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SOI Tax Stats - Split-Interest Trust Study Terms and Concepts

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This page contains information about selected terms and concepts used in SOI's Split-Interest Trust Study articles and tables.

Please visit Split-Interest Trust Statistics to access these articles and tables.

A - F G - L M - R S - Z

Accounts payable and accrued expenses
Accounts payable and accrued expenses represent the trust’s obligation to pay off a short-term debt and is recorded as a liability on the balance sheet.

Examples of this could include unpaid payroll or unpaid invoices.
Source: Form 5227, Page 3, Part IV, Line 51 (2011 Revision)

Accounts receivable
Accounts receivable is money owed to the trust for products or services provided on credit. This is recorded as an asset on the balance sheet.
Source: Form 5227, Page 3, Part IV, Line 40b (2011 Revision)

Annuity trust
An annuity trust is a trust in which the payments for the duration of the trust, either to a private or charitable beneficiary, are of a fixed amount.

In the context of split-interest trusts, an annuity trust can be either a charitable remainder trust (with a private income beneficiary) or charitable lead trust (with a charitable income beneficiary). The payment amount is determined by multiplying a specified percentage by the fair market value of the assets initially placed in the trust.

Attorney, accountant, and return preparer fees
Fees paid to attorneys, accountants and return preparers in exchange for their services performed on behalf of the trust are a deductible expense.
Source: Form 5227, Page 1, Part I, Line 20 (2011 Revision)

Beneficiary(ies)
Beneficiary(ies) refers to the person, persons, or organization that receives payments or assets from a trust.

Beneficiaries can be either charitable or noncharitable, and can be either an income beneficiary or a remainder beneficiary.

Book value
Book value is generally the cost basis of an asset or the price at which an asset is acquired.

All trusts must report the beginning- and end-of-year book value of their assets on Part IV, Balance Sheet, Columns A and B, of Form 5227.

Business income or loss
Business income or loss is the amount of income and expenses received by a business operated by the trust.

Income and expenses related to such a business should be reported on Form 1040 Schedule C, Profit or Loss from Business. This amount should equal the net profit or loss from Line 3 of Schedule C.
Source: Form 5227, Page 1, Part I, Line 3 (2011 Revision)

Capital gain or loss
A capital gain or loss results from the sale of investments into a capital asset, such as stocks, bonds or real estate.
Source: Form 5227, Page 1, Part I, Section B (2011 Revision)

Cash
The value of all cash on deposit any non-interest-bearing account is reported as an asset on the balance sheet.

This includes the value of all checking accounts, deposits in transit, change funds, and petty cash funds.
Source: Form 5227, Page 3, Part IV, Line 38 (2011 Revision)

Charitable deduction
The charitable deduction is the value of assets given to a qualified charitable organization during the tax year.

The qualifications for a charitable organization are detailed in Section 642(c).
Source: Form 5227, Page 1, Part I, Line 23 (2011 Revision)

Charitable lead trust (CLT)
Charitable lead trusts (CLT) are split-interest trusts in which a charity receives an income stream during the life of the trust and noncharitable beneficiaries receive the remaining assets when the trust terminates.

Charitable lead trusts can be classified as either grantor or nongrantor lead trusts, and payments can be made on an annuity basis or a unitrust basis.

Charitable purpose land, buildings, and equipment
Charitable purpose land, buildings, and equipment is the value of all land, buildings, and equipment not held for investments purposes, such as those used for charitable activities.
Source: Form 5227, Page 3, Part IV, Line 48 (2011 Revision)

Charitable remainder annuity trust (CRAT)
A charitable remainder annuity trust (CRAT) is a charitable remainder trust in which the income payments to the noncharitable beneficiary are fixed throughout the life of the trust.

The payment amount is calculated by multiplying the designated percentage by the fair market value of the assets initially placed in the trust.

