How long does a 645 election last?
However this benefit is only available if the decedent’s estate is required to file an estate tax return. If a trust is part of a taxable estate that is not required to file an estate tax return, the 645 election is only effective for two years from the date of death.
Why would you make a 645 election?
Well, a §645 election allows the executor of an estate and the trustee of a revocable trust to elect to treat the estate and the trust as one for tax purposes. If you elect §645, it gives you the ability to have the trust on a fiscal year end as well, meaning only one tax return.
Can you make a 645 election for an irrevocable trust?
The IRC § 645 election is irrevocable once made. The election must be made on IRS Form 8855 (Election to Treat a Qualified Revocable Trust as Part of an Estate) by the due date, including extensions, of the estate’s initial income tax return.
What is an IRS Section 645 election?
IRC §645 provides an irrevocable election to treat a qualified revocable trust as part of the decedent’s estate for federal income tax purposes. When the election is made by the executor and trustee, tax advantages available to an estate are available to the trust.
What happens when 645 election expires?
Upon termination of the section 645 election, a former electing trust may need to obtain a new TIN. See § 301.6109-1(a)(4) of this chapter. If the related estate continues after the termination of the election period, the related estate must continue to use the TIN assigned to the estate during the election period.
Who can make a 645 election?
The trustees of each qualified revocable trust (QRT) and the executor of the related estate, if any, use Form 8855 to make a section 645 election. This election allows a QRT to be treated and taxed (for income tax purposes) as part of its related estate during the election period.
How does a beneficiary get money from a trust?
The trust can pay out a lump sum or percentage of the funds, make incremental payments throughout the years, or even make distributions based on the trustee’s assessments. Whatever the grantor decides, their distribution method must be included in the trust agreement drawn up when they first set up the trust.
Do I need to file Form 8885?
Even if you can’t claim the HCTC on your income tax return, you must still file Form 8885 to elect the HCTC for any months you participated in the advance monthly payment program.
How do I know if I qualify for health coverage tax credit?
Claiming the HCTC requires that you are an eligible recipient of a qualifying trade adjustment assistance program, currently on an approved break from such training or receiving unemployment insurance in lieu of training. You may also qualify if you are 55 or older and a PBGC payee.
When does an estate terminate under Section 645?
Notwithstanding the above, if the estate has joined in making a valid election under section 645 to treat a qualified revocable trust, as defined under section 645 (b) (1), as part of the estate, the estate shall not terminate under this paragraph prior to the termination of the section 645 election period.
What are the rules for the duration of Section 645?
Rules for determining the duration of the section 645 election period are in paragraph (f) of this section. Rules regarding the tax effects of the termination of the election are in paragraph (h) of this section.
What are the benefits and detriments of § 645?
The §645 Election: The Benefits are Many and the Detriments are Few The §645 Election: The Benefits are Many and the Detriments are Few ESTATES & TRUSTS: Use the election when trust distributes to charity or to preserve an S corporation selection. By Donita M. Joseph, CPA, MBT
What do you need to know about IRC 645?
Specific knowledge and understanding of estate and trust taxation, estate income tax returns, qualified revocable trusts (QRTs), Form 1041, charitable contributions, passive losses; familiarity with IRC 645 elections, separate share rules, and combined estate and trust tax filings.