Discussion:Charitable Remainder Unitrust
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Jweldoncpa (talk|edits) said: | 28 June 2007 |
| I have a client who formed a CRUT on April 1, 2006 and contributed appreciated real estate with a FMV of $2,500,000. The real estate only generated income of $1700 in 2006 and the real estate was not sold until January 2007. The trust has a required income payout percentage of 10% or $250,000; however since there were insufficent liquid assets to distribute in 2006, I do not know how to report this situation on the initial form 5227. | |
| 28 June 2007 | |
| I hope this was a NIMCRUT?
If not, blame the attorney setting it up for not thinking. | |
Jweldoncpa (talk|edits) said: | 28 June 2007 |
| No, it is not a Nimcrut. Any suggestions? | |
| 28 June 2007 | |
| I don't have my research material with me but I don't think the answer is good - I think something very bad happens. I'm out on the road teaching Final 1040/Estate 1041 and won't return to my office until next week, where most of my research material on CRUTs is. I'll look though the files on my laptop that I have with me, but otherwise it will next week before I can give you an answer. | |
| June 28, 2007 | |
| How about a NI-CRUT?
10% and no NI limitation. Wow! How much did the charitable deduction end up being? Just wait 10 years to sell and you can distribute the property back to the Grantor. | |
Jweldoncpa (talk|edits) said: | 28 June 2007 |
| A Ni-Crut will not work since the property was sold in January 2007. Thanks for your help. | |
| 28 June 2007 | |
| My guess would be FLIP. In any event, the document language will give you the answer. I wouldn't be betting against the attorney. | |
| 28 June 2007 | |
| Yes, a FLIP would work, but would have NI or NIM language then changing to a regular CRUT. I agree with Dennis, time to ask the attorney. | |
Jweldoncpa (talk|edits) said: | 29 June 2007 |
| 60% of the donation was land and the remainder was a rental house which generated a profit of $1700 in 2006 | |
| 29 June 2007 | |
| You get to prorate the first year payout since the funds were not in for the entire year. | |
Jweldoncpa (talk|edits) said: | 29 June 2007 |
| That is true but prorating requires a distribution of appromately $165,000 and the cash available was $1700. | |
| 29 June 2007 | |
| Actually all you have to do is fill out the reconcilliation in Part V. Since this is the first return you must attach a copy of the trust, so if the IRS has a bitch it's the attorney's problem. You do need to know what the tratment is for year two though. Payout could be anything from net investment income on sale proceeds to full make up. (It is not uncommon to have the flip kick in starting in the year after the sale.) | |
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