Instructions For Form 5227 - Split-Interest Trust Information Return

Line 4—Rents, Royalties,

tax-exempt income, see the instructions

F. Unrelated Business Taxable

Partnerships, Other Estates and

for Form 1041.

Income (section 664 trusts only)

Trusts, etc.

All Federal income taxes for which the

If the charitable remainder trust has any

split-interest trust is liable because it has

Use Schedule E (Form 1040),

unrelated business taxable income

unrelated business taxable income, and

Supplemental Income and Loss, to

(within the meaning of section 512 and

all taxes imposed by Chapter 42 of the

report the trust’s income or (losses) from

related regulations) for 1994, all of the

Internal Revenue Code (relating to

rents, royalties, partnerships, S

trust’s income is subject to the same

private foundations), are allocated to

corporations, other estates and trusts,

taxes (including estimated tax payments)

corpus.

and REMICs. Enter the net profit or

that are imposed on complex trusts

(loss) from Schedule E on line 4. See the

under subchapter J of the Internal

Part II—Accumulation

instructions for Schedule E (Form 1040)

Revenue Code. The trust cannot be

for reporting requirements. If the trust

Schedule

taxed as a grantor trust.

received a Schedule K-1 from a

If you answer “Yes,” in addition to

Report the income (both current and

partnership, S corporation, or other

Form 5227, file Form 1041 (if a domestic

cumulative undistributed income) of the

flow-through entity, use the

trust). Use Form 1041 to report all the

trust for purposes of determining the

corresponding lines on Form 5227 to

trust’s income (not just the unrelated

character of distributions in three

report the interest, dividends, capital

business income) and its deductions

categories:

gains, etc., from the flow-through entity.

(including the deduction for distributions

1. Ordinary income,

to beneficiaries) and to compute any tax

Line 5—Farm Income or (Loss)

2. Capital gains and losses, and

due. Use the regular trust rules

If the trust operated a farm, use

contained in the Instructions for Form

3. Nontaxable income.

Schedule F (Form 1040), Profit or Loss

1041. You must also complete Schedule

A loss in any one of the three

From Farming, to report farm income

H of Form 1041 to determine whether

categories may not be used to reduce a

and expenses. Enter the net profit or

the trust is subject to any alternative

gain in any other category. For example,

(loss) from Schedule F on line 5.

minimum tax. See the instructions for

a capital loss may not be used to reduce

Part III to determine the amount of the

Line 6—Ordinary Gain or (Loss)

ordinary income. However, a loss in any

current distribution to report to each

one category may be used to reduce

Enter from Form 4797, Sales of

beneficiary on Forms 1041, Schedule

undistributed gain for earlier years within

Business Property, the gain or loss from

K-1.

that same category, and any excess may

the sale or exchange of property other

be carried forward to reduce gain in

Part I—Ordinary Income

than capital assets and also from

future years within that same category.

involuntary conversions (other than

Line 1—Interest Income

casualty or theft). For more information,

Part III—Current

see the instructions for Form 4797.

Report all taxable interest income that

Distributions Schedule

was received by the trust. Examples of

Deductions

taxable interest include interest from:

You must give each recipient listed in

Deductions are to be allocated in the

Accounts (including certificates of

Part III a Schedule K-1 (Form 1041) that

following manner:

deposit and money market accounts)

reflects his or her respective current

with banks, credit unions, and thrifts.

1. Allowable deductions directly

distribution. Also, attach a copy of each

attributable to one or more classes of

Notes, loans, and mortgages.

Schedule K-1 to Form 5227. See the

income items (i.e., interest, dividends, or

Specific Instructions for Schedule K-1

U.S. Treasury bills, notes, and bonds.

rents) or corpus are allocated to such

(Form 1041) for more information.

U.S. savings bonds.

income classes or corpus.

Original issue discount.

Beneficiary’s Identifying Number

2. Allowable deductions not allocated

Income received as a regular interest

under 1 above are allocated on the basis

As a payer of income, the trust is

holder of a Real Estate Mortgage

of gross income after directly

required under section 6109 to request

Investment Conduit (REMIC).

attributable deductions, to the extent of

and provide a proper identifying number

such income.

For taxable bonds acquired after

for each recipient of income. Enter the

December 31, 1987, amortizable bond

recipient’s number on the respective

3. Deductions not allocated under

premium is treated as an offset to the

Schedule K-1. Individuals and business

either 1 or 2 above may be allocated in

interest income instead of as a separate

recipients are responsible for giving you

any manner.

interest deduction. See Pub. 550,

their taxpayer identification numbers

No deduction is ever allowed for:

Investment Income and Expenses.

upon request. You may use Form W-9,

The personal exemption under section

Request for Taxpayer Identification

642(b).

Line 2—Dividends

Number and Certification, to request the

Charitable contributions under section

Report all taxable dividends received by

beneficiary’s identifying number.

642(c).

the trust.

Penalty.—Under section 6723, the payer

Net operating losses under section

is charged a $50 penalty for each failure

Line 3—Business Income or (Loss)

642(d).

to provide a required taxpayer

If the trust operated a business, report

Income distribution deductions under

identification number, unless reasonable

the income and expenses on Schedule

section 661.

cause is established for not providing it.

C, Profit or Loss From Business (or

Explain any reasonable cause in a

Capital loss carryforwards under

Schedule C-EZ, Net Profit From

signed affidavit and attach it to this

section 1212.

Business) of Form 1040. See the

return.

Federal income taxes.

instructions for F. Unrelated Business

Substitute Forms

Federal excise taxes under

Taxable Income above. Enter the net

Chapter 42.

profit or (loss) from Schedule C or C-EZ

You do not need prior IRS approval for

on line 3.

Any expense that is not deductible in

substitute Schedules K-1 that follow the

determining taxable income and not

specifications in Pub. 1167, Substitute

allocated to nontaxable income must be

Printed, Computer-Prepared, and

allocated to corpus. For a discussion on

Computer-Generated Tax Forms and

the allocation of deductions to

Page 3

Instructions For Form 5227 - Split-Interest Trust Information Return - 1994 Page 3

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