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Important Income Tax Election for Trusts and Estates


Election to treat a revocable trust as part of an estate. Sec. 645 allows for an election to treat a qualified revocable trust (QRT) as part of a decedent’s estate for federal income tax purposes. A QRT is a grantor trust under Sec. 676 (with revocation power retained by the grantor) as of the decedent’s date of death. Accordingly, a testamentary trust cannot be a QRT.

The advantages of making the election include: the estate and electing trust file a single Form 1041, U.S. Income Tax Return for Estates and Trusts; the electing trust can adopt a fiscal year; the electing trust is not subject to the active-participation requirement under the passive loss rules for two years; the electing trust can hold S corporation stock without terminating the corporation’s S election; and the electing trust will be allowed a charitable deduction under Sec. 642(c) for amounts permanently set aside for charitable purposes. The election is made by the trustee and executor on Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate, by the due date, including extensions, of the estate’s (or in a case where there is no executor of the estate, the filing trust’s) initial income tax return. If there is more than one executor of the estate or more than one trustee for an electing QRT, only one executor or trustee must sign Form 8855, unless otherwise required by applicable local law or the governing document. As it is possible to have more than one QRT, the trustee, or, where required, trustees, of each QRT joining in the election must sign Form 8855. The election is irrevocable.



Your Sarasota & Manatee Estate Tax Planner