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Charitable Remainder Trust K-1 Income - where to check the box not subject to investment income tax

oola
Level 1
How to prevent Charitable Remainder Trust Income on K-1 from being reported on Form 8960.
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sjrcpa
Level 15

That says the trust is exempt.

It does not say that a beneficiary is exempt on the income shown on their K-1.


Ex-AllStar

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sjrcpa
Level 15
Why isn't it subject to NIIT?

Ex-AllStar
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oola
Level 1
https://www.irs.gov/newsroom/questions-and-answers-on-the-net-investment-income-tax

7. What estates and trusts are not subject to the Net Investment Income Tax?
The following trusts are not subject to the Net Investment Income Tax:

Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified retirement plan trusts exempt from tax under section 501, and Charitable Remainder Trusts exempt from tax under section 664).

A trust or decedent’s estate in which all of the unexpired interests are devoted to one or more of the purposes described in section 170(c)(2)(B).

Trusts that are classified as “grantor trusts” under sections 671-679.

Trusts that are not classified as “trusts” for federal income tax purposes (e.g., Real Estate Investment Trusts and Common Trust Funds).

Electing Alaska Native Settlement Trusts.

Perpetual Care (Cemetery) Trusts.
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sjrcpa
Level 15

That says the trust is exempt.

It does not say that a beneficiary is exempt on the income shown on their K-1.


Ex-AllStar
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oola
Level 1
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sjrcpa
Level 15
Yes that says that a charitable remainder trust is exempt from NIIT. It does not say that the beneficiary's K-1 income isxempt.

Ex-AllStar
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oola
Level 1
True. After review of the IRS code section regarding this issue I can find no evidence to suggest income to beneficiaries would be tax exempt. Thank you for your input, Oola
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sjrcpa
Level 15
You're welcome.

Ex-AllStar
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