Split-Interest Trust Information Return

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Instructions for Form 5227

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1st draft circulation as of November 7, 2007

2007

Department of the Treasury
Internal Revenue Service

Instructions for Form 5227
Split-Interest Trust Information Return
Section references are to the Internal Revenue Code unless
otherwise noted.

General Instructions
Purpose of Form

What’s New
Act Section 1201(b) of the Pension Protection Act of
2006 made changes that affect split-interest trusts for
2007. The changes are reflected in the substantially
revised 2007 Form 5227. Now, split-interest trusts no
longer have to file Form 1041-A. Form 5227 now meets
the requirements of Section 6034 and continues to meet
the requirements of Regulations section 53.6011-1(d)
and, for charitable remainder trusts, Regulations section
1.6012-3(a). Form 5227 is now open to public inspection
as a result of the change. New Schedule A, which is part
of Form 5227, is not open for public inspection and
contains information that is specific to private
beneficiaries. Major changes to the form include the
following.
• Part I, Income and Deductions, is revised and now all
trusts must complete Part I through Section D.
• Part III from the prior year is revised and moved to new
Schedule A.
• Part III-A is new to Form 5227 and is a revised version
of Form 1041-A, Part III.
• Part III-B is new to Form 5227 and is a revised version
of Form 1041-A, Part II.
• Part V-B is revised and provides an easier format to
figure the required distribution for different charitable
remainder unitrusts.
• New Schedule A expands on the old Part II,
Accumulation Schedule, reflects distribution information
of private beneficiaries, and asks for information about
the donor and the assets donated.
Section 1201(b) of the Pension Protection Act also
revised penalty amounts for failure to file and expanded
penalty application to include failure to file complete and
correct returns. Also, an increased penalty amount is
imposed on trustees who are required to file the return
and knowingly fail to file the return. See Penalty for
Failure To File Timely, Completely, or Correctly, on page
3 for more information.

Use Form 5227 to:
• Report the financial activities of a split-interest trust.
• Provide certain information regarding charitable
deductions and distributions of or from a split-interest
trust.
• Determine if the trust is treated (for Chapter 42 excise
tax purposes) as a private foundation and subject to
certain excise taxes under Chapter 42.
Form 5227 is open to public inspection.
Use Schedule A of Form 5227 to report:

• Accumulations of income for charitable remainder
trusts,
• Distributions to non-charitable beneficiaries, and
• Information about donors and assets contributed
during the year.
Schedule A of Form 5227 is not open for public
inspection.

Who Must File
All charitable remainder trusts described in section 664
must file Form 5227. All pooled income funds described
in section 642(c)(5) and all other trusts such as charitable
lead trusts that meet the definition of a split-interest trust
under section 4947(a)(2) must file Form 5227 unless the
Exception (below) applies.
Exception. Generally, a split-interest trust created
before May 27, 1969, is not required to file Form 5227.
However, if any amounts were transferred to the trust
after May 26, 1969, for which a deduction was allowed
under any of the sections listed under section 4947(a)(2),
Form 5227 must be filed for the year of the transfer and
all subsequent years regardless of whether additional
transfers are made in subsequent years.
If all transfers of corpus to the trust occurred before
May 27, 1969, then the trust is not required to file Form
5227.

Photographs of Missing Children

If a trust was created before May 27, 1969, and any
amount was transferred to the trust after May 26, 1969,
for which no deduction was allowed under any of the
sections listed under section 4947(a)(2), then the trust is
not required to file Form 5227.

The Internal Revenue Service is a proud partner with the
National Center for Missing and Exploited Children.
Photographs of missing children selected by the Center
may appear in instructions on pages that would otherwise
be blank. You can help bring these children home by
looking at the photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.

Note. Regulations section 1.6012-3(a)(6) references
Form 1041-B. Form 5227 replaces Form 1041-B.
Regulations section 1.6034-1(c) references Form
1041-A. Form 5227 replaces Form 1041-A for
split-interest trusts. Also, any trust not required to file
Form 5227 but is allowed a deduction under section
642(c), must file Form 1041-A.

