[Federal Register Volume 60, Number 245 (Thursday, December 21, 1995)]
[Rules and Regulations]
[Pages 66085-66091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30682]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
26 CFR Parts 1, 25, 301, and 602
[TD 8633]
RIN 1545-AS37
Grantor Trust Reporting Requirements
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
method of reporting for trusts that are treated as owned by grantors or
other persons under the provisions of subpart E (section 671 and
following), part I, subchapter J, chapter 1 of the Internal Revenue
Code. These regulations are intended to reduce the current filing
burden on trustees, to provide necessary information to grantors or
other persons treated as the owners of trusts, to reduce any cases of
duplicate filing, and to provide more meaningful information to the
IRS. These regulations affect grantors and trustees of trusts that are
treated as owned by grantors or other persons, as well as persons who
are required to file information returns with respect to payments to
these trusts.
DATES: These regulations are effective January 1, 1996. For dates of
applicability of these regulations, see Sec. 1.671-4(h).
FOR FURTHER INFORMATION CONTACT: Steven Schneider, (202) 622-3060 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1442. This information is required by the IRS to
insure the proper reporting of income and proceeds paid to a trust any
portion of which is treated as owned by the grantor or another person.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The estimated annual burden per respondent is 30 minutes.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington,
DC 20224, and to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information and
Regulatory Affairs, Washington, DC 20503.
Books or records relating to this collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
On July 22, 1994, the IRS published in the Federal Register a
notice of proposed rulemaking and notice of public hearing (59 FR
37450) proposing amendments to the Income Tax Regulations (26 CFR part
1) under section 671 of the Internal Revenue Code (Code) and to the
Procedure and Administration Regulations (26 CFR part 301) under
sections 6012 and 6109 of the Code.
Written comments responding to the notice were received. A public
hearing was held on September 21, 1994, pursuant to the notice
published in the Federal Register on July 22, 1994. After consideration
of all written and oral comments regarding the proposed amendments,
those amendments are adopted as revised by this Treasury decision.
Explanation of Provisions and Significant Changes in the Final
Regulations
Subject to certain new limitations under Sec. 1.671-4(b)(6) and
(7), discussed below, Sec. 1.671-4(b) of the final regulations retains
the optional alternative methods of reporting contained in the proposed
regulations published on July 22, 1994.
Several comments were submitted requesting confirmation that the
alternative methods of reporting described in the proposed regulations
are optional and not mandatory. Section 1.671-4(b) of the final
regulations clarifies that the trustee of a trust all of which is
treated as owned by one or more grantors or other persons may, but is
not required to, report pursuant to one of the alternative methods.
Certain commentators were unsure of which persons are considered
payors for purposes of the alternative filing methods. The final
regulations define the term payor as including any person who is
required by any provision of the Code and the regulations thereunder to
make any type of information return with respect to the trust for the
taxable year.
With respect to the alternative methods of reporting, several
commentators were unsure of the items
[[Page 66086]]
and the amounts of income that must be reported on any Forms 1099
required to be filed by the trustee. Section 1.671-4(b)(5) of the final
regulations clarifies that the amounts that must be included on any
Forms 1099 required to be filed by the trustee do not include any
amounts that are reportable by the payor on an information return other
than Form 1099.
For example, in the case of a trustee who furnishes the name, TIN,
and address of the trust to all payors pursuant to Sec. 1.671-
4(b)(2)(i)(B) of the final regulations, the trustee does not include
items of income attributable to an interest in a partnership on any
Forms 1099 filed by the trustee because those items are reportable by
the partnership on Schedule K-1 of Form 1065 (reporting distributive
shares to members of a partnership). While the statement furnished to
the grantor or other person treated as the owner of the trust by the
trustee will show all items of income, deduction, and credit
attributable to the partnership interest, those items will not be
reported to the IRS by the trustee on any type of form.
Several commentators were unsure of the dates by which a trustee
must file any required Forms 1099 and must furnish any required
statements to grantors or other persons treated as owners of the trust.
Section 1.671-4(c) of the final regulations provides that the due date
for any Forms 1099 required to be filed with the IRS by a trustee is
the due date otherwise in effect for filing Forms 1099. Currently, the
due date is February 28 of the following year.
Section 1.671-4(d) of the final regulations provides that the due
date for the statement required to be furnished by a trustee to the
grantor or other person treated as an owner of the trust is the date
specified by section 6034A(a). Currently, the due date is April 15 of
the following year.
