Instructions For Form 5227 - 2016 (Page 12 of 20) in pdf

blank. If someone prepares this return without charge, that

tax purposes using the section 664 category and class

person should not sign the return.

system. However, see Effect of the SNIIC Election on Netting

and Ordering Rules, later.

Paid Preparer. Generally, anyone who is paid to prepare a

tax return for a charitable remainder trust must sign the return

Calculation of NII

and fill in the other blanks in the Paid Preparer Use Only area

In computing the CRT’s NII, if in a taxable year a CRT’s

of the return. For all other trusts, completion of Form 5227's

properly allocable deductions described in section 1411(c)(1)

Paid Preparer Use Only area is optional.

(B) exceed the gross investment income and net gain

If you have questions about whether a preparer is required

described in section 1411(c)(1)(A), then such excess

to sign the return, please contact an IRS office.

deductions shall reduce the NII for that taxable year and, to

The person required to sign the return as the preparer

the extent of any remaining excess deductions, reduce NII in

must:

subsequent taxable years of the CRT.

Complete the required preparer information,

Example. A CRT has dividend income of $1,000 and a

Sign it in the space provided for the preparer's signature (a

long-term capital loss of $10,000 in 2015; and $11,000

facsimile signature is acceptable), and

long-term capital gains in 2016. The CRT would have

Give the trustee a copy of the return in addition to the copy

($9,000) of accumulated NII in 2015, so any 2015

to be filed with the IRS.

distributions to income recipients would not include any NII.

Enter the paid preparer’s PTIN, not his or her Social

In 2016, the CRT would have $2,000 of NII available for

Security number (SSN), in the “PTIN” box in the paid

distribution in 2016 and after.

preparer’s block. Because Form 5227 is publicly

CAUTION

Note. The SNIIC election is available for the 2016 tax year

disclosable, any information entered in this block will become

under Proposed Regulations section 1.1411-3(d)(3). When

public. For more information about PTINs, visit the IRS

finalized, Proposed Regulations section 1.1411-3(d)(3) is

website at

proposed to apply to tax years of the CRT beginning after

Schedule A—Distributions, Assets,

December 31, 2012. However, if, after consideration of all

comments received in response to those proposed

and Donor Information

regulations, it appears that there is no significant interest

among taxpayers in having the option of using the simplified

Note. Schedule A isn't open to public inspection.

method, the IRS may omit this election from the regulations

Part I-A. Accumulation Schedule (Section 664

when finalized. If the SNIIC election is omitted, the CRT won't

have to amend the 2016 return. The Instructions to Form

trust only)

5227 in a later year will describe the actions that the CRT

The following information applies to lines 2a and 2b:

must take to transition from the SNIIC to calculating NII using

Line 2a. Enter the total of all distributions for 2016 on the

the section 664 category and class system.

short line to the immediate right of the “2016.”

When to Make the SNIIC Election

Line 2b. Enter the amount distributed from each income

CRTs established after December 31, 2012. In the

category.

case of a CRT established after December 31, 2012, a CRT

Part I-B. Simplified Net Investment

wanting to make the SNIIC election must do so on its Form

5227 return for the taxable year in which the CRT is

Income Calculation Election (SNIIC

established.

Election) (Section 664 trust only)

CRTs established before January 1, 2013. In the case

of a CRT established before January 1, 2013, the CRT

The CRT may make an election to calculate receipts and

wanting to make the election must do so on its Form 5227

distributions of NII using a simplified method that is

return for its first taxable year beginning on or after January 1,

independent of the section 664 category and class system.

2013.

Once made, the SNIIC election is irrevocable. If a CRT

Making a SNIIC Election on an Amended Return. The

makes the SNIIC election, the CRT computes the NII in the

CRT may make the election on an amended Form 5227

same manner as an individual. When using the SNIIC, a

return for that year only if the taxable year for which the SNIIC

CRT’s accumulated NII is a separate and independent

election is made, and all taxable years that are affected by

tracking system within the CRT and isn't assigned,

the election, for both the CRT and its recipients, aren't closed

combined, or taken into account in any of the CRT's existing

by the period of limitations on assessments under section

categories (ordinary income, capital gain, nontaxable

6501.

income).

Amount of NII Allocable to Income Recipients

How to Make the SNIIC Election and Completing

the Form 5227 with a SNIIC Election

If a CRT makes the SNIIC election, distributions from a CRT

to a recipient for a tax year consist of NII equal to the lesser

A CRT makes the SNIIC election by:

of:

Completing lines 27 through 29 of Part II by reporting all

1. The total amount of the distributions to that recipient

income received as Excluded Income;

for that year, or

Completing lines 1 through 3 of Part I-A of Schedule A by

reporting all income distributed as Excluded Income;

2. The current and accumulated NII of the CRT.

Completing Part I-B of Schedule A (see Instructions for

With this election, the classification of a distribution as

Part I-B of Schedule A, later); and

consisting of NII or Excluded Income is independent from the

Reporting the allocable share of NII to recipients

character of the income distributed to the recipient for regular

consistent with the election.

-12-

Instructions for Form 5227

Instructions For Form 5227 - 2016 Page 12

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