A trust is an arrangement where the trustor gives control of a certain property to a trustee for the benefit of a beneficiary. A trust is subject to the same tax rate as that of an individual and also enjoys the same deductible expenses. Ergo, its gross income is the same as an individual taxpayer's.In addition, it can also claim as a deductible expense the amount of the income of the trust that is to be currently distributed to the beneficiaries as well as the amount of the income collected by the guardian of an infant which is to be held or distributed as the courts may decide.
The parties to a trust are the grantor, trustee/fiduciary and beneficiary. In the payment of taxes, it's the trustee/fiduciary who files the return and pays the taxes. In view of this, a trust is required to adopt the calendar year for its accounting period, just like an individual taxpayer.
These are the trusts subject to income tax:
1.) Trust where income is accumulated for the benefit of an unborn or unascertained person or persons with contingent interest
2.) Trust where income is accumulated for future distribution under the terms of the trust or will
3.) Trust where income is to be distributed currently by the fiduciary to the beneficiaries
4.) Trust where the income collected by the guardian of an infant is held or distributed as the court may decide
5.) Trust where the income, in the trustee's/fiduciary's discretion, may be either distributed to the beneficiaries or accumulated
Employee's Trust
This is a trust that is exempt from taxation. It forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees.
Computation of a Trust's Taxable Income
Gross Income - (Deductible Expenses + Income Distributed to Beneficiaries) = Net Income
Net Income - Personal Exemption = Taxable Income
The grantor may make 2 or more trusts in favor of the same beneficiary. If this happens, the net incomes of all the trusts must be consolidated and the exemption will be deducted from the consolidation.
The parties to a trust are the grantor, trustee/fiduciary and beneficiary. In the payment of taxes, it's the trustee/fiduciary who files the return and pays the taxes. In view of this, a trust is required to adopt the calendar year for its accounting period, just like an individual taxpayer.
These are the trusts subject to income tax:
1.) Trust where income is accumulated for the benefit of an unborn or unascertained person or persons with contingent interest
2.) Trust where income is accumulated for future distribution under the terms of the trust or will
3.) Trust where income is to be distributed currently by the fiduciary to the beneficiaries
4.) Trust where the income collected by the guardian of an infant is held or distributed as the court may decide
5.) Trust where the income, in the trustee's/fiduciary's discretion, may be either distributed to the beneficiaries or accumulated
Employee's Trust
This is a trust that is exempt from taxation. It forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees.
Computation of a Trust's Taxable Income
Gross Income - (Deductible Expenses + Income Distributed to Beneficiaries) = Net Income
Net Income - Personal Exemption = Taxable Income
The grantor may make 2 or more trusts in favor of the same beneficiary. If this happens, the net incomes of all the trusts must be consolidated and the exemption will be deducted from the consolidation.
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