Charitable remainder trust (CRT)
Charitable remainder trusts (CRT) are split-interest trusts in which a noncharitable beneficiary receives a stream of income for the duration of the trust, and a designated charity receives the remaining trust assets upon termination.

Charitable remainder trusts can be either annuity trusts or unitrusts, depending on the method used to calculate the payment amounts. Further, unitrusts can be of the net income or net income with makeup variety.

Charitable remainder unitrust (CRUT)
A charitable remainder unitrust (CRUT) is a charitable remainder trust in which the income payments to the noncharitable beneficiary fluctuate with the fair market value of the assets in the trust.

The payment amount is calculated by multiplying the designated percentage (called the unitrust percentage) by the fair market value of the assets, as they are valued each year. Unitrusts can have net income or net income with makeup provisions.

Charity or charitable organization
A charity, or charitable organization, refers to a tax-exempt organization with purposes that are charitable, educational, scientific, literary, or religious in nature, or that otherwise qualifies as a 501(c) (3) organization.

For more information on what qualifies as a 501(c)(3) organization, see the Internal Revenue Service Exemption Requirements.

Corporate bonds
Corporate bonds are financial debt instruments issued by a corporation that mature in more than one year.
Source: Form 5227, Page 3, Part IV, Line 45c (2011 Revision)

Corporate stock
Corporate stock is the value of all equity the trust owns in a corporation.
Source: Form 5227, Page 3, Part IV, Line 45b (2011 Revision)

Corpus (or Principal)
The corpus (or principal) of a trust consists of the original assets transferred into the trust. Often referred to as the body of the trust, the corpus may generate income streams.

Current year income
Current year net income is the value of all net income that the trust received during the current tax year prior to any distributions of income.

This includes net ordinary income, net capital gains (losses), and net nontaxable income.
Source: Form 5227, Page 2, Part II, Line 28 (2011 Revision)

Deductions allocable to capital gains
Deductions allocable to capital gains is the value of deductions that can be attributed to the capital gains.

On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 1, Part I, Line 25a (2011 Revision)

Deductions allocable to nontaxable income
Deductions allocable to nontaxable income is the value of deductions that can be attributed to the nontaxable income.

On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 1, Part I, Line 26a (2011 Revision)

Deductions allocable to ordinary income
Deductions allocable to ordinary income is the value of deductions that can be attributed to the ordinary income.

On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 1, Part I, Line 24a (2011 Revision)

Deferred revenue
Deferred revenue is payment received for goods that have not yet been supplied or services that have not yet been performed.

This is recorded as a liability on the balance sheet
Source: Form 5227, Page 3, Part IV, Line 52 (2011 Revision)

Distributions of income
Distributions of income is the sum of all income distributed by the trust in the current tax year. This includes ordinary income, capital gains (losses), and nontaxable income.
Source: Form 5227, Page 7, Schedule A, Part I, Line 2b (2011 Revision)

Donor
A donor, also referred to as a grantor or contributor, is the individual who transfers personal assets into the trust or fund.

Fair market value
Fair market value is defined, for the purposes of this study, as the market price of the asset (or liability) as of a certain point in time.

The end-of-year fair market value of assets is reported for all split-interest trust types on Page 1 of Form 5227. A detailed listing of the fair market value of assets and liabilities is reported for charitable remainder unitrusts in Part IV, Balance Sheet, Column C, of Form 5227. The valuation can occur at any time during the tax year; however it should occur on the same day each year and is set forth in the trust instrument.

Farm income or loss
Farm income or loss is the amount of farm income and expenses received by a farm operated by the trust.

Farm income or loss should be reported on Form 1040 Schedule F, Profit or Loss from Farming. The value of farm income or loss should equal the net profit or loss from Schedule F Line 5.
Source: Form 5227, Page 1, Part I, Line 5 (2011 Revision)

Government obligations
Government obligations are financial debt instruments backed by a federal, state, or local government entity, which mature in more than one year.