Cat. No. 13228E

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Instructions for Form 5227

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1st draft circulation as of November 7, 2007
Disqualified person. A disqualified person is:
1. A substantial contributor;
2. A foundation manager;
3. A person who owns more than 20% of a
corporation, partnership, trust, or unincorporated
enterprise, which is itself a substantial contributor;
4. A member of the family of an individual in the first
three categories; or
5. A corporation, partnership, trust, or estate in which
persons described in (1),( 2), (3), or (4) above own a total
beneficial interest of more than 35%.
6. For purposes of section 4943 (excess business
holdings), a disqualified person also includes:
a. A private foundation which is effectively controlled
(directly or indirectly) by the same persons who control
the trust in question, or
b. A private foundation substantially all of the
contributions to which were made (directly or
indirectly) by the same person or persons described in
(1), (2), or (3) above, or members of their families,
within the meaning of section 4946(d), who made
(directly or indirectly) substantially all of the
contributions to the trust in question.
7. For purposes of section 4941 (self-dealing), a
disqualified person also includes certain government
officials. (See section 4946(c) and the related
regulations.)

Which Parts To Complete
Certain Parts in the return only apply to a particular type
of trust (such as a charitable remainder trust). Parts (or
lines) that only apply to a particular type of trust are
appropriately labeled. If a Part does not reference any
particular type of trust, then the Part may be applicable to
all split-interest trusts. However, a split-interest trust can
have a requirement to file Form 5227 but certain Parts
that can apply to that type of trust may not apply in
certain cases. The following discussions by type of trust
identify the situations in which certain Parts do have to be
completed.
Charitable remainder trust. If the charitable interests
involve only war veterans posts or cemeteries described
in sections 170(c)(3) and 170(c)(5), Parts VI-A and VI-B
do not have to be completed.
If a trust was created before May 27, 1969 and
1. amounts were transferred to the trust after May 26,
1969, for which no deduction was allowed under any of
the sections listed under section 4947(a)(2) or
2. no amounts were transferred to the trust after May
26, 1969,
then Parts VI-A, VI-B, and VII (except line 95) do not
have to be completed. Also, Parts III-A and III-B do not
have to be completed if (2) applies.
Charitable lead trust. If the charitable interest involves
only veteran war posts or cemeteries described in
sections 170(c)(3) and 170(c)(5), Parts VI-A and VI-B do
not have to be completed.

Phone Help
If you have questions and/or need help completing this
form, please call 1-877-829-5500. This toll-free telephone
service is available Monday through Friday.

Definitions
Split-interest trust. A split-interest trust is a trust that:
• Is not exempt from tax under section 501(a);
• Has some unexpired interests that are devoted to
purposes other than religious, charitable, or similar
purposes described in section 170(c)(2)(B); and
• Has amounts transferred in trust after May 26, 1969,
for which a deduction was allowed under one of the
sections listed in section 4947(a)(2).

Additional Information
For additional information on private foundations and
foundation managers, visit
www.irs.gov/charities/foundations/index.html.

Other Forms You May Have To File
You may also be required to file one or more of the
following forms.
• Form 56, Notice Concerning Fiduciary Relationship.
• Form 1041, U.S. Income Tax Return for Estates and
Trusts.
• Form 1041-ES, Estimated Income Tax for Estates and
Trusts.
• Form 4720, Return of Certain Excise Taxes Under
Chapters 41 and 42 of the Internal Revenue Code.
• Form 8275, Disclosure Statement. Use this form to
disclose items or positions (except those contrary to a
regulation —see Form 8275-R, below) that are not
otherwise adequately disclosed on the tax return. The
disclosure is made to avoid parts of the accuracy-related
penalty for disregard of rules or substantial
understatement of tax. Form 8275 is also used for
disclosures relating to preparer penalties for
understatements due to unrealistic positions or for willful
or reckless conduct.
• Form 8275-R, Regulation Disclosure Statement. Use
this form to disclose any item on a tax return for which a
position has been taken that is contrary to Treasury
regulations.
• Form 8822, Change of Address.

A split-interest trust is subject to many of the same
requirements and restrictions that are imposed on private
foundations.
Split-interest trusts are usually one of the following
types:
• Charitable Remainder Trusts described in section 664,
• Pooled Income Funds described in section 642(c)(5),
and
• Charitable Lead Trusts which are trusts that make
payments for charitable purposes, have at least one
noncharitable beneficiary entitled to a remainder interest,
and claimed a deduction under one of the sections listed
under section 4947(a)(2).
Recipient. A recipient is a beneficiary who receives the
possession or beneficial enjoyment of the unitrust or
annuity amount.
Foundation manager. A foundation manager is an
officer, director, or trustee (or an individual who has
powers or responsibilities similar to those of officers,
directors, or trustees). In the case of any act or failure to
act, the term foundation manager may also include an
employee of the trust who has the authority to act.
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Instructions for Form 5227

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1st draft circulation as of November 7, 2007
• Form 8868, Application for Extension of Time To File

Penalty for Failure To File Timely,
Completely, or Correctly

an Exempt Organization Return.
• Form 8870, Information Return for Transfers
Associated With Certain Personal Benefit Contracts.

