Abusive Trust Tax Evasion Schemes - Law and Arguments (Section III)
III. Taxation of Non-Grantor Trusts
If the trust is not a sham and is not a grantor trust, the trust's income (reduced by amounts distributed to beneficiaries) is taxable. The trust must obtain a taxpayer identification number and file annual returns reporting its income. The trust must report distributions to beneficiaries on Forms K-1 and the beneficiary must include the distributed income on the beneficiary's tax return. (IRC §§ 641, 651, 652, 661 and 662)
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.