Deducting Trust and Estate Charitable Donations: Trust Provisions and Wills, Recent Court Cases, Reporting Issues

Determining whether a charitable contribution generates a deduction on an estate or trust return is complicated. Primarily, a preparer must look to the governing instrument--the trust document or will--to determine whether a contribution made (or to be made) will generate a tax deduction. Under specific circumstances, deductions are allowed even though not stipulated in these documents.

IRC Section 642(c) sets forth unique rules on the deductibility of donations. These rules differ in substantial ways from individual charitable deduction criteria. There is no adjusted gross income limitation for trusts, and trusts can contribute to foreign charitable organizations. Since trusts can be taxed themselves or carryout taxable income to beneficiaries, trust and estate practitioners and fiduciaries need to understand these rules to preserve these valuable deductions.

Specific bequests, although deductible on the estate return, are considered deductions from principal and do not generate a tax deduction. Making charitable bequests with particular assets, however, can generate significant tax savings. Even after determining the contribution is allowed, these contributions must be appropriately reported on Schedule A of Form 1041 and Schedule O of Form 706 to ensure deductibility.

Listen as our panel of trust and estate tax experts explains the caveats and considerations of making and deducting charitable contributions on estate and trust returns.

1. Trust and estate charitable deductions - An Overview
2. Trusts
   1. Trust documents
   2. Internal revenue code requirements
3. Estates
   1. Wills
   2. Internal revenue code requirements
4. Reporting charitable contributions
   1. Form 1041
   2. Form 706
5. Impact of recent cases
6. Charitable alternatives

The panel will review these and other critical issues:

• Proper reporting of charitable deductions on Form 1041
• Distinctions between contributions made from the corpus and those made from income
• Types of trusts eligible to make deductible donations
• Specific provisions in trust documents that allow for deductible contributions
• Differences between allowable individual and trust contributions

Learning Objectives

After completing this course, you will be able to:

• Determine the types of trusts eligible to make deductible donations.
• Differentiate between allowable individual and estate/trust charitable contributions.
• Understand the application of the adjusted gross income (AGI) limitations on charitable giving.

• Identify the trust or estate provisions governing charitable contributions and the impact these provisions have on deductibility.

• Ascertain the tax treatment of contributed property and cash, including appreciated property.

• Recognize contributions that qualify as the contribution of qualified property.

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or tax firm experience at mid-level within the organization, preparing complex tax forms and schedules. Specific knowledge and understanding of charitable trusts, trust and estate charitable donations, limitations on charitable giving, general rules for charitable contributions deductibility, qualified transfers, and Form 1042; familiarity with charitable remainder trusts (CRTs), charitable lead trusts (CLTs), and types of trusts eligible to make deductible donations.

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).