Instructions For Form 5227 (Page 5 of 12) in pdf

treated as distributed prior to 2003, and that was not in

Line 17—Long-Term Capital Gain or Loss

the 28% rate class, the 25% rate class, or the qualified

The total of long-term capital gains or losses from all

5-year gain class, is included in the 15% rate class, as if

classes (described below) is entered on line 17a. The

it had been properly taken into account by the trust after

following is a summary of the classes:

•

May 5, 2003.

28% rate class. This class consists of collectibles

For more information, see the instructions for

gains and losses and the taxable gain (but not more than

Schedule D (Form 1041).

the section 1202 exclusion) on the sale or exchange of

qualified small business stock. Enter these gains or

Part II—Accumulation Schedule

losses on line 17b.

•

25% rate class. This class consists of unrecaptured

Report the income (both current and cumulative

section 1250 gain (generally, the part of real estate

undistributed income) of the trust for purposes of

capital gain attributable to depreciation) on sales,

determining the character of distributions in three

exchanges, etc., of assets held more than one year.

categories:

Enter this gain on line 17d. Undistributed, unrecaptured

1. Ordinary income,

section 1250 gain on sales, exchanges, etc., after May 6,

2. Capital gains and losses, and

1997, is included in the 25% rate class.

3. Nontaxable income.

•

Qualified 5-year gain class.This class consists of

gains (including installment payments received) earned

A loss in any one of the three categories may not be

by the trust before May 6, 2003, on sales, exchanges,

used to reduce a gain in any other category. For

etc., of assets held for more than 5 years. Enter this gain

example, a capital loss may not be used to reduce

of line 17c.

ordinary income. However, a loss in any one category

may be used to reduce undistributed gain for earlier

Though the qualified 5-year gain provision has

years within that same category, and any excess may be

been repealed for sales and other dispositions

carried forward to reduce gain in future years within that

after May 5, 2003, these gains remain in a

CAUTION

same category.

separate class because the 5-year gain provision is

For information on recordkeeping for long-term capital

scheduled to come back into existence in 2008.

gains, see the worksheet on page 12.

No additions may be made to this class for

dispositions after May 5, 2003, and before 2008, but

Part III—Current Distributions

distributions may continue to be made from this class

Schedule

during that period.

You must give each recipient listed in Part III a Schedule

For 2003, qualified 5-year gain properly taken into

K-1 (Form 1041) that reflects that recipient’s current

account after December 31, 2002, and before May 6,

distribution. Also, attach a copy of each Schedule K-1 to

2003, that is deemed distributed in 2003 is included on

Form 5227. See the Specific Instructions for Schedule

line 4c of the 2003 Schedule K-1 (Form 1041) and is

K-1 (Form 1041) for more information.

taxed at 20/8%. Qualified 5-year gain that is properly

taken into account before 2003 and that is distributed in

Beneficiary’s Identifying Number

2003 is included on line 4b of the 2003 Schedule K-1 and

As a payer of income, the trust is required under section

is taxed at 15/5%.

6109 to request and provide a proper identifying number

•

All other long-term gain class.This class consists of

for each recipient of income. Enter the recipient’s number

all other gains or losses from sales, exchanges, and

on the respective Schedule K-1. Individuals and business

conversions (including installment payments received) of

recipients are responsible for giving you their taxpayer

assets held more than 12 months.

identification numbers upon request. You may use Form

Transitional rules. The following transitional rules apply

W-9, Request for Taxpayer Identification Number and

for 2003:

Certification, to request the beneficiary’s identifying

number.

There are two all other long-term gain classes

subject to two different tax rates: 20%/10% (hereinafter

Penalty. Under section 6723, the payer is charged a $50

referred to as the 20% rate class) and 15/5% (referred to

penalty for each failure to provide a required taxpayer

as the 15% rate class).

identification number, unless reasonable cause is

•

The 20% rate class includes net capital gain from sales

established for not providing it. Explain any reasonable

and other dispositions after December 31, 2002, and

cause in a signed affidavit and attach it to this return.

before May 6, 2003 (including installment payments

Substitute Forms

received during that period), provided these gains are

deemed distributed in 2003. If the gains are deemed

You do not need prior IRS approval for substitute

distributed in 2003, the gains must only be reported on

Schedules K-1 that follow the specifications in Pub.

line 4a of Schedule K-1 (Form 1041). Any gain taken into

1167, Substitute Printed, Computer-Prepared and

account by the trust after December 31, 2002, and before

Computer-Generated Tax Forms and Schedules, or that

May 6, 2003, that is not deemed distributed in 2003

are an exact copy of an IRS Schedule K-1. Other

becomes part of the all other long-term gain class for

substitute Schedules K-1 require approval. You may

2004.

apply for approval of a substitute form by writing to:

•

The 15% rate class includes any gain properly taken

Internal Revenue Service

into account by the trust (including installment payments

Attention: Substitute Forms

received) after May 5, 2003, that is not in the 28% rate

Program Coordinator

class or the 25% rate class. Also, any gain taken into

SE:W:CAR:MP:FP:S:CS

account by the trust before January 1, 2003, that was not

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-5-

Instructions For Form 5227 Page 5

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