IRC 645 Elections for Qualified Revocable Trusts: Mastering the DNI Separate Share Calculation Rules

Allocating Between Estate and Component Trust and Timing Distributions to Avoid Unnecessary Tax

A live 110-minute CPE webinar with interactive Q&A

Thursday, June 8, 2017 (in 13 days)
1:00pm-2:50pm EDT, 10:00am-11:50am PDT

This webinar will provide trust tax advisers with a comprehensive and practical guide to the tax calculations, benefits and potential hazards involved with making a Section 645 election to treat qualified revocable trusts (QRTs) as estates. The panel will detail the impact of the “separate share rule” of IRC 663 in calculating DNI, making tax allocations, and reporting the separate shares impact on the Form 1041.


A powerful but misunderstood post-mortem planning tool for estate advisers is the IRC Section 645 Election to Treat a Qualified Revocable Trust as Part of an Estate. While this election can provide significant flexibility in minimizing income tax, advisers must be aware of the potential tax consequences of failing to properly allocate income and distributions between the estate and its component trust.

The election provides tax advisers to qualified revocable trusts with several key advantages. The ability to treat a QRT as an estate allows advisers and fiduciaries to select a fiscal year, rather than defaulting to a calendar year as required under trust reporting. This provides fiduciaries with greater flexibility in timing income and distributions. The election also waives the material participation requirement for purposes of the passive loss rules.

While making a 645 election allows the fiduciary to file a single Form 1041 Income Tax Return, the tax adviser must treat the estate and the component QRT as separate shares for purposes of calculating distributable net income (DNI).

Fiduciaries and compliance professionals must be aware of the application of the separate share rule to trusts making a Section 645 election to ensure income and distributions are properly allocated and avoid unnecessary entity-level income tax.

Listen as our experienced panel provides a comprehensive and practical guide to using a Section 645 election to reduce income tax on qualified revocable trusts.


  1. Qualified revocable trusts eligible for a Section 645 election
  2. Advantages of a Section 645 election
    1. Ability to select a fiscal year for the estate
    2. Waiver of active participation requirements
    3. Allows for longer S corporation stock holding period
  3. Mechanics of making the election
  4. Income tax reporting and application of “separate share” rule after a Section 645 election
  5. Illustrations


The panel will discuss these and other important topics:

  • Types of trusts that qualify as QRTs eligible to make a Section 645 election
  • Applying the “separate share” rule to DNI calculations and allocations between the QRT and the estate after the election
  • Post-mortem tax planning strategies present with a Section 645 election
  • Mechanics of making the election with initial income tax filing

Learning Objectives

After completing this course, you will be able to:

  • Identify specific advantages with a Section 645 election
  • Recognize the application of the separate share rules in calculating DNI
  • Discern the tax treatment of income and distributions between a QRT and the estate after a Section 645 election
  • Determine client scenarios where it would not be advantageous to make a Section 645 election


John E. Dawson, Member
Dickinson Wright, Las Vegas

Mr. Dawson's practice focuses primarily in the areas of trusts, estates, and asset protection. He has extensive practice experience in estate planning, wills, offshore trusts and revocable living trusts, probate, guardianships, business succession planning, asset protection planning, estate and gift taxation, and all related corporate law in support of entity formation, including corporations, family limited partnerships, and limited liability companies. He is co-author of Asset Protection Guidebook for Attorneys and Accountants, and has taught various Continuing Legal Education courses on probate, estate taxation, asset protection and related topics.

Christiana M. Lazo, Counsel
Ropes & Gray, New York

Ms. Lazo’s practice consists of representing ultra-high net worth individuals, their family offices, and closely held businesses in developing and implementing sophisticated domestic and international tax and estate plans. She has significant experience counseling global clients on inbound and outbound planning, particularly advising families with members in multiple jurisdictions on wealth transfers and on tax-efficient investment and business ownership structures.

Priya Prakash Royal, Esq. LL.M., Managing Attorney
Royal Law Firm, Washington, D.C.

Ms. Royal practices in the areas of tax, trusts & estates, and business law, representing clients in diverse areas of the law, including trusts and estates. She previously served as an attorney in the Estate and Gift Tax division of the Internal Revenue Service, where, she examined estate and gift tax returns, challenged asset valuations, and made tax assessments. She worked on several special projects including developing course materials for incoming IRS attorneys, working on a complex team audit of a prominent estate worth over $100 million, and supervising a group of estate tax attorneys. She was instrumental in a project to develop a better understanding of the implications of income tax law in estate and gift tax.

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Live Webinar $147.00

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This program is eligible for 2.0 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: None.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: Group-Internet (via computer).
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of verification codes announced throughout the presentation.
  • Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of revocable trust rules and structure, specific knowledge of estate and trust Form 1041 Income Tax Return and distributable net income calculations; familiarity with estate elections, separate share rule and distribution strategies..

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