Instructions For Form 5227 (Page 6 of 15) in pdf

Section D—Deductions

Part II. Schedule of Distributable

Income (Section 664 trust only)

For Section 664 Trusts

Include all allowable deductions and any expense that

Report the income (both current and cumulative

would be allowable but for the fact that it must be

undistributed income) of the trust for purposes of

allocated to tax-exempt income. No deduction is ever

determining the character of distributions in three

allowed for:

categories:

•

The personal exemption under section 642(b),

1. Ordinary income,

•

Charitable contributions under section 642(c),

2. Capital gains and losses, and

•

3. Nontaxable income.

Net operating losses under section 642(d),

•

Income distribution deductions under section 661,

•

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

Capital loss carryforwards under section 1212,

used to reduce a gain in any other category. For

•

Federal income taxes, or

example, a capital loss may not be used to reduce

•

Federal excise taxes under Chapter 42.

ordinary income. However, a loss in any one category

may be used to reduce undistributed gain for earlier

Any expense that is not deductible in determining

years within that same category, and any excess may be

taxable income (or not otherwise deductible but for the

carried forward to reduce gain in future years within that

fact that it must be allocated to nontaxable income) must

same category.

be allocated to corpus.

For information on recordkeeping for long-term capital

Attached schedule. List any other allowable deduction

gains or ordinary income, see the worksheets on pages

(or any expense that would be an allowable deduction

14 and 15.

but for the fact that it must be allocated to tax-exempt

income) that is not included on lines 17 through 20 and

Part III-A. Distributions of Principal for

the amount of the deduction. Total the amounts listed

Charitable Purposes

and enter the total on line 21.

Line 31. Provide the information requested for columns

For Split-Interest Trusts Other Than Section 664

A through C and enter the amount on the line to the right.

Trusts

In column C, list in sufficient detail each class of activity

Include all expenses attributable to gross income that are

for amounts paid out of principal to the same payee for

deductible for the tax year.

charitable purposes.

Example. “Cash payments to buy library material” or

Attached schedule. List any other deductible expense

“Grant, paid in cash, to equip the chemistry lab at

that is attributable to the gross income of the trust and is

Magnolia University.”

not included on lines 17 through 20 and line 23 and show

the amount of the deduction. Total the amounts listed

Do not merely enter the category (that is, religious,

and enter the total on line 21.

charitable, scientific, literary, or educational). The

purpose of the deduction must be entered as shown in

Line 23. Charitable Deduction

the examples above.

Enter the amount of any charitable deduction or other

Part III-B. Accumulated Income Set

deduction taken under section 642(c) for the tax year.

Aside and Income Distributions for

Section E—Deductions Allocable to Income

Charitable Purposes

Categories (Section 664 trust only)

Complete Part III-B if any of the following apply.

Deductions are allocated as follows.

•

The trust claimed a deduction in a prior year under

1. Allowable deductions directly attributable to one or

section 642(c) for an amount permanently set aside and

more classes of income items (that is, interest, dividends,

at the beginning of the year the set aside amount was not

or rents) or corpus are allocated to such income classes

fully distributed.

or corpus.

•

The trust claimed a deduction during the year under

2. Allowable deductions not allocated under (1) above

section 642(c) whether the amount was set aside or paid.

are allocated on the basis of gross income after directly

•

The trust made payment for charitable purposes during

attributable deductions, to the extent of such income.

the year but claimed the section 642(c) deduction in the

3. Deductions not allocated under either (1) or (2)

prior year.

above may be allocated in any manner.

Line 35. Provide the information requested for columns

A through C and enter the amount on the line to the right.

Add the deductions that were allocated to all the

In column C, list in sufficient detail each class of activity

classes of income items within each category and enter

to the same payee for charitable purposes for amounts

the amount on the appropriate line. (Note: Any deduction

distributed in which a section 642(c) deduction was

allocated to corpus is not shown on any line in

claimed.

Section E.)

Do not merely enter the category (that is, religious,

For a discussion on the allocation of deductions to

charitable, scientific, literary, or educational). The

tax-exempt income, see Allocation of Deductions for

purpose of the deduction must be entered as shown in

Tax-Exempt Income in the Instructions for Form 1041.

the examples in Part III-A above.

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Instructions For Form 5227 Page 6

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