This includes treasury bonds, savings bonds, and municipal bonds.
Source: Form 5227, Page 3, Part IV, Line 45a (2011 Revision)

Gross Income
The gross income of a trust is the sum of income prior to being reduced by deductions.
Source: Form 5227, Page 1, Line D (2011 Revision)

Income beneficiary
The income beneficiary of a split-interest trust is the recipient of the stream of payments made over the duration of the trust.

The income beneficiary of charitable remainder trusts and pooled income funds is the noncharitable beneficiary. In charitable lead trusts, the income beneficiary is the designated charitable organization.

Interest deduction
An interest deduction is allowed for interest paid on a qualified debt.
Source: Form 5227, Page 1, Part I, Line 17 (2011 Revision)

Interest income
Interest income is the taxable income the trust received as a result of invested capital.

Sources of such income can include accounts with banks, credit unions, and thrifts; notes, loans, and mortgages; U.S. Treasury bills, notes, and bonds; U.S. savings bonds; Real Estate Mortgage Investment Conduit (REMIC).
Source: Form 5227, Page 1, Part I, Line 1 (2011 Revision)

Inventories for sale or use
Inventories for sale or use is the amount of materials, goods, and supplies purchased or manufactured by the trust and held for sale or use in some future period.
Source: Form 5227, Page 3, Part IV, Line 43 (2011 Revision)

Investment assets
Investment assets refer to the sum of “Government obligations” (line 45a); “corporate stock” (line 45b); “corporate bonds” (line 45c); “land, buildings, and equipment that is not held for charitable purposes” (line 46); and “other investments” (line 47) reported on the balance sheet (Part IV, Form 5227).

Land, buildings, and equipment
The value of all land, buildings, and equipment held for investments purposes, such as rental properties, are included on the balance sheet as an asset.
Source: Form 5227, Page 3, Part IV, Line 46 (2011 Revision)

Loans from officers, directors, trustees, etc.
The unpaid balance of loans the trust received by the trust from officers, directors, and trustees are included as liability on the balance sheet.
Source: Form 5227, Page 3, Part IV, Line 53 (2011 Revision)

Long-term capital gain or loss
Long-term capital gains or losses are the result of the sales of capital assets that were held for more than 1 year.

The holding period is begins on the day after the property was acquired and includes the day the property was sold.
Source: Form 5227, Page 1, Part I, Line 10 (2011 Revision)

Mortgages and other notes payable
The value of all mortgages and other notes payable by the trust are included as liability on the balance sheet.
Source: Form 5227, Page 3, Part IV, Line 54 (2011 Revision)

Net income charitable remainder unitrust (NI-CRUT)
Net income charitable remainder unitrusts are charitable remainder unitrusts that allow the annual payment to the noncharitable beneficiary to be the lesser of either the unitrust amount or the trust’s net income.

Net income with makeup charitable remainder unitrusts (NIM-CRUT)
Net income with makeup charitable remainder unitrust allows the payment to the noncharitable beneficiary to be the lesser of the unitrust amount or the accounting income, however any deficiencies must be repaid when income allows.

Deficiencies in the distributions, which occur when the net income is less than the unitrust payment amount, accrue year-to-year and are made up in subsequent years when the net income of the trust is greater than the unitrust amount.

Net nontaxable income
Net nontaxable income is the value of nontaxable income minus any deductions related to nontaxable income.

On Form 5227, this is equal to the value of total nontaxable income (Page 1, Line 16) less deductions allocable to nontaxable income (Page 26a). This value is only reported for charitable remainder trusts.
Source: Form 5227, Page 1, Part I, Line 26b (2011 Revision)

Net ordinary income
Net ordinary income is the value of total ordinary income minus any deductions related to ordinary income.

On Form 5227, this is equal to the value of total ordinary gains (Page 1, Line 8) less deductions allocable to ordinary income (Page 24a). This value is only reported for charitable remainder trusts.
Source: Form 5227, Page 1, Part I, Line 25b (2011 Revision)

Nontaxable income
Nontaxable income is income received by the trust that is not subject to Federal taxation.

