• trusts and estates can be taxed on the income that accrues during the administration of the fiduciary
• they are taxed on income retained by the fiduciary and not distributed currently to beneficiaries 

• legal entity created by transfer of property from a grantor
• purpose: hold and administer property for beneficiaries according to the terms of the trust instrument

1. distribution deduction is allowed for fiduciaries
2. income taxed to beneficiaries retains its character

• $600 for estates
• $300 for simple trusts and for complex trusts that dirstibute all of their income currently
• $100 for all other complex trusts

1. must distribute all income currently 
2. must make no distributions of corpus currently
3. must make no charitable contributions

1. get no standard deduction but can deduct interest, taxes, charitable contributions, and trustee's fees
2. when income is distributed, beneficiaries are taxed on it
3. investment advisory fees of nongrantor trusts and estates generally are subject to the 2% of AGI floor as miscellaneous itemized deductions, unless the fees are not commonly incurred by individuals

1. receipts and disbursements of trusts and estates are categorized by the fiduciary instrument or state law as either belonging to income or corpus (principal)
2. income and deductions are allocated among beneficiaries according to the trust instrument

1. deduct distributions of income to beneficiaries
2. pay income taxed (including AMT if applicable) on undistributed taxable income

4 distributable net income (DNI) rules

1. amount of accounting "income" thats available to be distributed; typically capital gains belong to corpus and are not apart of DNI
2. distribution deduction can't exceed DNI
3. property distributions are distributiong of DNI
4. beneficiaries are taxed on receipt of distributions to extent of DNI

1. add back personal exemptionm net tax-exempt income, and net capital loss
2. subtract net capital gains allocable to corpus

1. calendar year
2. file on 15 day of 4th month after year-end
3. automatic 5 month extension
4. must pay estimated income taxes
5. must file income tax return (form 1041) if gross income exceeds $600, has taxable income, or nonresdient alien is a beneficiary 

1. may choose any year-end
2. file on 15 day of 4th month after year-end
3. automatic 5 month extension
4. must pay estimated income taxes
5. must file income tax return (form 1041) if gross income exceeds $600, has taxable income, or nonresdient alien is a beneficiary 

• occurs if decedent was entitled to receive income at the date of death but the income was not received until after death
• taxed as income to the estate and included on the estate tax return