Comments were received requesting clarification of the trustee's
obligation, under the first of the alternative reporting methods, to
furnish the name and TIN of the grantor to all payors. The final
regulations provide that: (1) A trustee may not report under the first
alternative reporting method unless the grantor or other person treated
as the owner of the trust provides to the trustee a complete Form W-9
or other acceptable substitute form; (2) a trustee reporting under the
first alternative reporting method acts as the agent of the grantor or
other person treated as the owner of the trust for purposes of
furnishing backup withholding information to a payor; and (3) the payor
may rely on the name and TIN provided to the payor by the trustee. If
the Form W-9 indicates that the grantor or other person is subject to
backup withholding, then the trustee must notify all payors of
reportable interest and dividend payments of the requirement to backup
withhold.
Comments were received requesting clarification of the annuity and
unitrust payment dates under Sec. 25.2702-3 of the Gift Tax Regulations
for trusts electing one of the alternative methods of reporting. The
final regulations contain conforming amendments to Sec. 25.2702-
3(b)(1)(i) and Sec. 25.2702-3(c)(1)(i).
One commentator noted the need for more guidance concerning the
reporting requirements for widely held fixed investment trusts. Because
that guidance is outside the scope of this regulation, the final
regulations do not provide special rules for these trusts. However IRS
and Treasury anticipate providing guidance for these trusts in a
separate project and would welcome comments from interested taxpayers
and practitioners regarding such guidance.
Several of the comments received with respect to the proposed
regulations emphasized the necessity of making the trustee's choice to
report under one of the alternative methods revocable. The final
regulations provide that a trustee who has reported pursuant to one of
the alternative methods may report pursuant to the general rule
requiring the trustee to file a Form 1041 for any subsequent taxable
years of the trust, provided that certain conditions are met.
The final regulations provide that the trustee of a trust all of
which is treated as owned by one grantor or one other person that is an
exempt recipient for information reporting purposes may not report
under an alternative method. However, if the trust is treated as owned
by two or more grantors or other persons, the trustee may report
pursuant to the alternative method for multiple grantors if (1) at
least one grantor or one other person who is treated as an owner of the
trust is a person who is not an exempt recipient for information
reporting purposes and (2) the trustee reports without regard to
whether any of the grantors or other persons treated as owners of the
trust are exempt recipients for information reporting purposes.
The final regulations also provide that the trustee of a trust all
of which is treated as owned by one grantor or other person whose
taxable year is a fiscal year may not report under an alternative
method. However, the trustee of a trust that is treated as owned by two
or more grantors or other persons may report pursuant to the
alternative method for multiple grantors even though one or more of the
grantors or other persons treated as an owner of the trust has a
taxable year that is the fiscal year.
In addition, the final regulations provide that a trustee of a
trust that is a qualified subchapter S trust as defined in section
1361(d)(3) may not report under an alternative method.
The final regulations also provide that the trustee of a trust may
not report under an alternative method if any person who is treated as
an owner of the trust is not a United States person.
Effective Date and Transition Rule
The final regulations are effective for taxable years beginning on
or after January 1, 1996, subject to a requirement that certain
trustees file a final Form 1041 before adopting one of the alternative
methods of reporting. The final regulations retain the transition rule
contained in the proposed regulations providing that, for taxable years
beginning prior to January 1, 1996, the IRS will not challenge the
manner of reporting by trustees of certain trusts.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It has also been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Code, the notice of
proposed rulemaking preceding these regulations was submitted to the
Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is Robert Rio, formerly
of the Office of Assistant Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes,
[[Page 66087]]
Penalties, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1, 25, 301, and 602 are amended as
follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.671-4 is revised to read as follows:
Sec. 1.671-4 Method of reporting.
(a) Portion of trust treated as owned by the grantor or another
person. Except as otherwise provided in paragraph (b) of this section,
items of income, deduction, and credit attributable to any portion of a
trust which, under the provisions of subpart E (section 671 and
following), part I, subchapter J, chapter 1 of the Internal Revenue
Code, is treated as owned by the grantor or another person are not
reported by the trust on Form 1041, but are shown on a separate
statement to be attached to that form.
