Federal Income Taxation of Estates, Trusts & Beneficiaries (2019)

Over the last half-century or so, taxation of fiduciary income has become increasingly complex. While many fiduciaries and professionals share responsibility for wealth planning or reporting the income taxes relating to transmission of wealth, there is little published to guide them through the maze of choices and problems they may encounter. Federal Income Taxation of Estates, Trusts, & Beneficiaries provides step-by-step guidance for dealing with the problems of preparation of the decedent’s final return, characterization of income in respect of a decedent, computation of distributable net income (DNI), the interaction of the system of taxation of trusts and estates and the passive activity rules, the grantor trust rules, and the rules relating to split interest charitable trusts. As always, the update is designed to provide the reader with information that is timely and tailored to the needs of today’s busy practitioner.

The 2019 update to Federal Income Taxation of Estates, Trusts & Beneficiaries is a completely revised edition that brings you up to date on the latest developments in this complex and constantly changing area.

In late 2017, Congress enacted the Tax Cuts and Jobs Act of 2017. Its central feature is a reduction of the corporate tax rate to 21%. To provide so-called passthrough businesses relief of a somewhat similar nature, Congress added a new deduction under § 199A equal to 20% of “qualified business income.” Even as applied to individuals who operate certain types of businesses (or activities that can be reconceived as such), the new provision is remarkably complicated. It also applies to trusts and estates. In the context of Subchapter J entities, § 199A seems likely to prove at least as difficult to apply as the passive activity rules and the tax on net investment income.

In TCJA 2017, Congress suspended “miscellaneous itemized deductions” for the period 2018 to 2025. Whether § 67(e)(1) will shelter certain deductions, such as those for trustees’ fees, from the resulting general ban on deductions under § 212 remains to be seen.

In TCJA 2017, Congress suspended the deduction for the personal exemption for most taxpayers during taxable years 2018 to 2025. Estates and most trusts, however, continue to qualify for the familiar $600, $300, or $100 exemptions.

In TCJA 2017, Congress repealed the deduction for alimony, effective at the end of 2018. Accordingly, Congress also repealed § 682, also after 2018.

In Green v. United States, 121 A.F.T.R.2d 2018-427, 2018 WL 386656 (10th Cir. Jan. 12, 2018), the Tenth Circuit reversed a district court decision that had allowed a trust to deduct under § 642(c) the fair market value of various parcels of real estate transferred to charity.