AICPA on Decanting: Continuation Not Termination of Distributing Trust

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Decanting should be viewed as a continuation rather than the termination of a distributing trust, the Tax Executive Committee of the American Institute of Certified Public Accountants says in letter to IRS and Treasury officials. Unless there is a gift or estate tax consequence as a result of decanting, the grantor of the distributing trust will remain the grantor of the receiving trust for federal income tax purposes, the letter says. Treasury Regulations Section 1.671-2(c)(5) say that if a trust makes a gratuitous transfer of property to another trust, the grantor of the transferor trust generally will be treated as the grantor of the transferee trust, the letter adds.

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