The failure to file penalty under section 6652(c)(2)(C) is
imposed on a split-interest trust unless the failure is due
to reasonable cause. The penalty is imposed on the trust
for failure to:
• Timely file a return,
• File a complete return, or
• Furnish correct information.

You can order forms and publications by calling
1-800-TAX-FORM (1-800-829-3676). You can also get
most forms and publications at your local IRS office or
online at www.irs.gov.

Period To Be Covered by Return
File Form 5227 for each calendar year. This revision of
the form is for the 2007 calendar year.

The penalty is $20 for each day the failure continues
with a maximum of $10,000 for any one return. However,
if the trust has gross income greater than $250,000, the
penalty is $100 for each day the failure continues with a
maximum of $50,000 for any one return.

Accounting Methods
Trust income must be computed using the method of
accounting regularly used in keeping the trust’s books
and records. Generally, permissible methods include the
cash method, the accrual method, or any other method
authorized by the Internal Revenue Code. The method
used must clearly reflect income.

The IRS may make a written demand that the
delinquent return be filed or information be furnished
specifying a time to comply with the demand. If the
trustee fails to comply with the demand by the specified
date, the trustee will be charged a penalty of $10 for each
day the failure continues with a maximum of $5,000 for
any one return.

Unless otherwise allowed by law, the trust may not
change the accounting method used to report income (for
income as a whole or for any material item) without first
getting consent on Form 3115, Application for Change in
Accounting Method. See Pub. 538, Accounting Periods
and Methods, for more details.

If the trustee required to file the return knowingly fails
to file the return, the same penalty that is imposed on the
trust will also be imposed on such trustee. Also, penalties
for filing a false or fraudulent return apply.

When To File

Trust Instrument

File Form 5227 for calendar year 2007 by April 15, 2008.

When you file the first return for a charitable remainder
annuity trust or unitrust; or charitable lead annuity or
unitrust, include:
1. A copy of the trust instrument, and
2. A written declaration under penalties of perjury that
it is a true and complete copy.

Extension of Time To File. Use Form 8868 to request
an automatic 3-month extension of time to file. The
request for an automatic extension must be filed by the
due date of the return. After receiving an automatic
3-month extension, you can also use Form 8868 to apply
for an additional (not automatic) 3-month extension. The
request for an additional 3-month extension must be filed
by the extended due date of the return.

For sample forms of trusts that meet the requirements
of a charitable remainder unitrust, see Rev. Procs.
2005-52 through 2005-59, 2005-2 C.B. 326, 339, 353,
367, 383, 392, 402, and 412.

Where To File
File Form 5227 at the following address:

For sample forms of a trust that meet the requirements
of a charitable remainder annuity trust, see Rev. Procs.
2003-53 through 2003-60, 2003-2 C.B. 230, 236, 242,
249, 257, 262, 268, and 274.

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027
Private delivery services (PDSs). In addition to the
United States mail, exempt organizations can use certain
private delivery services designated by the IRS to meet
the “timely mailing as timely filing/paying” rule for tax
returns and payments. These private delivery services
include only the following.
• DHL Express (DHL): DHL Same Day Service, DHL
Next Day 10:30 am, DHL Next Day 12:00 pm, DHL Next
Day 3:00 pm, and DHL 2nd Day Service.
• Federal Express (FedEx): FedEx Priority Overnight,
FedEx Standard Overnight, FedEx 2Day, FedEx
International Priority, and FedEx International First.
• United Parcel Service (UPS): UPS Next Day Air, UPS
Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air
A.M., UPS Worldwide Express Plus, and UPS Worldwide
Express.

For sample forms of trusts that meet the requirements
of an inter vivos grantor or nongrantor charitable lead
annuity trust, see Rev. Proc. 2007-45, 2007-29 I.R.B. 89.
For a sample form of a trust that meets the requirements
of a testamentary charitable lead annuity trust, see Rev.
Proc. 2007-46, 2007-29 I.R.B. 102.

