Benefits of trust as S shareholder may outweigh cost

Article Abstract:

Designation of trusts as S shareholders can result in significant income and estate tax savings. According to Sec 1361(c)(2), the types of trusts allowed to be S corporation shareholders include voting trusts, grantor trusts and trusts wherein a non-grantor individual is considered as the owner, trusts that receive S stocks under a will, a decedent's estate, and qualified subchapter S trusts. These trusts are not permitted from carrying on the features of a business or corporation. The list of issues that must be considered encompasses expensing depreciable assets, election of tax year, passive loss rulings, gain on transferred property, losses on small business stock, estate freeze provisions, capital gains and transfer agreements.

Trusts, Methods, S corporations

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Trust annualization creates planning opportunities in filing 1988 returns

Article Abstract:

Federal tax regulation Section 645(a) requires most trusts to switch to a calendar reporting year commencing 1987. The selection of an annualization method can optimize savings for a short 1987 for terminated or new trusts and for reducing estimated tax payments. The generalized rule for annualization computation for the short period produces a higher than normal tax demand, but Section 443(b)(2)(A) is an alternative tax relief rule which enables a trust to seek a credit or refund for the amount of tax that exceeds normal tax requirements. Annualization regulations also alter the alternative minimum tax requirements by a pro rata trust exemption with subsequent annualization.

Analysis, Interpretation and construction, Tax law

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Use of custodial account with short-term trust maximizes income shifting benefits of both

Article Abstract:

Short-term trusts and custodial accounts attract taxpayers who seek to provide for the present and future needs of various dependents at low after-tax expense. Securities or cash must be transferred to the trustee as soon as possible following the execution of the trust instrument. Proposed rules would only allow in 1985 income shifting executed according to the Clifford trusts.

Planning, Economic aspects, Tax accounting, Taxation, Custodianship accounts, Custodial accounts

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