Trusts' Net Investment Income Also Taxable for Beneficiary in IRS Rules

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Once a trust distributes net investment income to a beneficiary under the Internal Revenue Service's recent NII tax rules, the income retains its character as investment income in that beneficiary's hands, said Adrienne Mikolashek, an attorney with the IRS Office of Chief Counsel.
Mikolashek and several practitioners addressed some of the issues practitioners still face under the IRS's proposed (REG-130843-13) and final (T.D. 9644) regulations on the 3.8 percent net investment income tax during a Feb. 18 American Law Institute Continuing Legal Education program aimed at trusts and family businesses (229 DTR G-6, 11/27/13)
If there is an active business at the trust level, the business remains active for the beneficiary under the current rules, said Richard Dees, partner with McDermott Will & Emery in Chicago.

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