Rounding Off to Whole Dollars
You may round off cents to whole dollars on your return
and schedules. If you do round dollars, you must round
all amounts. To round, drop amounts under 50 cents and
increase amounts from 50 to 99 cents to the next dollar.
For example, $1.39 becomes $1 and $2.50 becomes $3.
If you have to add two or more amounts to figure the
amount to enter on a line, include cents when adding the
amounts and round off only the total.

The private delivery service can tell you how to get
written proof of the mailing date.
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Instructions for Form 5227

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1st draft circulation as of November 7, 2007
(valued at 10% or more) is transferred to a charitable
organization described in section 170(c), or qualified
employer securities are transferred to an employee stock
ownership plan.
Charitable remainder unitrust. This is a trust under
section 664(d)(2) similar to a charitable remainder
annuity trust, except that it pays, at least annually, a fixed
percentage (not less than 5% but not more than 50%) of
the net fair market value of the trust’s assets.
Pooled income fund. This is a trust under section
642(c)(5) created and maintained by a charitable
organization described in section 170(b)(1)(A)(i)-(vi).
Donors to the fund receive a lifetime income interest and
the charitable organization receives the remainder
interest.

Attachments
If you need more space, attach separate sheets showing
the same information in the same order as on the printed
form. Show the totals on the printed form.
Enter the trust’s name and employer identification
number on each sheet. Also, use sheets that are the
same size as the forms and indicate clearly the line of the
printed form to which the information relates.

Specific Instructions
Identification Area
If you received a Form 5227 from the IRS with a peel-off
label, attach the label to the name and address area of
the return. If the name or address on the label is wrong,
draw a line through the incorrect portion and enter the
correct information.
If you did not receive a peel-off label, complete the
information called for at the top of the form as it appears
on Form SS-4, Application for Employer Identification
Number.

D. Gross Income
Enter the trust’s gross income for the tax year. Gross
income is all income from whatever source derived,
including:
• Interest,
• Dividends,
• Rents (such as the amount on line 3 of Schedule E
(Form 1040)),
• Royalties (such as the amount on line 4 of Schedule E
(Form 1040)),
• Gross income derived from business (such as the
amount on line 7 of Schedule C (Form 1041)), and
• Gains (not losses) derived from dealings in property.

Address
Include the suite, room, or other unit number after the
street address. If the Post Office does not deliver mail to
the street address and the trustee has a P.O. box, show
the box number instead.
If you receive mail for the trust in care of a third party
(such as an accountant or an attorney), enter on the
street address line “C/O” followed by the third party’s
name and street address or P.O. box.

E. Initial Return, Final Return, Amended
Return; or Change of Name or Address
Initial return. Check this box if this is the initial return
for the split-interest trust. Charitable remainder trusts also
must complete line 92 and attach a copy of the trust
instrument.
Final return. Check this box if this is a final return
because the trust has terminated. If the trust or
beneficiary’s interest in the trust has terminated, check
the “Final K-1” box at the top of the Schedule K-1 (Form
1041).
Amended return. If you are filing an amended 2007
Form 5227, check the “Amended return” box. Complete
the entire return and correct the appropriate lines with the
new information. On an attachment, explain the reason
for the changes and identify the lines and amounts being
changed.
For charitable remainder trusts. If the amended
return results in a change to income, or a change in
distribution of any income or other information provided
to a beneficiary, an amended Schedule K-1 (Form 1041)
must be filed with the amended Form 5227 and a copy
given to each recipient. Check the “Amended K-1” box at
the top of the Schedule K-1 (Form 1041).
Change of name or address. If there has been a
change in the trustee’s name or address from the one
used on the prior year’s return (including a change to an
“in care of” name and address), check the appropriate
box(es).

A. Employer Identification Number (EIN)
Every trust that completes this return must have an
employer identification number (EIN). You can use one of
the following methods to apply for an EIN.
• Online – Click on the EIN link at www.irs.gov/
businesses/small. The EIN is issued immediately once
the application information is validated.
• By telephone at 1-800-829-4933 from 7:00 a.m. to
10:00 p.m. in the trustee’s local time zone.
• By mailing or faxing Form SS-4, Application for
Employer Identification Number.
Note. The online application process is not yet available
for trusts with addresses in foreign countries or Puerto
Rico.

