Distributions based on need bar QTIP treatment

Article Abstract:

Spouses' interest in a trust will not be considered a qualified terminable interest property (QTIP) and the spouse will be denied a marital deduction if the trust provides income for their need rather than all the income that the spouse may demand. After the IRS has acquired rights to the trust revenues, subsequent modifications of the trust by state courts do not enable spouses' interests to qualify for the marital deduction. QTIPs are those trusts in which taxpayers pass a qualifying income interest to their spouse interest for the spouse's lifetime. For the surviving spouses' interest in the trust to be considered a QTIP, the spouses must be entitled to all the property's income and no one can appoint any part of the property to anyone but the surviving spouse during their lifetime. The interests of surviving spouses who are not entitled to all the income of the property will not qualify as a QTIP.

Accounting and auditing, Qualified terminable interest property, Qualified terminable interest property trusts, Marital deduction

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Forgoing an NOL carryback may result in a greater AMT in future years

Article Abstract:

The Tax Reform Act of 1986 (TRA '86) made major changes to the alternative minimum tax (AMT) rules, with the result that tax planners must closely examine both AMT and regular tax effects before making tax recommendations. Pre-1986 years are still available for carrybacks during the current implementation period for certain TRA '86 provisions, including the net operating loss (NOL) carryback. Due to the higher tax rates in pre-1986 years, each regular tax NOL dollar may have a greater refund value in those pre-1986 years. Taxpayers may receive considerable benefits from carrying an NOL back in cases involving both NOL and charitable contributions deductions since charitable contribution deductions are not affected by NOL carrybacks. Planners must be cognizant of the effect of AMT on elections to carry back NOL since forgoing a NOL carryback may result in a higher AMT in subsequent years.

Minimum tax, Business losses, Carryback losses

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