Examples of nontaxable income include interest on state and local bonds. Nontaxable income is detailed under Subtitle A, Chapter 1, Subchapter B, Part III of the Internal Revenue Code.

Ordinary dividends
Ordinary dividends are a result of the trust or estates’ investment in a corporation and are paid out of the earnings and profits of the corporation.

Ordinary dividends are taxable as ordinary income unless they are qualified dividends. Qualified dividends are a subset of ordinary dividends that meet the requirements to be taxed as net capital gains. These requirements are outlined in Internal Revenue Service Publication 550, Investment Income and Expenses.
Source: Form 5227, Page 1, Part I, Line 2a (2011 Revision)

Ordinary income
Ordinary income is income that is not the result of the sale or exchange of a capital asset.

On Form 5227, the ordinary income category includes interest, ordinary dividends, business income and losses, income form rents, royalties, partnerships, other estates and trusts, farm income, and ordinary gain.
Source: Form 5227, Page 1, Part I, Section A (2011 Revision)

Ordinary gain or loss
Ordinary gain or loss is equal to the ordinary gain or loss from the sale of property other than capital assets and also from involuntary conversions.

Ordinary gain or loss is received from the following sources: interest; dividends; business income; rents, royalties, partnerships, and other estates and trusts; farm income; ordinary gain; and “other income.”
Source: Form 5227, Page 1, Part I, Line 6 (2011 Revision)

Other allowable deductions
Other allowable deductions are deductible expenses attributable to gross income that cannot be classified as any other type of deduction, such as investment advisory funds.
Source: Form 5227, Page 1, Part I, Line 21 (2011 Revision)

Other assets
Other assets include all assets that could not be included in one of the explicit asset classifications included on the balance sheet.
Source: Form 5227, Page 3, Part IV, Line 49 (2011 Revision)

Other income
Other income is any income amount that is includable in gross income but not included in any other ordinary income classification.
Source: Form 5227, Page 1, Part I, Line 7 (2011 Revision)

Other investments
Other investments include all investment holdings that could not be classified as a government obligation, corporate stock, corporate bonds, or land, buildings and equipment.
Source: Form 5227, Page 3, Part IV, Line 47 (2011 Revision)

Other liabilities
Other liabilities include the value of all amounts owed by the trust that could not be included in another explicit classification.
Source: Form 5227, Page 3, Part IV, Line 55 (2011 Revision)

Other nontaxable income
Other nontaxable income is any income amount that is includable in gross income but not included in any other nontaxable income classification.
Source: Form 5227, Page 1, Part I, Line 15 (2011 Revision)

Other notes and loans receivable
Other notes and loans receivable is the value of all payments due from persons or entities that do not act as the officers, directors, or trustees of the trust, including those that result from a promissory note or loan.
Source: Form 5227, Page 3, Part IV, Line 42 (2011 Revision)

Pooled income fund (PIF)
A trust administered by a charity in which multiple donors pool assets for investment. Resulting income is distributed to donors on a prorated basis until their death, when their assets are transferred to the charity.

Prepaid expenses and deferred charges
A prepaid expense or deferred charge occurs when the trustee pays for a good or service in advance of its receipt.
Source: Form 5227, Page 3, Part IV, Line 44 (2011 Revision)

Prior-year undistributed income
Prior-year undistributed income is the value of all net income the remains in the trust from previous tax years after all distributions of income have been made.

This includes net ordinary income, net capital gains (losses), and net nontaxable income. On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 2, Part II, Line 27 (2011 Revision)

Qualified dividends
A qualified dividend is a dividend received from a domestic corporation or a qualified foreign corporation and meets the requirements to be taxed as net capital gains.
Source: Form 5227, Page 1, Part I, Line 2b (2011 Revision)

Receivables due from officers, directors, trustees, etc.
The value of all payments due from persons who also act as the officers, directors, or trustees of the trust, including those that result from a loan or advance are reported as an asset on the balance sheet.
Source: Form 5227, Page 3, Part IV, Line 41 (2011 Revision)

Remainder beneficiary
The remainder beneficiary of a split-interest trust is the recipient of the trust’s assets at the conclusion of the trust.

