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Unformatted text preview: es. No double deduction is allowed. [See pp. 25-6 and 25-8 and 642(g).] Per rules governing individual taxation, a fiduciary may deduct an annual maximum of $3,000 of net capital loss; and excess capital loss is carried forward [See p. 25-10 and 641(b).] 25-3 25-4 25-5 25-6 25-7 25-8 25-1 25-2 Chapter 25 Income Taxation of Estates and Trusts 25-9 25-10 Operating losses of a fiduciary do not "flow through" to be deducted by beneficiaries; rather, they are subject to carryback or carryforward at the fiduciary level. [See p. 25-10 and 642(d).] From the point of view of the fiduciary, the taxable portion of DNI is the maximum amount deductible for distributions to beneficiaries. For beneficiaries, the taxable portion of DNI represents the maximum amount of fiduciary income for which they may be taxed. [See pp. 25-14 through 25-16 and 651(b), 652(a), 661(c), and 662(a).] When a beneficiary receives a distribution from a fiduciary, the distribution is considered nontaxable to the same extent, or in the same proportion, that the fiduciary DNI is nontaxable. [See Example 12, p. 25-14, and 652(b) and 662(b).] Unlike charitable contributions made by individual taxpayers, charitable contributions made from fiduciary gross income are deductible without limitation. Also, a fiduciary may elect to deduct a charitable contribution in the year paid or in the preceding taxable year. [See p. 25-9 and 642(c)(1).] Such property distribution may represent a distribution of estate taxable income, unless it is a specific property bequest. [See Example 9, p. 25-13, and 663(a)(1).] In the year of termination, all trusts distribute trust corpus to the appropriate beneficiaries. A trust that distributes corpus, by statutory definition, is a complex trust. [See p. 25-16 and 651(a), last sentence.] Such a cash reserve economically replaces the decline in value of depreciable trust corpus. Thus, the ultimate recipient of the trust corpus is protected against the economic decline or deterioration of his property during the existence of the trust. (See...
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- Spring '11