B. Type of Entity
Charitable lead trust. This is a trust that pays a fixed
annuity or unitrust amount to a charitable organization for
a fixed number of years. Upon termination of the
payments, the remainder interest is transferred to a
noncharitable beneficiary.
Charitable remainder annuity trust. This is a trust
under section 664(d)(1) that pays a fixed dollar amount
(not less than 5% but not more than 50% of the initial net
fair market value of all property placed in trust), at least
annually, to one or more beneficiaries, at least one of
which is not a charitable organization, for life, or for a
specified number of years (not to exceed 20). Upon
termination of the payments, the remainder interest

If the address shown on Form 5227 changes after you
file the form (including a change to an “in care of” name
and address) file Form 8822 to notify the IRS of the
change.
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Instructions for Form 5227

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1st draft circulation as of November 7, 2007
Enter the net profit or loss from Schedule E on line 4.
See the Instructions for Schedule E (Form 1040) for
reporting requirements. If the trust received a Schedule
K-1 from a partnership, S corporation, or other
flow-through entity, use the corresponding lines on Form
5227 to report the interest, dividends, capital gains, etc.,
from the flow-through entity.

G. Unrelated Business Taxable Income
(Section 664 trusts only)
If you answered “Yes” to item G, in addition to Form
5227, you must file Form 4720 on behalf of the trust. Use
Form 4720 to report the trust’s unrelated business
taxable income and to report the tax due on the unrelated
business taxable income only. The tax due is equal to the
trust’s unrelated business taxable income. This tax is
imposed under section 664(c) and is treated as a
Chapter 42 excise.

Line 5. Farm income or (loss). If the trust operated a
farm, use Schedule F (Form 1040), Profit or Loss From
Farming, to report farm income and expenses. Enter the
net profit or loss from Schedule F on line 5.

Part I. Income and Deductions

Note. If the trust has farm rental income and expenses
based on crops or livestock produced by a tenant, report
the income and expenses on Schedule E (Form 1040)
and include it on line 4. Do not use Form 4835, Farm
Rental Income and Expenses, or Schedule F (Form
1040) to report such income and expenses.

Section A—Ordinary Income
Report the trust’s ordinary income on lines 1 through 7.
Line 1. Interest income. Report all taxable interest
income that was received by the trust. Examples of
taxable interest include interest from:
• Accounts (including certificates of deposit and money
market accounts) with banks, credit unions, and thrifts;
• Notes, loans, and mortgages;
• U.S. Treasury bills, notes, and bonds;
• U.S. savings bonds;
• Original issue discount; and
• Income received as a regular interest holder of a Real
Estate Mortgage Investment Conduit (REMIC).
For taxable bonds acquired after December 31, 1987,
amortizable bond premium is treated as an offset to the
interest income instead of as a separate interest
deduction. See Pub. 550, Investment Income and
Expenses.
Line 2a. Ordinary dividends. Enter on line 2a the total
of all ordinary dividends, including the qualified dividends
reported on line 2b.
Line 2b. Qualified dividends. Report on this line all
qualified dividends received by the trust. In general, a
qualified dividend is a dividend received during the tax
year from (a) a domestic corporation or (b) a qualified
foreign corporation. A qualified dividend does not include
any dividend from a corporation if the corporation is (or
was) exempt from income tax under section 501 or 521
for the corporation’s current or preceding tax year during
which the distribution was made.
Generally, these dividends are reported to the trust in
box 1b of Form(s) 1099-DIV, Dividends and Distributions.
Qualified dividends are treated as a separate class of
ordinary income for purposes of ordering distributions.
See Ordering Rules for Ordinary Income on page 12 for
more information on distributions. See Pub. 550 for
additional information on qualified dividends, including
holding period requirements.
Line 3. Business income or (loss). If the trust
operated a business, report the income and expenses on
Schedule C, Profit or Loss From Business (or Schedule
C-EZ, Net Profit From Business) of Form 1040. See the
instructions for G. Unrelated Business Taxable Income
(Section 664 Trusts Only) on page 4. Enter the net profit
or loss from Schedule C or C-EZ on line 3.
Line 4. Rents, royalties, partnerships, other estates
and trusts, etc. Use Schedule E (Form 1040),
Supplemental Income and Loss, to report the trust’s
income or losses from rents, royalties, partnerships, S
corporations, other estates and trusts, and REMICs.