In the case of charitable remainder trusts, the remainder beneficiary is the selected charity; in charitable lead trusts, the remainder beneficiary is the designated private beneficiary.

Rents, royalties, partnerships, other estates and trusts, etc.
Rents, royalties, partnerships, other estates and trusts, etc. is the trust’s or estate’s share of income or losses from rents, royalties, partnerships, S corporations, other estates and trusts and REMICs.

This income or loss is also reported on Form 1040 Schedule E, Supplemental Income and Loss.
Source: Form 5227, Page 1, Part I, Line 4 (2011 Revision)

Savings and temporary cash investments
Savings and temporary cash investments are the value of all cash in savings or other interest bearing accounts and temporary cash investments.

This includes money market funds, commercial paper, certificates of deposit (CDs), U.S. Treasury bills, or other governmental obligations that mature in less than one year.
Source: Form 5227, Page 3, Part IV, Line 39 (2011 Revision)

Securities
Securities refer to the sum of “Government obligations” (line 45a); “corporate stock” (line 45b); and “corporate bonds” (line 45c) reported on the balance sheet (Part IV, Form 5227).

Short-term capital gain or loss
Short-term capital gains or losses are the result of the sales of capital assets that were held for 1 year or less.

The holding period is begins on the day after the property was acquired and includes the day the property was sold.
Source: Form 5227, Page 1, Part I, Line 9 (2011 Revision)

Short-term investments
Short-term investments are securities that mature in 1 year or less. Treasury bills and short-term corporate notes are common examples of a short-term investment.

Split-interest trust
A split-interest trust is an arrangement which has both charitable and noncharitable beneficiaries. The amount and timing of the distributions depends on the type of arrangement.

According to the 2011 Tax Year Instructions for Form 5227, is a trust that “is not exempt from tax under Internal Revenue Code section 501(a); has some unexpired interests that are devoted to purposes other than religious, charitable, or similar purposes described in Code section 170(c)(2)(B); and has amounts transferred in trust after May 26, 1969, for which a deduction was allowed under one of the Code sections listed in section 4947(a)(2).” The three major types of split-interest trusts are charitable lead trusts, charitable remainder trusts, and pooled income funds.

Tax-exempt interest
Tax-exempt interest is income that is not subject to Federal taxation. This includes income from Federal, state, and municipal bonds.
Source: Form 5227, Page 1, Part I, Line 14 (2011 Revision)

Taxes (deduction)
Taxes paid on behalf of the trust to non-Federal governments are a deductible expense.
Source: Form 5227, Page 1, Part I, Line 18 (2011 Revision)

Total accumulations of income
Total accumulations of income is equal to the sum of all undistributed net income from the prior tax year and all income received by the trust in the current tax year. 

This includes net ordinary income, net capital gains (losses), and net nontaxable income.  On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 2, Part II, Line 27 and Line 28 (2011 Revision)

Total assets
Total assets is the value of all assets owned by the trust, prior to reductions for liabilities. 
Source: Form 5227, Page 3, Part IV, Line 50 (2011 Revision)

Total capital gains (losses)
Total capital gains (losses) is equal to the sum of short- and long-term capital gains (losses).
Source: Form 5227, Page 1, Part I, Line 13 (2011 Revision)

Total deductions
Total deductions is the sum of all deductions reported by the trust.

On Form 5227, total deductions includes the sum of deductions claimed for interest, taxes, trustees fees, fees associated with attorney, accountant, and return preparation, and other allowable deductions.
Source: Form 5227, Page 1, Part I, Line 22 (2011 Revision)

Total income
Total income is the sum of ordinary income, capital gains, and nontaxable income, prior to any deductions.