(b) A trust all of which is treated as owned by one or more
grantors or other persons--(1) In general. In the case of a trust all
of which is treated as owned by one or more grantors or other persons,
and which is not described in paragraph (b)(6) or (7) of this section,
the trustee may, but is not required to, report by one of the methods
described in this paragraph (b) rather than by the method described in
paragraph (a) of this section. A trustee may not report, however,
pursuant to paragraph (b)(2)(i)(A) of this section unless the grantor
or other person treated as the owner of the trust provides to the
trustee a complete Form W-9 or acceptable substitute Form W-9 signed
under penalties of perjury. See section 3406 and the regulations
thereunder for the information to include on, and the manner of
executing, the Form W-9, depending upon the type of reportable payments
made.
(2) A trust all of which is treated as owned by one grantor or by
one other person--(i) In general. In the case of a trust all of which
is treated as owned by one grantor or one other person, the trustee
reporting under this paragraph (b) must either--
(A) Furnish the name and taxpayer identification number (TIN) of
the grantor or other person treated as the owner of the trust, and the
address of the trust, to all payors during the taxable year, and comply
with the additional requirements described in paragraph (b)(2)(ii) of
this section; or
(B) Furnish the name, TIN, and address of the trust to all payors
during the taxable year, and comply with the additional requirements
described in paragraph (b)(2)(iii) of this section.
(ii) Additional obligations of the trustee when name and TIN of the
grantor or other person treated as the owner of the trust and the
address of the trust are furnished to payors. (A) Unless the grantor or
other person treated as the owner of the trust is the trustee or a co-
trustee of the trust, the trustee must furnish the grantor or other
person treated as the owner of the trust with a statement that--
(1) Shows all items of income, deduction, and credit of the trust
for the taxable year;
(2) Identifies the payor of each item of income;
(3) Provides the grantor or other person treated as the owner of
the trust with the information necessary to take the items into account
in computing the grantor's or other person's taxable income; and
(4) Informs the grantor or other person treated as the owner of the
trust that the items of income, deduction and credit and other
information shown on the statement must be included in computing the
taxable income and credits of the grantor or other person on the income
tax return of the grantor or other person.
(B) The trustee is not required to file any type of return with the
Internal Revenue Service.
(iii) Additional obligations of the trustee when name, TIN, and
address of the trust are furnished to payors--(A) Obligation to file
Forms 1099. The trustee must file with the Internal Revenue Service the
appropriate Forms 1099, reporting the income or gross proceeds paid to
the trust during the taxable year, and showing the trust as the payor
and the grantor or other person treated as the owner of the trust as
the payee. The trustee has the same obligations for filing the
appropriate Forms 1099 as would a payor making reportable payments,
except that the trustee must report each type of income in the
aggregate, and each item of gross proceeds separately. See paragraph
(b)(5) of this section regarding the amounts required to be included on
any Forms 1099 filed by the trustee.
(B) Obligation to furnish statement. (1) Unless the grantor or
other person treated as the owner of the trust is the trustee or a co-
trustee of the trust, the trustee must also furnish to the grantor or
other person treated as the owner of the trust a statement that--
(i) Shows all items of income, deduction, and credit of the trust
for the taxable year;
(ii) Provides the grantor or other person treated as the owner of
the trust with the information necessary to take the items into account
in computing the grantor's or other person's taxable income; and
(iii) Informs the grantor or other person treated as the owner of
the trust that the items of income, deduction and credit and other
information shown on the statement must be included in computing the
taxable income and credits of the grantor or other person on the income
tax return of the grantor or other person.
(2) By furnishing the statement, the trustee satisfies the
obligation to furnish statements to recipients with respect to the
Forms 1099 filed by the trustee.
(iv) Examples. The following examples illustrate the provisions of
this paragraph (b)(2):
Example 1. G, a United States citizen, creates an irrevocable
trust which provides that the ordinary income is to be payable to
him for life and that on his death the corpus shall be distributed
to B, an unrelated person. Except for the right to receive income, G
retains no right or power which would cause him to be treated as an
owner under sections 671 through 679. Under the applicable local
law, capital gains must be added to corpus. Since G has a right to
receive income, he is treated as an owner of a portion of the trust
under section 677. The tax consequences of any items of capital gain
of the trust are governed by the provisions of subparts A, B, C, and
D (section 641 and following), part I, subchapter J, chapter 1 of
the Internal Revenue Code. Because not all of the trust is treated
as owned by the grantor or another person, the trustee may not
report by the methods described in paragraph (b)(2) of this section.
Example 2. (i)(A) On January 2, 1996, G, a United States
citizen, creates a trust all of which is treated as owned by G. The
trustee of the trust is T. During the 1996 taxable year the trust
has the following items of income and gross proceeds:
Interest.........................................................$2,500
Dividends.........................................................3,205
Proceeds from sale of B stock.....................................2,000
(B) The trust has no items of deduction or credit.
