An estate is treated as a charitable trust between the date it is considered terminated for federal income tax purposes and the date it finally distributes all net assets to or in trust for charitable beneficiaries.

Example.  Malcolm Thorn bequeaths his en­tire estate, including 100% of the stock of a wholly owned corporation, to M, an organization described in section 501(c)(3), under a will that gives his executor authority to hold the stock and manage the corporation for a period of up to 10 years for the benefit of M before its ultimate disposition.  A deduction for the charitable be­quest was allowed to Malcolm’s estate.  The ex­ecutor is vested with a full range of powers, including the power of sale.  Upon Malcolm’s death, his executor distributes Malcolm’s assets to M except for the stock of the corporation, which he holds for 5 years before its disposition.  Because the executor held the stock of the cor­poration beyond a reasonable time for perform­ing all the ordinary duties of administration, the estate is considered terminated for federal in­come tax purposes and is subject to the provi­sions of section 4947(a)(1) from the date of this termination to the date of final disposition of the stock of the corporation.


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