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The Latimer Trust: What Charitable Contribution Can Be Deducted?

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The Latimer Trust instrument directs that all income be paid annually to Laura Lee Latimer for life with remainder to Laura Lee's son Lance Latimer or his estate. The trust instrument does not authorize the trustee to make charitable contributions. The Latimer Trust owns a 15% interest in LLL Partnership, which operates a retail store. A Schedule K-1 the Latimer Trust received from the partnership reported, among other information, that the trust's share of charitable contributions made by the partnership for 2010 was $350. The trust had DNI of $25,000.

What charitable contribution deduction, if any, may the trust deduct? Is the trust a simple or complex Trust in 2010?

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A trust can be taxed on income that is retained and receives distribution deduction on amount distributed and beneficiaries are taxed on amount distributed. When a trust distributes income for charitable purpose the amount distributed is not treated as a distribution to the beneficiaries for deduction purposes. This is provided for in Sec. 1. 663 (a) (2). However, distribution made to charity can be deducted if it is line with requirements provided for in Sec. 642 (c). This section provides that deduction can be recognized without limitation in taxable income for any amounts of gross income (Englebrecht & Anderson, 2004). It provides that charitable contribution deduction can be recognized if the ...

Solution Summary

The solution discusses what charitable contribution can be detected in the Latimer Trust.

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