(ii)(A) The payors of the interest paid to the trust are X
($2,000), Y ($300), and Z ($200). The payors of the dividends paid
to the trust are A ($3,200), and D ($5). The payor of the gross
proceeds paid to the trust is D, a brokerage firm, which held the B
stock as the nominee for the trust. The B stock was purchased by T
for $1,500 on January 3, 1996, and sold by T on November 29, 1996. T
chooses to report pursuant to paragraph
[[Page 66088]]
(b)(2)(i)(B) of this section, and therefore furnishes the name, TIN,
and address of the trust to X, Y, Z, A, and D. X, Y, and Z each
furnish T with a Form 1099-INT showing the trust as the payee. A
furnishes T with a Form 1099-DIV showing the trust as the payee. D
does not furnish T with a Form 1099-DIV because D paid a dividend of
less than $10 to T. D furnishes T with a Form 1099-B showing the
trust as the payee.
(B) On or before February 28, 1997, T files a Form 1099-INT with
the Internal Revenue Service on which T reports interest
attributable to G, as the owner of the trust, of $2,500; a Form
1099-DIV on which T reports dividends attributable to G, as the
owner of the trust, of $3,205; and a Form 1099-B on which T reports
gross proceeds from the sale of B stock attributable to G, as the
owner of the trust, of $2,000. On or before April 15, 1997, T
furnishes a statement to G which lists the following items of income
and information necessary for G to take the items into account in
computing G's taxable income:
Interest.........................................................$2,500
Dividends.........................................................3,205
Gain from sale of B stock...........................................500
Information regarding sale of B stock:
Proceeds.........................................................$2,000
Basis.............................................................1,500
Date acquired...................................................1/03/96
Date sold......................................................11/29/96
(C) T informs G that any items of income, deduction and credit
and other information shown on the statement must be included in
computing the taxable income and credits of the grantor or other
person on the income tax return of the grantor or other person.
(D) T has complied with T's obligations under this section.
(iii)(A) Same facts as paragraphs (i) and (ii) of this Example
2, except that G contributed the B stock to the trust on January 2,
1996. On or before April 15, 1997, T furnishes a statement to G
which lists the following items of income and information necessary
for G to take the items into account in computing G's taxable
income:
Interest $2,500
Dividends 3,205
Information regarding sale of B stock:
Proceeds.........................................................$2,000
Date sold......................................................11/29/96
(B) T informs G that any items of income, deduction and credit
and other information shown on the statement must be included in
computing the taxable income and credits of the grantor or other
person on the income tax return of the grantor or other person.
(C) T has complied with T's obligations under this section.
Example 3. On January 2, 1996, G, a United States citizen,
creates a trust all of which is treated as owned by G. The trustee
of the trust is T. The only asset of the trust is an interest in C,
a common trust fund under section 584(a). T chooses to report
pursuant to paragraph (b)(2)(i)(B) of this section and therefore
furnishes the name, TIN, and address of the trust to C. C files a
Form 1065 and a Schedule K-1 (Partner's Share of Income, Credits,
Deductions, etc.) showing the name, TIN, and address of the trust
with the Internal Revenue Service and furnishes a copy to T. Because
the trust did not receive any amounts described in paragraph (b)(5)
of this section, T does not file any type of return with the
Internal Revenue Service. On or before April 15, 1997, T furnishes G
with a statement that shows all items of income, deduction, and
credit of the trust for the 1996 taxable year. In addition, T
informs G that any items of income, deduction and credit and other
information shown on the statement must be included in computing the
taxable income and credits of the grantor or other person on the
income tax return of the grantor or other person. T has complied
with T's obligations under this section.
(3) A trust all of which is treated as owned by two or more
grantors or other persons--(i) In general. In the case of a trust all
of which is treated as owned by two or more grantors or other persons,
the trustee must furnish the name, TIN, and address of the trust to all
payors for the taxable year, and comply with the additional
requirements described in paragraph (b)(3)(ii) of this section.
(ii) Additional obligations of trustee--(A) Obligation to file
Forms 1099. The trustee must file with the Internal Revenue Service the
appropriate Forms 1099, reporting the items of income paid to the trust
by all payors during the taxable year attributable to the portion of
the trust treated as owned by each grantor or other person, and showing
the trust as the payor and each grantor or other person treated as an
owner of the trust as the payee. The trustee has the same obligations
for filing the appropriate Forms 1099 as would a payor making
reportable payments, except that the trustee must report each type of
income in the aggregate, and each item of gross proceeds separately.