Line 6. Ordinary gain or (loss). Enter from Form 4797,
Sales of Business Property, the gain or loss from the sale
or exchange of property other than capital assets and
also from involuntary conversions (other than casualty or
theft). For more information, see the Instructions for Form
4797.
Line 7. Other income. List any other item and its
amount that is includable in gross income but not
included in lines 1 through 6 (or Section B) on the dashed
line to the left of the entry space. Enter the total of these
items on the entry space to the right. If more space is
needed, attach a schedule.

Section B—Capital Gains (Losses)
Reporting for a Section 664 Trust
Use Schedule D (Form 1041), Capital Gains and Losses,
as directed below. You may use Schedule D-1 (Form
1041), Continuation Sheet for Schedule D (Form 1041),
to report additional gains and losses.
Line 9. Total short-term capital gains or (losses) for
the tax year. Complete lines 1a through 3 and line 5 of
the 2007 Schedule D (Form 1041). Do not make an entry
on line 4 of Schedule D (Form 1041). Enter the amount
from line 5 of the Schedule D (Form 1041) on line 9.
Line 10. Total long-term capital gains or (losses) for
the tax year. Complete lines 6a through 10 and line 12
of the 2007 Schedule D (Form 1041). Do not make an
entry on line 11 of Schedule D (Form 1041). Enter the
amount from line 12 of Schedule D (Form 1041) on
line 10.
Line 10 is the total of all classes (described below) of
long-term capital gain. The following is a summary of the
classes:
• 28% long-term capital gain class. This class consists
of collectibles gains and losses and the taxable gain (but
not more than the section 1202 exclusion) on the sale or
exchange of qualified small business stock. Enter these
gains or losses on line 12.
• Section 1250 long-term capital gain class. This
class consists of unrecaptured section 1250 gain
(generally the part of real estate capital gain attributable
to depreciation) on sales, exchanges, etc. of assets held
more than one year. Undistributed, unrecaptured section
1250 gain on sales, exchanges, etc. after May 6, 1997, is
included in this class. Enter this gain on line 11.
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1st draft circulation as of November 7, 2007
• All other long-term capital gain class. This class

Add the deductions that were allocated to all the
classes of income items within each category and enter
the amount of the appropriate line. (Note: Any deduction
allocated to corpus is not shown on any line in
Section E.)

consists of all other gains or losses from sales,
exchanges, and conversions (including installment
payments received) of assets held more than 12 months.

Reporting for a Split-Interest Trust Other Than a
Section 664 Trust

For a discussion on the allocation of deductions to
tax-exempt income, see Allocation of Deductions for
Tax-Exempt Income in the Instructions for Form 1041.

Follow the instructions for Schedule D (Form 1041).
Complete only Parts I, II, III (column (3) only), and Part IV
(if applicable) of Schedule D (Form 1041).

Part II. Schedule of Distributable
Income (Section 664 trust only)

Section C—Nontaxable Income
In this section, include other income that is not included
in Section A or B. This section includes income excluded
under subtitle A, chapter 1, subchapter B, part III of the
Internal Revenue Code such as interest on state and
municipal bonds.

Report the income (both current and cumulative
undistributed income) of the trust for purposes of
determining the character of distributions in three
categories:
1. Ordinary income,
2. Capital gains and losses, and
3. Nontaxable income.

Section D—Deductions
For Section 664 Trusts

A loss in any one of the three categories may not be
used to reduce a gain in any other category. For
example, a capital loss may not be used to reduce
ordinary income. However, a loss in any one category
may be used to reduce undistributed gain for earlier
years within that same category, and any excess may be
carried forward to reduce gain in future years within that
same category.

Include all allowable deductions and any expense that
would be allowable but for the fact that it must be
allocated to tax-exempt income. No deduction is ever
allowed for:
• The personal exemption under section 642(b),
• Charitable contributions under section 642(c),
• Net operating losses under section 642(d),
• Income distribution deductions under section 661,
• Capital loss carryforwards under section 1212,
• Federal income taxes, or
• Federal excise taxes under Chapter 42.
Any expense, that is not deductible in determining
taxable income or otherwise deductible but for the fact
that it must be allocated to nontaxable income, must be
allocated to corpus.
Attached schedule. List any other allowable deduction
(or any expense that would be an allowable deduction
but for the fact that it must be allocated to tax-exempt
income) that is not included on lines 17 through 20 and
the amount of the deduction. Total the amounts listed
and enter the total on line 21.