Total investments
Total investments is the sum of all investment assets held by the trust, including government obligations, corporate stock and bonds, investments in land, buildings, or equipment.

For Form 5227, this equals the sum of Lines 45a through 47 on Page 3, Part IV (2011 Revision).

Total liabilities
The sum of all liabilities attributable to the trust, including accounts payable, accrued expenses, deferred revenue, loans, mortgages, and notes payable.
Source: Form 5227, Page 3, Part IV, Line 56 (2011 Revision)

Total net assets
Total net assets is the value of all assets owned by the trust minus all liabilities attributable to the trust.
Source: Form 5227, Page 3, Part IV, Line 59 (2011 Revision)

Total net income
Total net income is the sum of net ordinary income, net capital gains, and net nontaxable income. 

Total nontaxable income
Total nontaxable income is the sum of all income received by the trust that is not subject to Federal taxation.

Examples of nontaxable income include interest on state and local bonds. Nontaxable income is detailed under Subtitle A, Chapter 1, Subchapter B, Part III of the Internal Revenue Code.
Source: Form 5227, Page 1, Part I, Line 16 (2011 Revision)

Total ordinary income
Total ordinary income is sum of all income that is not the result of the sale or exchange of a capital asset.

On Form 5227, total ordinary income is a sum of interest income, ordinary dividends, business income (or loss), income from rents, , partnerships, and other estates and trusts, farm income (or loss), ordinary gain (or loss) and other income.
Source: Form 5227, Page 1, Part I, Line 8 (2011 Revision)

Trust
A trust is a legal arrangement between its creator (donor or grantor), the manager of the trust (trustee), and the beneficiary or beneficiaries of the trust.

Trusts are legal entities in their own right, and can be responsible for any tax liabilities separate from the liabilities of the grantor and beneficiary. The conditions and provisions of a trust are defined in the trust document.

Trustee
A trustee is charged with holding, investing, and distributing the assets of the trust.

A trustee may be an individual, a group of individuals, or an entity, such as a bank. Each has a legal responsibility to both manage the property of the trust and to ensure that all transactions, including distributions, conform to estate or trust documents as well as applicable laws. Trustees must also coordinate the preparation, verification, and submission of all required state and Federal tax forms and legal documents.

Trustee fees deduction
The deduction for trustee fees is equal to the amount of compensation the trustee received for services performed on behalf of the trust.
Source: Form 5227, Page 1, Part I, Line 19 (2011 Revision)

Undistributed income at end of year
Undistributed income at end of year is the value of all net income the remains in the trust at the end of the current tax year after all distributions of income have been made. 

This includes net ordinary income, net capital gains (losses), and net nontaxable income.  On Form 5227, this value is only reported for charitable remainder trusts.
Source: Form 5227, Page 7, Schedule A, Part I, Line 3 (2011 Revision)

Unitrust
A unitrust is a trust in which the income interest, paid either to a private or charitable beneficiary, varies with the annual fair market value of the total assets of the trust in a given year.

A unitrust can be either of the charitable remainder trust (with income payments to a private beneficiary) or charitable lead trust (with income payments to a charitable beneficiary) variety. The payment amount is determined by multiplying a specified percentage by the fair market value of the assets of the trust, valued annually.

Unrecaptured section 1250 gain
Unrecaptured section 1250 gain is the portion of long-term gain or loss which is realized on the sale of depreciated real estate.
Source: Form 5227, Page 1, Part I, Line 11 (2011 Revision)

28% capital gain
A 28% capital gain, also known as a collectibles gain or loss, is the portion of long-term gain or loss that is the result of the sale or exchange of a collectible that is a capital asset.

Examples of collectibles include works of art, rugs, and coins.
Source: Form 5227, Page 1, Part I, Line 12 (2011 Revision)

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Page Last Reviewed or Updated: 12-Mar-2014