See paragraph (b)(5) of this section regarding the amounts required to
be included on any Forms 1099 filed by the trustee.
(B) Obligation to furnish statement. (1) The trustee must also
furnish to each grantor or other person treated as an owner of the
trust a statement that--
(i) Shows all items of income, deduction, and credit of the trust
for the taxable year attributable to the portion of the trust treated
as owned by the grantor or other person;
(ii) Provides the grantor or other person treated as an owner of
the trust with the information necessary to take the items into account
in computing the grantor's or other person's taxable income; and
(iii) Informs the grantor or other person treated as the owner of
the trust that the items of income, deduction and credit and other
information shown on the statement must be included in computing the
taxable income and credits of the grantor or other person on the income
tax return of the grantor or other person.
(2) Except for the requirements pursuant to section 3406 and the
regulations thereunder, by furnishing the statement, the trustee
satisfies the obligation to furnish statements to recipients with
respect to the Forms 1099 filed by the trustee.
(4) Persons treated as payors--(i) In general. For purposes of this
section, the term payor means any person who is required by any
provision of the Internal Revenue Code and the regulations thereunder
to make any type of information return (including Form 1099 or Schedule
K-1) with respect to the trust for the taxable year, including persons
who make payments to the trust or who collect (or otherwise act as
middlemen with respect to) payments on behalf of the trust.
(ii) Application to brokers and customers. For purposes of this
section, a broker, within the meaning of section 6045, is considered a
payor. A customer, within the meaning of section 6045, is considered a
payee.
(5) Amounts required to be included on Forms 1099 filed by the
trustee--(i) In general. The amounts that must be included on any Forms
1099 required to be filed by the trustee pursuant to this section do
not include any amounts that are reportable by the payor on an
information return other than Form 1099. For example, in the case of a
trust which owns an interest in a partnership, the trust's distributive
share of the income and gain of the partnership is not includible on
any Forms 1099 filed by the trustee pursuant to this section because
the distributive share is reportable by the partnership on Schedule K-
1.
(ii) Example. The following example illustrates the provisions of
this paragraph (b)(5):
Example. (i)(A) On January 2, 1996, G, a United States citizen,
creates a trust all of which is treated as owned by G. The trustee
of the trust is T. The assets of the trust during the 1996 taxable
year are shares of stock in X, an S corporation, a limited
partnership interest in P, shares of stock in M, and shares of stock
in N. T chooses to report pursuant to paragraph (b)(2)(i)(B) of this
section and therefore furnishes the name, TIN, and address of the
trust to X, P, M, and N. M furnishes T with a Form 1099-DIV showing
the trust as the payee. N does not furnish T with a Form 1099-DIV
because N paid a dividend of less than $10 to T. X and P furnish T
with Schedule K-1 (Shareholder's Share of Income, Credits,
Deductions, etc.) and Schedule K-1 (Partner's Share of Income,
Credits, Deductions, etc.), respectively, showing the trust's name,
TIN, and address.
(B) For the 1996 taxable year the trust has the following items
of income and deduction:
[[Page 66089]]
Dividends paid by M . . . . . . . . . . . . . . $12
Dividends paid by N . . . . . . . . . . . . . . 6
Administrative expense . . . . . . . . . . . . $20
Items reported by X on Schedule K-1 attributable to trust's
shares of stock in X:
Interest . . . . . . . . . . . . . . . . . . $20
Dividends . . . . . . . . . . . . . . . . . 35
Items reported by P on Schedule K-1 attributable to trust's
limited partnership interest in P:
Ordinary income . . . . . . . . . . . . . $300
(ii)(A) On or before February 28, 1997, T files with the
Internal Revenue Service a Form 1099-DIV on which T reports
dividends attributable to G as the owner of the trust in the amount
of $18. T does not file any other returns.
(B) T has complied with T's obligation under paragraph
(b)(2)(iii)(A) of this section to file the appropriate Forms 1099.
(6) Trusts that cannot report under this paragraph (b). The
following trusts cannot use the methods of reporting described in this
paragraph (b)--
(i) A common trust fund as defined in section 584(a);
(ii) A trust that has its situs or any of its assets located
outside the United States;
(iii) A trust that is a qualified subchapter S trust as defined in
section 1361(d)(3);
(iv) A trust all of which is treated as owned by one grantor or one
other person whose taxable year is a fiscal year;
(v) A trust all of which is treated as owned by one grantor or one
other person who is not a United States person; or
(vi) A trust all of which is treated as owned by two or more
grantors or other persons, one of whom is not a United States person.