For information on recordkeeping for long-term capital
gains or ordinary income, see the worksheets on pages
14 and 15.

Part III-A. Distributions of Principal for
Charitable Purposes
Line 31. Provide the information requested for columns
A through C and enter the amount on the line to the right.
In column C, list in sufficient detail each class of activity
for amounts paid out of principal to the same payee for
charitable purposes.
Example. “Cash payments to buy library material” or
“Grant, paid in cash, to equip the chemistry lab at
Magnolia University.”

For Split-Interest Trusts Other Than Section 664
Trusts

Do not merely enter the category (that is, religious,
charitable, scientific, literary, or educational). The
purpose of the deduction must be entered as shown in
the examples above.

Include all expenses attributable to gross income that are
deductible for the tax year.
Attached schedule. List any other deductible expense
that is attributable to the gross income of the trust and is
not included on lines 17 through 20 and line 23 and show
the amount of the deduction. Total the amounts listed
and enter the total on line 21.

Part III-B. Accumulated Income Set
Aside and Income Distributions for
Charitable Purposes

Section E—Deductions Allocable to Income
Categories (Section 664 trust only)

Complete Part III-B if any of the following apply.
• The trust claimed a deduction in a prior year under
section 642(c) for an amount permanently set aside and
at the beginning of the year the set aside amount was not
fully distributed.
• The trust claimed a deduction during the year under
section 642(c) whether the amount was set aside or paid.
Line 35. Provide the information requested for columns
A through C and enter the amount on the line to the right.
In column C, list in sufficient detail each class of activity
to the same payee for charitable purposes for amount

Deductions are allocated as follows.
1. Allowable deductions directly attributable to one or
more classes of income items (that is, interest, dividends,
or rents) or corpus are allocated to such income classes
or corpus.
2. Allowable deductions not allocated under (1) above
are allocated on the basis of gross income after directly
attributable deductions, to the extent of such income.
3. Deductions not allocated under either (1) or (2)
above may be allocated in any manner.
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distributed in which a section 642(c) deduction was
claimed.
Do not merely enter the category (that is, religious,
charitable, scientific, literary, or educational). The
purpose of the deduction must be entered as shown in
the examples in Part III-A above.

arising from transactions not functionally related to the
trust’s charitable purposes must be reported as separate
loans for each officer, director, etc.
2. Receivables that are subject to the same terms and
conditions (including credit limits and rate of interest) as
receivables due from the general public and that arose in
connection with an activity functionally related to the
trust’s charitable purposes may be reported as a single
total for all the officers, directors, etc. Travel advances
made in connection with official business of the trust may
also be reported as a single total.

Part IV. Balance Sheet
Complete the balance sheet using the accounting
method the trust uses in keeping its books and records.
All filers must complete columns (a) and (b). Also, all
charitable remainder unitrusts must complete column (c).
Enter the end-of-year book value where space is
provided to the left of column (a) to report receivables
and the related allowance for doubtful accounts or
depreciable assets and accumulated depreciation. Enter
the net amounts in column (b).

For each outstanding loan or other receivable that
must be reported separately, the attached schedule
should use a columnar format and show the following
information:
• Borrower’s name and title,
• Original amount,
• Balance due,
• Date of note,
• Maturity date,
• Repayment terms,
• Interest rate,
• Security provided by the borrower,
• Purpose of the loan, and
• Description and FMV of the consideration furnished by
the lender.
The above detail is not required for receivables or
travel advances that may be reported as a single total
(see instruction (2) above). However, report and identify
those totals separately in the attachment.
Line 42. Other notes and loans receivable. Enter the
combined total of notes receivable and net loans
receivable.
Notes receivable. Enter the amount of all notes
receivable not listed on line 41 and not acquired as
investments. Attach a schedule similar to that called for in
the line 28 instructions. The schedule should also identify
the relationship of the borrower to any officer, director,
trustee, or other disqualified person.
For a note receivable from any section 501(c)(3)
organization, list only the name of the borrower and the
balance due on the required schedule.
Loans receivable. Enter the gross amount of loans
receivable, less the allowance for doubtful accounts,
arising from the normal activities of the trust. An itemized
list of these loans is not required, but attach a schedule
indicating the total amount of each type of loan
outstanding. Report loans to officers, directors, trustees,
or other disqualified persons on line 41, and loans to
other employees on line 49.
Line 43. Inventories for sale or use. Enter the amount
of materials, goods, and supplies purchased or
manufactured by the trust and held for sale or use in
some future period.
Line 44. Prepaid expenses and deferred charges.
Enter the amount of short-term and long-term
prepayments of future expenses attributable to one or
more future accounting periods. Examples include
prepayments of rent, insurance, and pension costs, and
expenses incurred in connection with a solicitation
campaign to be conducted in a future accounting period.
Lines 45a, b, and c. Investments —U.S. and state
government obligations, corporate stock, and

