8086 / What filing requirements apply to charitable remainder trusts?

Split-interest charitable trusts are required to file the form required by the Secretary of the Treasury each year. Historically this has been Form 1041-A, Trust Accumulation of Charitable Amounts. PPA 2006 eliminates the current exception that exempted such trusts from filing the form if all of the net income of the trust was distributed currently. The exception continues to apply to non-charitable trusts that must file Form 1041-A as a result of claiming a deduction under IRC Section 642(c).¹

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Planning Point: This change impacts charitable remainder trusts, charitable lead trusts, and pooled income funds. It remains to be seen whether Treasury will create a new form for split-interest charitable trusts or continue to use Form 1041-A.

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In addition, the penalty for failure to file the form (required by IRC Section 6034(a)) is $10 for each day the form is late. The maximum penalty that may be imposed is $5,000. However, for certain large trusts with gross income in excess of $250,000, the penalty is $100 per day up to a maximum of $50,000.²

Form 1041-A is subject to public inspection. However, information regarding the noncharitable beneficiaries of charitable split-interest trusts is not subject to public inspection.³

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1.IRC § 6034, as amended by PPA 2006.