Instructions For Form Ftb 5870a - Tax On Accumulation Distribution Of Trusts

Instructions for Form FTB 5870A

Tax on Accumulation Distribution of Trusts

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 1998, and to the California Revenue & Taxation Code (R&TC).

General Information

Schedule J (541) because the trust did not file

Sections 666(b) and (c)) to the net income

Form 541 or pay the required California tax due.

reported on line 3.

The entire trust accumulation income is taxable

In general, California tax law conforms to the

Special Rule for Multiple Trusts. If you

in the year that you receive the distribution, and

Internal Revenue Code (IRC) as of January 1,

received accumulation distributions from two or

should be reported on Schedule CA (540), Cali-

1998. However, there are continuing differences

more other trusts that were considered to have

fornia Adjustments – Residents, or Schedule CA

between California and federal tax law. California

been made in any of the earlier tax years from

(540NR), California Adjustments – Nonresidents

has not conformed to the changes made to the

which the current accumulation distribution is

or Part-Year Residents, line 21f, column C. See

IRC by the federal Internal Revenue Service

considered to have been made, do not include

R&TC Section 17745(a).

(IRS) Restructuring and Reform Act of 1998

on line 4 the taxes attributable to the current

(Public Law 105-206) and the Tax and Trade

California does not follow the federal rules for:

accumulation distribution considered to have

•

Relief Extension Act of 1998 (Public Law

been distributed in the same earlier tax year(s).

Generation-skipping transfer tax imposed by

105-277).

IRC Section 2601; and

This special rule applies only to those trusts with

•

If you received an accumulation distribution from

The tax relating to estates imposed by IRC

accumulation distributions (including earlier accu-

a foreign trust, then federal Form 4970, Tax on

Section 2001 or Section 2101.

mulation distributions that are considered under

Accumulation Distribution of Trusts, is used as a

IRC Section 666(a) to have been distributed in

Except as explained above, get and follow the

worksheet. The actual partial tax from an accu-

the same earlier year) that total $1,000 or more.

instructions for federal Form 4970, to compute

mulation distribution of a foreign trust computed

the partial tax.

Line 8 – You can determine the number of years

on federal Form 4970 is reported on federal

which the UNI is deemed to have been distrib-

Nonresidents or part-year residents in preced-

Form 3520, Annual return to Report Transactions

uted by counting the ‘‘throwback years’’ for which

ing 5 years: For any year you were a nonresi-

With Foreign Trusts and Receipt of Certain For-

there are entries on line 26 through line 29 of

dent or part-year resident in the accumulation

eign Gifts. California does not conform to the fed-

Part IV of Schedule J (Form 541). These throw-

years listed in Part I, Section B, skip line 14

eral provision relating to information returns

back rules apply even if you would not have

through line 22. Complete Form 540NR,

required for Foreign Trusts with United States

been entitled to receive a distribution in the ear-

California Nonresident or Part-Year Resident

Beneficiaries (IRC Section 6048 (c)).

lier tax year if the distribution had actually been

Income Tax Return up to line 46, total tax. Make

Report the accumulation distributions from for-

made then. Note: There can be more than four

your adjustments on the accumulation years

eign trusts and from certain domestic trusts (see

‘‘throwback years.’’

listed, eliminating the highest and lowest taxable

IRC Section 665 (c)) on this form, and attach it to

income years. Include in the total adjusted gross

Line 11 – From the number of years entered on

your return.

line 8, subtract any year in which the distribution

income for Form 540NR the amount from form

California tax law conforms to provisions of the

FTB 5870A, line 12, plus all other income of the

from column (a), Part IV of Schedule J

Taxpayer Relief Act of 1997 that repealed the

beneficiary as if the beneficiary was a California

(Form 541) is less than the amount on line 10 of

throwback rules for distributions made by certain

resident for the entire year.

form FTB 5870A. If the distribution for each

domestic trusts in tax years beginning on or after

throwback year is more than line 10, then enter

If you were a California resident at the trust’s

January 1, 1998.

the same number on line 11 as you entered on

year end, include the amount from form

line 8.