(7) Grantors or other persons who are treated as owners of the
trust and are exempt recipients for information reporting purposes--(i)
Trust treated as owned by one grantor or one other person. The trustee
of a trust all of which is treated as owned by one grantor or one other
person may not report pursuant to this paragraph (b) if the grantor or
other person is an exempt recipient for information reporting purposes.
(ii) Trust treated as owned by two or more grantors or other
persons. The trustee of a trust, all of which is treated as owned by
two or more grantors or other persons, may not report pursuant to this
paragraph (b) if one or more grantors or other persons treated as
owners are exempt recipients for information reporting purposes
unless--
(A) At least one grantor or one other person who is treated as an
owner of the trust is a person who is not an exempt recipient for
information reporting purposes; and
(B) The trustee reports without regard to whether any of the
grantors or other persons treated as owners of the trust are exempt
recipients for information reporting purposes.
(8) Husband and wife who make a single return jointly. A trust all
of which is treated as owned by a husband and wife who make a single
return jointly of income taxes for the taxable year under section 6013
is considered to be owned by one grantor for purposes of this paragraph
(b).
(c) Due date for Forms 1099 required to be filed by trustee. The
due date for any Forms 1099 required to be filed with the Internal
Revenue Service by a trustee pursuant to this section is the due date
otherwise in effect for filing Forms 1099.
(d) Due date and other requirements with respect to statement
required to be furnished by trustee. The due date for the statement
required to be furnished by a trustee to the grantor or other person
treated as an owner of the trust pursuant to this section is the date
specified by section 6034A(a). The trustee must maintain in its records
a copy of the statement furnished to the grantor or other person
treated as an owner of the trust for a period of three years from the
due date for furnishing such statement specified in this paragraph (d).
(e) Backup withholding requirements--(1) Trustee reporting under
paragraph (b)(2)(i)(A) of this section. In order for the trustee to be
able to report pursuant to paragraph (b)(2)(i)(A) of this section and
to furnish to all payors the name and TIN of the grantor or other
person treated as the owner of the trust, the grantor or other person
must provide a complete Form W-9 to the trustee in the manner provided
in paragraph (b)(1) of this section, and the trustee must give the name
and TIN shown on that Form W-9 to all payors. In addition, if the Form
W-9 indicates that the grantor or other person is subject to backup
withholding, the trustee must notify all payors of reportable interest
and dividend payments of the requirement to backup withhold. If the
Form W-9 indicates that the grantor or other person is not subject to
backup withholding, the trustee does not have to notify the payors that
backup withholding is not required. The trustee should not give the
Form W-9, or a copy thereof, to a payor because the Form W-9 contains
the address of the grantor or other person and paragraph (b)(2)(i)(A)
of this section requires the trustee to furnish the address of the
trust to all payors and not the address of the grantor or other person.
The trustee acts as the agent of the grantor or other person for
purposes of furnishing to the payors the information required by this
paragraph (e)(1). Thus, a payor may rely on the name and TIN provided
to the payor by the trustee, and, if given, on the trustee's statement
that the grantor is subject to backup withholding.
(2) Other backup withholding requirements. Whether a trustee is
treated as a payor for purposes of backup withholding is determined
pursuant to section 3406 and the regulations thereunder.
(f) Penalties for failure to file a correct Form 1099 or furnish a
correct statement. A trustee who fails to file a correct Form 1099 or
to furnish a correct statement to a grantor or other person treated as
an owner of the trust as required by paragraph (b) of this section is
subject to the penalties provided by sections 6721 and 6722 and the
regulations thereunder.
(g) Changing reporting methods--(1) Changing from reporting by
filing Form 1041 to a method described in paragraph (b) of this
section. If the trustee has filed a Form 1041 for any taxable year
ending before January 1, 1996 (and has not filed a final Form 1041
pursuant to Sec. 1.671-4(b)(3) (as contained in the 26 CFR part 1
edition revised as of April 1, 1995)), or files a Form 1041 for any
taxable year thereafter, the trustee must file a final Form 1041 for
the taxable year which ends after January 1, 1995, and which
immediately precedes the first taxable year for which the trustee
reports pursuant to paragraph (b) of this section, on the front of
which form the trustee must write: ``Pursuant to Sec. 1.671-4(g), this
is the final Form 1041 for this grantor trust.''.
