trust and charitable contribution

[Bucky]

Taxpayer had a revocable trust, client died which makes the trust irevocable. The trust document ask that a donation of $40,000 be made to his church. The trust will have about $24000 income and it will be a final return. The trust document states the donation come from both income and principal. Is the $40000 donation a deduction on the 1041 thus wiping out the income?

Thanks

Mark

[Roland Slugg]

Yes. Estates and trusts are allowed an unlimited charitable deduction, but no carryover.

Although it does not appear to apply in your case, see Code §642(c)(1) regarding the election by a trust to claim a charitable deduction on its prior year's return.

Based on the facts in this post, it would have been better if the decedent had stated in his trust that the charitable contribution should be the lower of $40,000 or the trust's taxable income for the applicable year, and that if the taxable income is less than $40,000, then the beneficiaries are to make up the difference themselves, in proportion to their inherited shares of his trust's property. Obviously, this would only work if the benes are trusted persons who would be sure to do what the decedent wanted. The advantage of this arrangement would be an additional income tax deduction for each bene who made his share of the additional contribution. In the case at hand that's an additional $16,000 deduction ($40,000 less $24,000).