Instructions For Form 5227 - 2016 (Page 11 of 20) in pdf

Section D—Charitable Remainder Trusts

respect to the CFC or QEF. The election may be made on an

original or an amended return, provided that the tax year for

Line 91. If a charitable remainder annuity trust or certain

which the election is made, and all tax years affected by the

charitable remainder unitrusts pay the annuity or unitrust

election, aren't closed by the period of limitations on

amount after the close of the tax year, and:

assessments under section 6501. For more information, see

1. The payment is made within a reasonable time after

Regulations section 1.1411-10(g).

the close of the tax year, and

Note. CRTs that make the Simplified Net Investment Income

2. To the extent the payment is characterized as corpus

Calculation election also may make the Regulations section

from a property distribution (other than cash), the trustee

1.1411-10(g) election. See Simplified Net Investment Income

treats any income generated by the distribution as occurring

Calculation Election, in the instructions for Part I-B of

on the last day of the tax year for which the annuity or unitrust

Schedule A, later.

amount is due, then the annuity trust or certain unitrusts won't

For more information on the NII treatment of income from

be deemed to have:

certain CFCs and PFICs within the section 664 category and

Engaged in self-dealing (section 4941),

class system, see Regulations section 1.1411-10 and

Unrelated debt-financed income (section 514),

Proposed Regulations section 1.1411-3(d)(2)(ii).

Received an additional contribution (Regulations section

Contents of the election. In order to make the election, the

1.664-2(b) and 1.664-3(b)), or

CRT must check the “Yes” box on line 92 and must attach a

Failed to function exclusively as a charitable remainder

statement to its Form 5227, which must include:

trust (Regulations section 1.664-1(a)(4)).

Name of the CRT and its EIN,

See Regulations sections 1.664-2(a)(1) and 1.664-3(a)(1)

A declaration that the CRTs elect under Regulations

for more information.

section 1.1411-10(g) to apply the rules in Regulations section

Under Regulations section 1.664-1(d)(5), a distribution of

1.1411-10(g) to the CFCs and QEFs identified in the

property (other than cash) is treated as a sale by the trust.

statement, and

The following information with respect to each CFC and

Note. You must report income (gain) generated by the

QEF for which an election is made:

property distribution (discussed above) on Part I of Form

The name of the CFC or QEF; and

5227 for the current tax year.

Either the EIN of the CFC or QEF, or, if the CFC or QEF

does not have an EIN, the reference ID number of the CFC or

Trusts created before December 10, 1998. The election

QEF.

in Regulations sections 1.664-2(a)(1)(i)(a)(2) and 1.664-3(a)

(1)(i)(g)(2) does not apply to charitable remainder annuity

Line 96. Check the “Yes” box and enter the name of the

trusts and certain charitable remainder unitrusts whose

foreign country if either (1) or (2) below applies.

annuity or unitrust amount is 15% or less.

1. The trust owns more than 50% of the stock in any

Line 92. Net Investment Income Tax (NIIT)—Regulations

corporation that owns one or more foreign bank accounts.

Section 1.1411-10(g) Election. In general, a CRT that

2. At any time during the year, the trust had an interest in

owns stock of a controlled foreign corporation (CFC) (within

or signature or other authority over a bank, securities, or

the meaning of section 953(c)(1)(B) or 957(a)) or a passive

other financial account in a foreign country.

foreign investment company (within the meaning of section

1297(a)) that it treats as a qualified electing fund (QEF) under

Exception. Check “No” if either of the following applies to

section 1295 may make the election provided in Regulations

the trust:

section 1.1411-10(g). For NIIT purposes, if an election is in

The combined value of the accounts was $10,000 or less

effect with respect to a CFC or QEF, then, in general, the

during the whole year, or

amounts included in income for regular tax purposes under

The accounts were with a U.S. military banking facility

section 951 and section 1293 from the CFC or QEF also are

operated by a U.S. financial institution.

included in NII, and distributions of previously taxed income

See FinCEN Form 114, Report of Foreign Bank and

to the CRT from the CFC or QEF described in section 959(d)

Financial Accounts (FBAR) and its instructions to determine

or 1293(c) are excluded from NII.

whether the trust is considered to have an interest in or

This election must be made on an entity by entity basis,

signature or other authority over a bank, securities, or other

and applies only to the particular CFCs and QEFs for which

financial account in a foreign country. If “Yes,” electronically

an election is made. If the CRT owns a CFC or QEF through

file FinCEN Form 114 with the Department of the Treasury

certain domestic pass-through entities, such as a domestic

using the FinCEN's BSA E-Filing System. Because FinCEN

partnership or common trust fund, the domestic pass-through

Form 114 isn't a tax form, don't file it with Form 5227. See

entity may make the election with respect to the CFC or QEF

for more information.

and you will be considered as having made the election. If

If you are required to file FinCEN Form 114 but don't,

the entity does not make the election, you may make the

you may have to pay a penalty of up to $10,000

election with respect to the CFC or QEF owned through the

(more in some cases).

entity.

CAUTION

When to make the election. The election applies to the tax

Signature

year for which it is made and later tax years, and applies to all

Form 5227 must be signed by the trustee or by an authorized

interests in the CFC or QEF that the CRT later acquires. The

representative.

CRT cannot revoke the election. The election must be made

no later than the first taxable year beginning after December

If you, as trustee (or an employee or officer of the trust), fill

31, 2013, in which the CRT includes an amount in income for

in Form 5227, the Paid Preparer's space should remain

regular tax purposes under section 951(a) or 1293(a) with

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Instructions for Form 5227

Instructions For Form 5227 - 2016 Page 11

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