4970 Tax on Accumulation Distribution of Trusts

Form

4970

OMB No. 1545-0192

Tax on Accumulation Distribution of Trusts
©

Department of the Treasury
Internal Revenue Service

2007

Attach to beneficiary’s tax return.
©

Attachment
Sequence No.

See instructions on back.

73

A

Name(s) as shown on return

B Social security number

C

Name and address of trust

D Employer identification number

E

Type of trust (see instructions)
Domestic

Part I
1
2
3
4
5
6
7
8
9
10
11
12
13

F

Beneficiary’s date of birth

Foreign

G Enter number of trusts from which you received accumulation
©

distributions in this tax year

Average Income and Determination of Computation Years

Amount of current distribution that is considered distributed in earlier tax years (from Schedule J
(Form 1041), line 37, column (a))
Distributions of income accumulated before you were born or reached age 21
Subtract line 2 from line 1
Taxes imposed on the trust on amounts from line 3 (from Schedule J (Form 1041), line 37, column (b))
Total (add lines 3 and 4)
Tax-exempt interest included on line 5 (from Schedule J (Form 1041), line 37, column (c))
Taxable part of line 5 (subtract line 6 from line 5)
Number of trust’s earlier tax years in which amounts on line 7 are considered distributed
9
Average annual amount considered distributed (divide line 3 by line 8)
10
Multiply line 9 by .25

1
2
3
4
5
6
7
8

11
Number of earlier tax years to be taken into account (see instructions)
12
Average amount for recomputing tax (divide line 7 by line 11). Enter here and in each column on line 15
(a) 2006
(b) 2005
(c) 2004
(d) 2003
Enter your taxable income before

(e) 2002

this distribution for the 5
immediately preceding tax years

Part II

Tax Attributable to the Accumulation Distribution
(a)

14

(b)

Enter the amounts from line 13, eliminating the highest and
lowest taxable income years

14

15

Enter amount from line 12 in each column

15

16

Recomputed taxable income (add lines 14 and 15)

16

17

Income tax on amounts on line 16

17

18

Income tax before credits on line 14 income

18

19

Additional tax before credits (subtract line 18 from line 17)

19

20

Tax credit adjustment

20

21

Subtract line 20 from line 19

21

22

Alternative minimum tax adjustments

22

23
24
25
26
27
28

23
Combine lines 21 and 22
Add columns (a), (b), and (c), line 23
Divide the line 24 amount by 3
Multiply the amount on line 25 by the number of years on line 11
Enter the amount from line 4
Partial tax attributable to the accumulation distribution (subtract line 27 from 26) (If zero or less,
enter -0-)

For Paperwork Reduction Act Notice, see back of form.

Cat. No. 13180V

(c)

24
25
26
27
28
Form

4970

(2007)

Form 4970 (2007)

General Instructions
Section references are to the Internal Revenue
Code unless otherwise noted.

Purpose of Form
A beneficiary of certain domestic trusts (see Who
Must File below) uses Form 4970 to figure the
partial tax on accumulation distributions under
section 667. The fiduciary notifies the beneficiary
of an “accumulation distribution” by completing
Part IV of Schedule J (Form 1041).
Thus, if you received a distribution for this tax
year from a trust that accumulated its income
instead of distributing it each year (and the trust
paid taxes on that income), you must complete
Form 4970 to compute any additional tax
liability. The trustee must give you a completed
Part IV of Schedule J (Form 1041) so you can
complete this form.
If you received accumulation distributions from
more than one trust during the current tax year,
prepare a separate Form 4970 for each trust
from which you received an accumulation
distribution. You can arrange the distributions in
any order you want them considered to have
been made.

Who Must File
Beneficiaries who received an accumulation
distribution from certain domestic trusts that
were created before March 1, 1984, must file
Form 4970. For details, see section 665(c).
Foreign trust beneficiaries. If you received an
accumulation distribution from a foreign trust,
you must report the distribution and the partial
tax on a 2007 Form 3520, Annual Return To
Report Transactions With Foreign Trusts and
Receipt of Certain Foreign Gifts.
Do not file Form 4970 for distributions from
any foreign trusts, except to attach it as a
worksheet to Form 3520 if those instructions
direct you to.
Note: If the accumulation distributions are from a
domestic trust that used to be a foreign trust,
see Rev. Rul. 91-6, 1991-1 C.B. 89.

Definitions
Undistributed net income (UNI). Undistributed
net income is the distributable net income (DNI)
of the trust for any tax year less (1) the amount
of income required to be distributed currently
and any other amounts properly paid or credited
or required to be distributed to beneficiaries in
the tax year and (2) the taxes imposed on the
trust attributable to such DNI.
Accumulation distribution. An accumulation
distribution is the excess of amounts properly
paid, credited, or required to be distributed
(other than income required to be distributed
currently) over the DNI of the trust reduced by
income required to be distributed currently.
Generally, except for tax-exempt interest, the
distribution loses its character upon distribution
to the beneficiary. See section 667(d) for special
rules for foreign trusts.

Specific Instructions
Item E—Type of trust. If you received an
accumulation distribution from a foreign trust,
see Foreign trust beneficiaries above. Do not file
this form other than as an attachment to Form
3520.
Line 1. For a nonresident alien or foreign
corporation, include only the part of the
accumulation distribution that is attributable to
U.S. sources or is effectively connected with a
trade or business carried on in the United States.

