Trusts Holding Partnership Assets: DNI and FAI Calculations, Fiduciary and Reporting

Determining Whether Distributions Count as Income or Principal, Calculating QBI Deduction, Allocating Between Trust and Beneficiaries

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


Thursday, December 6, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide tax professionals and fiduciary advisers with a practical guide to the rules governing trust accounting income and tax treatment of partnership share assets held by trusts. The panel will discuss the specific challenges that partnership holdings present in calculating FAI, detail the rules for QBI calculations, and discuss the potential impact to trusts owning partnerships of the proposed regulations on the treatment of guaranteed payments.

Description

FAI and tax reporting for trusts holding partnership assets present calculation challenges for fiduciaries and their tax advisers. The new Section 199A deduction for qualified business income from some pass-through entities introduces new complexities in allocating trust income from partnerships between principal and interest.

In determining distributable net income (DNI) treatment of income from partnerships, trust advisers focus on the taxable income reported on the partnership’s K-1 and related footnote disclosures. For fiduciary entities, the deduction is divided between the trust or estate and its beneficiaries, and compliance professionals must understand any terms in the trust document that impact allocation of the deduction. Additionally, trusts holding S corporation stock generally must determine whether to make a QSST or ESBT election to qualify for the deduction.

For FAI purposes, trust income from partnerships is calculated using amounts distributed. However, allocating those distribution amounts between principal and income can be especially tricky given an absence of concrete guidance from either the RUPIA or most state statutes. Liquidating distributions, for example, generally must be allocated to income absent an exception in the trust operating instrument.

Listen as our experienced panel provides a thorough and practical guide to the new challenges of FAI and DNI calculations for trust income from partnerships in light of the new tax reform law.

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Outline

  1. FAI calculations for trust income from partnerships
    1. Calculated based on distributions of cash or property
    2. UPIA general allocation rules
    3. Allocation of distributions in exchange for all or part of a partnership interest, or in full or partial liquidation, generally allocated to principal
    4. Treatment of distributions made to cover tax liabilities
  2. DNI/tax calculations of trust income from partnership holdings
  3. Section 199A impact on DNI/tax calculations
    1. Identifying QBI and eligible partnerships
    2. Wages and capital limitations
    3. Allocating deduction between trust and beneficiaries
  4. Special rules for trusts holding S corporation stock
  5. Entity planning opportunities

Benefits

The panel will discuss these and other relevant questions:

  • Identifying pass-through activities and revenues that are not “qualified business income” eligible for the Section 199A deduction
  • How wage, income and capital limitations impact Section 199A deduction calculations
  • Allocating deduction between trusts and beneficiaries
  • Handling loss carry-forwards in calculating current and future year deduction
  • Navigating the new S corporation trust rules in applying Section 199A
  • Planning considerations arising from Section 199A deduction calculations

Faculty

Bridgers, Griffin
Griffin H. Bridgers

Atty
Hutchins & Associates

Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate...  |  Read More

Doyle, Jere
Jeremiah W. Doyle, IV

Senior Wealth Strategist
BNY Mellon Wealth Management

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their...  |  Read More

Jones, Paul
Paul Jones, CPA

Atty
Paul Jones Attorney

Mr. Jones is an attorney and CPA. He focuses his practice on tax law, business law, estate planning, expat tax and...  |  Read More

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