Note: Although California conforms to the

FTB 5870A, line 12, in the California adjusted

federal provision repealing the throwback

gross income amount on the Form 540NR,

Line 13 – Enter your taxable income for years

rules, California may still apply R&TC

line 20. If you were a nonresident at the trust’s

1993 through 1997, even if the trust had accu-

Section 17745 (b). This provision states that if

year end, include the California source income

mulated income less than five years after the

the trust did not pay tax on current or accumu-

amount from form FTB 5870A, line 12 in the

beneficiary became 21 years old. Use the taxa-

lated income of the trust because the resident

California adjusted gross income amount on

ble income as originally reported, amended or as

beneficiary’s interest in the trust was contingent,

Form 540NR, line 20. You may need to contact

changed by the Franchise Tax Board (FTB).

this income will be taxable when it is distributed

the trust for additional information regarding

Include in the taxable income, amounts consid-

or distributable to the beneficiary. See the

sourced income. In either instance, include all

ered distributed as a result of prior accumulation

instructions for Form 541 for more information.

other income of the beneficiary from periods of

distributions whether from the same or another

California residency and all other California

trust, and whether made in an earlier year or the

Purpose

source income from periods of nonresidency.

current year.

Use form FTB 5870A to figure the additional tax

Enter the amount from Form 540NR, line 46 on

For years 1993 through 1997, enter the amount

under IRC Section 667 or R&TC

form FTB 5870A, line 23. Follow the instructions

of your taxable income, but not less than zero.

Sections 17745(b) and (d) on an accumulation

for completing the rest of form FTB 5870A.

Line 17 – Compute the tax (not including any

distribution made by a foreign trust and certain

alternative minimum tax) on the income on

domestic trusts in the current year.

Specific Line Instructions

line 16 using the tax rates in effect for the earlier

If you were a noncontingent beneficiary and you

year shown in each of the three columns. Use

received Schedule J (541), Trust Allocation of an

Part I

the California tax tables included in the personal

Accumulation Distribution, and the trust filed

income tax booklets for prior years. Call FTB’s

Line 1 – Enter the amount distributed in the cur-

Form 541, California Fiduciary Income Tax

F.A.S.T. automated phone service at

rent year that represents the undistributed net

Return, and paid the tax, you must compute your

(800) 338-0505 (within the United States) or

income of a trust considered to have been dis-

additional tax under the provisions of IRC

(916) 845-6600 (from outside the United States

tributed in earlier years.

Section 667. Complete Part I of form FTB 5870A

[not toll-free] ) to order the booklets and forms for

to determine the amount of the tax due.

Line 2 – Enter any amount on line 1 that repre-

tax years 1995, 1996, 1997 and 1998. To place

sents undistributed net income (UNI) of a trust

If you were a contingent beneficiary and you did

an order, select personal income tax forms

considered to have been accumulated before you

not receive Schedule J (541) because the trust

request and follow the recorded instructions.

were born or reached age 21. However, if the

was not required to file Form 541, you must com-

If you have Internet access, you may download,

multiple trust rule applies, see the instructions for

pute your additional tax under the provisions of

view and print California income tax forms and

line 4.

R&TC Sections 17745(b) and (d). Complete

publications. Our Internet address is:

Part II, Section A or Section B, of form

Line 4 – Except as noted below under Special

FTB 5870A to determine the amount of additional

Rule for Multiple Trusts, enter on line 4 the

Line 18 – Enter your tax (not including any alter-

tax due.

California taxes (not including any alternative

native minimum tax) as originally reported,

minimum tax) charged for any earlier year on the

Do not use form FTB 5870A if you were a non-

amended or as changed by the FTB before

trust income that are attributable (under IRC

contingent beneficiary and you received an accu-

reduction for any credits for the particular earlier

mulation distribution, but you did not receive

year shown in each of the three columns.

FTB 5870A Instructions 1998 Page 1

Instructions For Form Ftb 5870a - Tax On Accumulation Distribution Of Trusts - 1998

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