Instructions For Form 5227 (Page 4 of 12) in pdf

•

Original issue discount; and

Deductions

•

Income received as a regular interest holder of a Real

Deductions are to be allocated as follows.

Estate Mortgage Investment Conduit (REMIC).

1. Allowable deductions directly attributable to one or

For taxable bonds acquired after December 31, 1987,

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

amortizable bond premium is treated as an offset to the

or rents) or corpus are allocated to such income classes

or corpus.

interest income instead of as a separate interest

2. Allowable deductions not allocated under 1 above

deduction. See Pub. 550, Investment Income and

are allocated on the basis of gross income after directly

Expenses.

attributable deductions, to the extent of such income.

Line 2a. Qualified Dividends

3. Deductions not allocated under either 1 or 2 above

may be allocated in any manner.

Report on this line all qualified dividends received by the

trust. In general, a qualified dividend is a dividend

No deduction is ever allowed for:

received during the tax year from (a) a domestic

•

The personal exemption under section 642(b),

corporation or (b) a qualified foreign corporation. A

•

Charitable contributions under section 642(c),

qualified dividend does not include any dividend from a

•

Net operating losses under section 642(d),

corporation if the corporation is (or was) exempt from

•

Income distribution deductions under section 661,

income tax under section 501 or 521 for the corporation’s

•

Capital loss carryforwards under section 1212,

current or preceding tax year during which the distribution

•

Federal income taxes, or

was made.

•

Federal excise taxes under Chapter 42.

Generally, these dividends are reported to the trust in

Any expense that is not deductible in determining

box 1b of Form(s) 1099-DIV, Dividends and Distributions.

taxable income and not allocated to nontaxable income

must be allocated to corpus. For a discussion on the

Qualified dividends are treated as a separate class of

allocation of deductions to tax-exempt income, see the

ordinary income for purposes of ordering distributions.

Instructions for Form 1041.

See Ordering Rules on page 5 for more information on

distributions. See Pub. 550 for additional information on

All federal income taxes for which the split-interest

qualified dividends, including holding period

trust is liable because it has unrelated business taxable

requirements.

income, and all taxes imposed by Chapter 42 of the

Internal Revenue Code (relating to private foundations),

Line 2b. Ordinary Dividends

are allocated to corpus.

Enter on line 2b the total of all ordinary dividends,

Line 17. Total Long-Term Capital Gain or

including the qualified dividends reported on line 2a.

(Loss) for Tax Year

Line 3. Business Income or (Loss)

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

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

If the trust operated a business, report the income and

following is a summary of the classes:

expenses on Schedule C, Profit or Loss From Business

•

28% long-term capital gain class. This class consists

(or Schedule C-EZ, Net Profit From Business) of Form

of collectibles gains and losses and the taxable gain (but

1040. See the instructions for F. Unrelated Business

not more than the section 1202 exclusion) on the sale or

Taxable Income on page 3. Enter the net profit or loss

exchange of qualified small business stock. Enter these

from Schedule C or C-EZ on line 3.

gains or losses on line 17b.

•

Section 1250 long-term capital gain class. This

Line 4. Rents, Royalties, Partnerships, Other

class consists of unrecaptured section 1250 gain

Estates and Trusts, etc.

(generally, the part of real estate capital gain attributable

Use Schedule E (Form 1040), Supplemental Income and

to depreciation) on sales, exchanges, etc., of assets held

Loss, to report the trust’s income or losses from rents,

more than one year. Enter this gain on line 17c.

royalties, partnerships, S corporations, other estates and

Undistributed, unrecaptured section 1250 gain on sales,

trusts, and REMICs. Enter the net profit or loss from

exchanges, etc., after May 6, 1997, is included in this

Schedule E on line 4. See the Instructions for Schedule E

class.

•

(Form 1040) for reporting requirements. If the trust

All other long-term capital gain class.This class

received a Schedule K-1 from a partnership, S

consists of all other gains or losses from sales,

corporation, or other flow-through entity, use the

exchanges, and conversions (including installment

corresponding lines on Form 5227 to report the interest,

payments received) of assets held more than 12 months.

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

Part II. Accumulation Schedule

Line 5. Farm Income or (Loss)

Report the income (both current and cumulative

If the trust operated a farm, use Schedule F (Form 1040),

undistributed income) of the trust for purposes of

Profit or Loss From Farming, to report farm income and

determining the character of distributions in three

expenses. Enter the net profit or loss from Schedule F on

categories:

line 5.

1. Ordinary income,

2. Capital gains and losses, and

Line 6. Ordinary Gain or (Loss)

3. Nontaxable income.

Enter from Form 4797, Sales of Business Property, the

gain or loss from the sale or exchange of property other

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

than capital assets and also from involuntary conversions

used to reduce a gain in any other category. For

(other than casualty or theft). For more information, see

example, a capital loss may not be used to reduce

the Instructions for Form 4797.

ordinary income. However, a loss in any one category

-4-

Instructions For Form 5227 Page 4

Related Articles

Related forms

Related Categories