(2) Changing from reporting by a method described in paragraph (b)
of this section to the filing of a Form 1041. The trustee of a trust
who reported pursuant to paragraph (b) of this section for a taxable
year may report pursuant to paragraph (a) of this section for
subsequent taxable years. If the trustee reported pursuant to paragraph
(b)(2)(i)(A) of this section, and therefore furnished the name and TIN
of the grantor to all payors, the trustee must furnish the name, TIN,
and address of the trust to all payors for such subsequent taxable
years. If the trustee reported pursuant to paragraph (b)(2)(i)(B) or
(b)(3)(i) of this section, and therefore furnished the name and TIN of
the trust to all payors, the trustee
[[Page 66090]]
must indicate on each Form 1096 (Annual Summary and Transmittal of U.S.
Information Returns) that it files (or appropriately on magnetic media)
for the final taxable year for which the trustee so reports that it is
the final return of the trust.
(3) Changing between methods described in paragraph (b) of this
section--(i) Changing from furnishing the TIN of the grantor to
furnishing the TIN of the trust. The trustee of a trust who reported
pursuant to paragraph (b)(2)(i)(A) of this section for a taxable year,
and therefore furnished the name and TIN of the grantor to all payors,
may report pursuant to paragraph (b)(2)(i)(B) of this section, and
furnish the name and TIN of the trust to all payors, for subsequent
taxable years.
(ii) Changing from furnishing the TIN of the trust to furnishing
the TIN of the grantor. The trustee of a trust who reported pursuant to
paragraph (b)(2)(i)(B) of this section for a taxable year, and
therefore furnished the name and TIN of the trust to all payors, may
report pursuant to paragraph (b)(2)(i)(A) of this section, and furnish
the name and TIN of the grantor to all payors, for subsequent taxable
years. The trustee, however, must indicate on each Form 1096 (Annual
Summary and Transmittal of U.S. Information Returns) that it files (or
appropriately on magnetic media) for the final taxable year for which
the trustee reports pursuant to paragraph (b)(2)(i)(B) of this section
that it is the final return of the trust.
(4) Example. The following example illustrates the provisions of
paragraph (g) of this section:
Example. (i) On January 3, 1994, G, a United States citizen,
creates a trust all of which is treated as owned by G. The trustee
of the trust is T. On or before April 17, 1995, T files with the
Internal Revenue Service a Form 1041 with an attached statement for
the 1994 taxable year showing the items of income, deduction, and
credit of the trust. On or before April 15, 1996, T files with the
Internal Revenue Service a Form 1041 with an attached statement for
the 1995 taxable year showing the items of income, deduction, and
credit of the trust. On the Form 1041, T states that ``pursuant to
Sec. 1.671-4(g), this is the final Form 1041 for this grantor
trust.'' T may report pursuant to paragraph (b) of this section for
the 1996 taxable year.
(ii) T reports pursuant to paragraph (b)(2)(i)(B) of this
section, and therefore furnishes the name, TIN, and address of the
trust to all payors, for the 1996 and 1997 taxable years. T chooses
to report pursuant to paragraph (a) of this section for the 1998
taxable year. On each Form 1096 (Annual Summary and Transmittal of
U.S. Information Returns) which T files for the 1997 taxable year
(or appropriately on magnetic media), T indicates that it is the
trust's final return. On or before April 15, 1999, T files with the
Internal Revenue Service a Form 1041 with an attached statement
showing the items of income, deduction, and credit of the trust. On
the Form 1041, T uses the same TIN which T used on the Forms 1041
and Forms 1099 it filed for previous taxable years. T has complied
with T's obligations under paragraph (g)(2) of this section.
(h) Effective date and transition rule--(1) Effective date. The
trustee of a trust any portion of which is treated as owned by one or
more grantors or other persons must report pursuant to this section for
taxable years beginning on or after January 1, 1996.
(2) Transition rule. For taxable years beginning prior to January
1, 1996, the Internal Revenue Service will not challenge the manner of
reporting of--
(i) A trustee of a trust all of which is treated as owned by one or
more grantors or other persons who did not report in accordance with
Sec. 1.671-4(a) (as contained in the 26 CFR part 1 edition revised as
of April 1, 1995) as in effect for taxable years beginning prior to
January 1, 1996, but did report in a manner substantially similar to
one of the reporting methods described in paragraph (b) of this
section; or
(ii) A trustee of two or more trusts all of which are treated as
owned by one or more grantors or other persons who filed a single Form
1041 for all of the trusts, rather than a separate Form 1041 for each
trust, provided that the items of income, deduction, and credit of each
trust were shown on a statement attached to the single Form 1041.
