E. Nonexempt Charitable and Split-Interest Trusts

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E. Nonexempt Charitable and Split-Interest Trusts

Section 4947(a)(1) Trust

Check this box if the trust is a nonexempt charitable trust within the meaning of section 4947(a)(1).

A nonexempt charitable trust is a trust:

  • That is not exempt from tax under section 501(a);

  • In which all of the unexpired interests are devoted to one or more charitable purposes described in section 170(c)(2)(B); and

  • For which a deduction was allowed under section 170 (for individual taxpayers) or similar Code section for personal holding companies, foreign personal holding companies, or estates or trusts (including a deduction for estate or gift tax purposes).

Nonexempt charitable trust treated as a private foundation. If a nonexempt charitable trust is treated as though it were a private foundation under section 509, then the fiduciary must file Form 990-PF, Return of Private Foundation, in addition to Form 1041.

If a nonexempt charitable trust is treated as though it were a private foundation, and it has no taxable income under Subtitle A, it may check the box on Form 990-PF, Part VII-A, line 15 and enter the tax-exempt interest received or accrued during the year on that line, instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year.

Excise taxes.

If a nonexempt charitable trust is treated as a private foundation, then it is subject to the same excise taxes under chapters 41 and 42 that a private foundation is subject to. If the nonexempt charitable trust is liable for any of these taxes (except the section 4940 tax), then it reports these taxes on Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. Taxes paid by the trust on Form 4720 or on Form 990-PF (the section 4940 tax) cannot be taken as a deduction on Form 1041.

Not a Private Foundation

Check this box if the nonexempt charitable trust (section 4947(a)(1)) is not treated as a private foundation under section 509. For more information, see Regulations section 53.4947-1.

Other returns that must be filed. If a nonexempt charitable trust is not treated as though it were a private foundation, the fiduciary must file Form 990, Return of Organization Exempt From Income Tax, or Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, in addition to Form 1041, if the trust meets the filing requirements for either of those forms.

If a nonexempt charitable trust is not treated as though it were a private foundation, and it has no taxable income under Subtitle A, it may answer “Yes” on Form 990, Part V, line 12a and enter the tax-exempt interest received or accrued during the year on Form 990, Part V, line 12b instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year (or if Form 990-EZ is filed instead of Form 990, you may check the box on Form 990-EZ, line 43 and enter the tax-exempt interest received or accrued during the year on that line).

Section 4947(a)(2) Trust

Check this box if the trust is a split-interest trust described in section 4947(a)(2).

A split-interest trust is a trust that:

  • Is not exempt from tax under section 501(a);

  • Has some unexpired interests that are devoted to purposes other than religious, charitable, or similar purposes described in section 170(c)(2)(B); and

  • Has amounts transferred in trust after May 26, 1969, for which a deduction was allowed under section 170 (for individual taxpayers) or similar Code sections for personal holding companies, foreign personal holding companies, or estates or trusts (including a deduction for estate or gift tax purposes).

Other returns that must be filed. The fiduciary of a split-interest trust must file Form 5227. However, see the Instructions for Form 5227 for the exception that applies to split-interest trusts other than section 664 charitable remainder trusts.