Form 1041 charitable contribution deduction

[MEHCPA]

My client died in 2009. All of her assets were in a revocable trust which became an irrevocable trust upon her death. She did not have enough assets to file a 706. She has no direct descendants, so she left $25000 to a cousin, and the rest of the assets in the trust are to be distributed to two charities.

For 2009 the trust received interest income of $5,000 and a 1099-R for $48,000. The trust made a distribution of $50,000 to the charities in 2010. I am making an election to treat the 2010 charitable contribution as a charitable deduction on the 2009 return, thus wiping out any taxable income. Does anyone see a problem with this?

Also, my client was a resident of Arizona, the assets (cash & bonds) are all located in Arizona, but the trustee (successor trustee) is located in Iowa. The trust document is silent on the location. Which state should I file a return in?

[jainen]

>>assets in the trust are to be distributed to two charities<<

Apparently the will did not require that the charitable contributions be made from taxable income, so they would not be deductible on Form 1041.

[MEHCPA]

>>assets in the trust are to be distributed to two charities<<

Apparently the will did not require that the charitable contributions be made from taxable income, so they would not be deductible on Form 1041.

The wording in the trust instrument is as follows: On the death of the Settlor, Trustee shall divide the trust estate, including undistributed income and any subsequent additions, as follows:

(as discussed in previous post, specific distribution of $25K, the remainder divided by two charities.)

[jainen]

>>the remainder divided by two charities<<

Apparently about a third of the estate consisted of assets other than taxable income. Since the will did not require that the charitable contributions be made from taxable income, they would not be deductible on Form 1041.

[Taxlave]

>>the remainder divided by two charities<<

Apparently about a third of the estate consisted of assets other than taxable income. Since the will did not require that the charitable contributions be made from taxable income, they would not be deductible on Form 1041.

I just went through an audit on this very issue 642©. Rev. Rul. 71-285 states basically that if the governing instrument is silent on whether distributions to qualifying organizations are to be made from income or principal, state law will determine. Some states require that distributions to charities are to be made from corpus only, in which case no deduction would be allowed, but if distributions from income are permissible in the state, then you should prevail.