in further regulation on the matter.
Under IRC §170(c)(2)(A) generally speaking when a trust uses its income to buy an asset and in a later year gives that asset to a charity it is allowed a charitable deduction. Chief Counsel Advice 20104202 stipulates however that if the deduction was not limited to the trust’s basis in the assets, the contribution of low-basis property would yield a double tax advantage because the trust would be able to avoid tax on the potential gain and it would be able to deduct not only the basis but also the gain from gross income.
In other words trusts generally speaking may take a charitable deduction for real property donated equal to the trust’s cost basis in the property assuming that the property in question was purchased with income generated from the trust.