Secular Trust

[Randy Watson]

Does anyone know whether earnings on the assets held in a secular trust can be treated as captial gains rather than ordinary income?

[mbozek]

Taxation of distributions from a taxable trust are governed by complex rules for trust taxation since the trust is a conduit for income paid out. Payments from the trust are taxed in 4 categories, ordinary income, capital gains, tax exempt income and principal. However there are complex accounting rules which govern which bucket a payment is allocted to. You need a tax accountant to determine the classification of payments from a taxable trust.

[Randy Watson]

Thank you.

[Guest Harry O]

I agree with mbozek. The tax rules also depend on the exact structure of the secular trust -- whether the employee or employer is the grantor, whether the trust is simple or complex, if complex are earnings required to be distributed, etc. Get some help.

[Kirk Maldonado]

Harry O:

The IRS used to take the position that a secular trust could not be an employer-grantor trust. Do you believe that they have changed that position, or do you think that the IRS is wrong?

[Guest Harry O]

Kirk,

I have to be honest and say that I haven't rolled up my sleeves and looked hard at a secular trust in over 10 years. And since I can't remember what I looked at 10 minutes ago, I sure as hell can't remember 10 years ago! <g> Maybe if I get a free minute, I'll pull my secular trust file and refresh my memory.