Reporting Charitable Bequests on Form 706 and Form 1041

Author: Klaralee R. Charlton

Taxpayers frequently incorporate charitable giving into their estate plans. These transfers can be drafted as dollar amounts, specific assets, or percentages of a residuary. When reporting these transfers on the Estate Tax Return, Form 706, practitioners must understand the reporting nuances particularly for percentage transfers which require a cumbersome circular calculation to accurately claim the charitable deduction. For estates and trusts requiring a Fiduciary Income Tax Return, Form 1041, practitioners must similarly understand how to review the governing documents and evaluate the type of transfer to accurately report the charitable income tax deduction. This course will evaluate both Form 706 and Form 1041 reporting of post-death charitable transfers.

Publication Date: June 2023

Designed For
Attorneys, CPAs, Enrolled Agents

Topics Covered

• Estate Tax Brief Recap
  • Unlimited Charitable Deduction
  • Specific Bequests vs. Percentage Bequests
  • Discounting Charitable Bequests
• Fiduciary Tax Brief Recap
  • Charitable Income Tax Deduction
  • Qualifying Gross Income
  • Qualifying Charitable Purpose
  • Pursuant to the Governing Instrument
  • Year of Deduction

Learning Objectives

• Recognize how to advise clients on the difference between specific bequests and residuary devises and the charitable deduction allowed for each
• Recognize how to analyze a taxpayer's ability to claim a charitable income tax deduction when preparing Form 1041
• Recognize how to calculate the proper charitable deduction when preparing Form 706 for specific bequests and residuary devises
• Identify the importance of properly drafting an estate plan to maximize the use of the charitable deduction

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic understanding of Trust and Estate Taxation

Advance Preparation
None