Page

Line 2. Enter any amount from line 1 that
represents UNI of a domestic trust accumulated
before you were born or reached age 21.
However, if the multiple trust rule applies, see
the instructions for line 4.
Line 4. Multiple trust rule. If you received
accumulation distributions from two or more
other trusts that were considered to have been
made in any of the earlier tax years in which the
current accumulation distribution is considered
to have been made, do not include on line 4 the
taxes attributable to the current accumulation
distribution considered to have been distributed
in the same earlier tax year(s).
For this special rule, only count as trusts those
trusts for which the sum of this accumulation
distribution and any earlier accumulation
distributions from the trust, which are considered
under section 666(a) to have been distributed in
the same earlier tax year, is $1,000 or more.
Foreign trust. If the trust is a foreign trust, see
section 665(d)(2).
Line 8. You can determine the number of years
in which the UNI is deemed to have been
distributed by counting the “throwback years”
for which there are entries on lines 32 through
36 of Part IV of Schedule J (Form 1041). These
throwback rules apply even if you would not
have been entitled to receive a distribution in the
earlier tax year if the distribution had actually
been made then. There can be more than 5
“throwback years.”
Line 11. From the number of years entered on
line 8, subtract any year in which the distribution
from column (a), Part IV of Schedule J (Form
1041) is less than the amount on line 10 of Form
4970. If the distribution for each throwback year
is more than line 10, then enter the same
number on line 11 as you entered on line 8.
Line 13. Enter your taxable incomes for years
2002–2006, even if less than 5 years of the trust
had accumulated income after you became 21.
Use the taxable income as reported by you or as
changed by the IRS. Include in the taxable
income amounts considered distributed in that
year as a result of prior accumulation
distributions, whether from the same or another
trust, and whether made in an earlier year or the
current year.
If your taxable income as adjusted is less than
zero, enter zero.
Line 17. Figure the income tax (not including any
alternative minimum tax (AMT)) on the income on
line 16 using the tax rates in effect for your
particular earlier tax year shown in each of the
three columns. Use the Tax Rate Schedules,
etc., as applicable. You can get the Tax Rate
Schedules and prior year forms from many IRS
offices by calling 1-800-TAX-FORM
(1-800-829-3676), or by downloading them from
the IRS website at www.irs.gov.
Line 18. Enter your income tax (not including
any AMT) as originally reported, corrected, or
amended, before reduction for any credits for
your particular earlier year shown in each of the
three columns.
Line 20. Nonrefundable credits that are limited
to tax liability, such as the general business
credit, may be changed because of an
accumulation distribution. If the total allowable
credits for any of the 3 computation years
increases, enter the increase on line 20.
However, do not treat as an increase the part of
the credit that was allowable as a carryback or
carryforward credit in the current or any
preceding year other than the computation year.

2

To refigure these credits, you must consider
changes to the tax before credits for each of the
3 computation years due to previous
accumulation distributions.
If the accumulation distribution is from a
domestic trust that paid foreign income taxes,
the limitation on the foreign tax credit under
section 904 is applied separately to the
accumulation distribution. If the distribution is
from a foreign trust, see sections 667(d) and
904(f)(4) for special rules.
Attach the proper form for any credit you
refigure. The amount determined for items on
this line is limited to tax law provisions in effect
for those years involved.
Line 22. Use and attach a separate Form 4626,
Form 6251, or the AMT schedule for Form 1041
to recompute the AMT for each earlier year and
show any change in those taxes in the bottom
margin of the forms or schedules. Enter the
adjustments on this line.
Line 28. If estate taxes or generation-skipping
transfer taxes apply to the accumulation
distribution, reduce the partial tax proportionately
for those taxes. See section 667(b)(6) for the
computation.
Individuals. Include the amount from this line on
line 63, Form 1040. Write “ADT” to the left of the
line 63 entry space.
Trusts and decedents’ estates. Include the
amount on line 7, Schedule G, Form 1041. Write
“From Form 4970” and the amount of the tax to
the left of the line 7 entry space.
Other filers. Add the result to the total tax
liability before the refundable credits on your
income tax return for the year of the
accumulation distribution. Attach this form to
that return.
Paperwork Reduction Act Notice. We ask for
the information on this form to carry out the
Internal Revenue laws of the United States. You
are required to give us the information. We need
it to ensure that you are complying with these
laws and to allow us to figure and collect the
right amount of tax.
You are not required to provide the
information requested on a form that is subject
to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or
records relating to a form or its instructions must
be retained as long as their contents may
become material in the administration of any
Internal Revenue law. Generally, tax returns and
return information are confidential, as required
by section 6103.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is
included in the estimates shown in the
instructions for their individual income tax return.
The estimated burden for all other taxpayers who
file this form is shown below.
Recordkeeping
1 hr., 12 min.
Learning about the
law or the form
15 min.
Preparing the form
1 hr., 25 min.
Copying, assembling, and
sending the form to the IRS
20 min.
If you have comments concerning the
accuracy of these time estimates or suggestions
for making this form simpler, we would be happy
to hear from you. See the instructions for the tax
return with which this form is filed.