(i) Cross-reference. For rules relating to employer identification
numbers, and to the obligation of a payor of income or proceeds to the
trust to furnish to the payee a statement to recipient, see
Sec. 301.6109-1(a)(2) of this chapter.
Par. 3. Section 1.6012-3 is amended by revising paragraph (a)(9) to
read as follows:
Sec. 1.6012-3 Returns by fiduciaries.
(a) * * *
(9) A trust any portion of which is treated as owned by the grantor
or another person pursuant to sections 671 through 678. In the case of
a trust any portion of which is treated as owned by the grantor or
another person under the provisions of subpart E (section 671 and
following) part I, subchapter J, chapter 1 of the Internal Revenue Code
see Sec. 1.671-4.
* * * * *
PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954
Par. 4. The authority citation for part 25 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 5. Section 25.2702-3 is amended by adding a sentence to the
end of paragraphs (b)(1)(i) and (c)(1)(i), respectively, to read as
follows:
Sec. 25.2702-3 Qualified interests.
* * * * *
(b) * * *
(1) * * * (i) * * * If the trustee reports for the taxable year
pursuant to Sec. 1.671-4(b) of this chapter, the annuity payment must
be made no later than the date by which the trustee would have been
required to file the Federal income tax return of the trust for the
taxable year (without regard to extensions) had the trustee reported
pursuant to Sec. 1.671-4(a) of this chapter.
* * * * *
(c) * * *
(1) * * * (i) * * * If the trustee reports for the taxable year
pursuant to Sec. 1.671-4(b) of this chapter, the unitrust payment must
be made no later than the date by which the trustee would have been
required to file the Federal income tax return of the trust for the
taxable year (without regard to extensions) had the trustee reported
pursuant to Sec. 1.671-4(a) of this chapter.
* * * * *
PART 301--PROCEDURE AND ADMINISTRATION
Par. 6. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 7. Section 301.6109-1 is amended by revising paragraph (a)(2)
to read as follows:
Sec. 301.6109-1 Identifying numbers.
(a) * * *
(2) A trust all of which is treated as owned by the grantor or
another person pursuant to sections 671 through 678--(i) Obtaining a
taxpayer identification number. If a trust does not have a taxpayer
identification number and the trustee furnishes the name and taxpayer
identification number of the grantor or other person treated as the
owner of the trust and the address of the trust to all payors pursuant
to Sec. 1.671-4(b)(2)(i)(A) of this chapter, the trustee need not
obtain a taxpayer identification number for the trust until either the
first taxable year of the trust in which all of the trust is no longer
owned by the grantor or another person, or until the first taxable year
of the trust for which the trustee no longer reports pursuant to
Sec. 1.671-4(b)(2)(i)(A) of this chapter. If the trustee has not
already obtained a taxpayer identification number for the trust, the
trustee must obtain a taxpayer identification number for the trust as
provided in paragraph (d)(2) of this
[[Page 66091]]
section in order to report pursuant to Sec. 1.671-4(a), (b)(2)(i)(B),
or (b)(3)(i) of this chapter.
(ii) Obligations of persons who make payments to certain trusts.
Any payor that is required to file an information return with respect
to payments of income or proceeds to a trust must show the name and
taxpayer identification number that the trustee has furnished to the
payor on the return. Regardless of whether the trustee furnishes to the
payor the name and taxpayer identification number of the grantor or
other person treated as an owner of the trust, or the name and taxpayer
identification number of the trust, the payor must furnish a statement
to recipients to the trustee of the trust, rather than to the grantor
or other person treated as the owner of the trust. Under these
circumstances, the payor satisfies the obligation to show the name and
taxpayer identification number of the payee on the information return
and to furnish a statement to recipients to the person whose taxpayer
identification number is required to be shown on the form.
(iii) Persons treated as payors. For purposes of this paragraph
(a)(2), the term payor means a person described in Sec. 1.671-4(b)(4)
of this chapter.
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 8. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 9. In Sec. 602.101, paragraph (c) is amended in the table by
revising the entry for 1.671-4 to read ``1.671-4 . . . . 1545-1442''.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: December 5, 1995:
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-30682 Filed 12-20-95; 8:45 am]
BILLING CODE 4830-01-U