Column (c)
In computing the net fair market value (FMV) of the
unitrust’s assets, take into account all assets and
liabilities without regard to whether particular items are
taken into account in determining the income of the trust.
The net FMV of the trust’s assets may be determined on
any one date during the tax year of the trust, or by taking
the average of valuations made on more than one date
during the tax year of the trust, as long as the same
valuation date or dates and valuation methods are used
each year. See Regulations section 1.664-3.
Line 38. Cash —non-interest-bearing. Enter the
amount of cash on deposit in checking accounts,
deposits in transit, change funds, petty cash funds, or
any other non-interest-bearing account. Do not include
advances to employees or officers or refundable deposits
paid to suppliers or others.
Line 39. Savings and temporary cash investments.
Enter the total of cash in savings or other interest-bearing
accounts and temporary cash investments, such as
money market funds, commercial paper, certificates of
deposit, U.S. Treasury bills, or other governmental
obligations that mature in less than one year.
Line 40. Accounts receivable. Enter the total accounts
receivable (reduced by the corresponding allowance for
doubtful accounts) that arose from the sale of goods and/
or the performance of services. Claims against vendors
or refundable deposits with suppliers or others may be
reported here if not significant in amount. (Otherwise,
report them on line 49, Other assets.) Any receivables
due from officers, directors, trustees, foundation
managers, or other disqualified persons must be reported
on line 41. Receivables (including loans and advances)
due from other employees should be reported on line 49.
Line 41. Receivables due from officers, directors,
trustees, and other disqualified persons. Enter here
(and in an attached schedule described below) all
receivables due from officers, directors, trustees, and
other disqualified persons and all secured and unsecured
loans (including advances) to such persons.
Attached schedule.
1. In the required schedule, report each loan
separately, even if more than one loan was made to the
same person, or the same terms apply to all loans made.
Salary advances and other advances for personal use
and benefit, and receivables subject to special terms or
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corporate bonds. Enter the book value (which may be
market value) of these investments. Attach a schedule
that lists each security held at the end of the year and
shows whether the security is listed at cost (including the
value recorded at the time of receipt in the case of
donated securities) or end-of-year market value. Do not
include amounts shown on line 39. Governmental
obligations reported on line 45a are those that mature in
1 year or more. Debt securities of the U.S. Government
may be reported as a single total rather than itemized.
Obligations of state and municipal governments may also
be reported as a lump-sum total. Do not combine U.S.
Government obligations with state and municipal
obligations on the attached schedule.
Line 46. Investments —land, buildings, and
equipment. Enter the book value (cost or other basis
less accumulated depreciation) of all land, buildings, and
equipment held for investment purposes, such as rental
properties. Attach a schedule listing these investment
fixed assets held at the end of the year and showing, for
each item or category listed, the cost or other basis,
accumulated depreciation, and book value.
Line 47. Investments —other. Enter the amount of all
other investment holdings not reported on line 45 or line
46. Attach a schedule describing each of these
investments held at the end of the year. Show the book
value for each and indicate whether the investment is
listed at cost or end-of-year market value. Do not include
program-related investments. See instructions for line 49.
Line 48. Land, buildings, and equipment. Enter the
book value (cost or other basis less accumulated
depreciation) of all land, buildings, and equipment owned
by the trust and not held for investment. This includes
any equipment owned and used by the trust in
conducting its charitable activities. Attach a schedule
listing these fixed assets held at the end of the year and
showing for each item or category listed, the cost or other
basis, accumulated depreciation, and book value.
Line 49. Other assets. List and show the book value of
each category of assets not reportable on lines 38
through 48. Attach a separate schedule if more space is
needed.
One type of asset reportable on line 49 is
program-related investments made primarily to
accomplish a charitable purpose of the trust rather than
to produce income.
Line 50. Total assets. Columns (a) and (b) (and column
(c) if a unitrust) must always have an entry, even if it is
zero.
Line 51. Accounts payable and accrued expenses.
Enter the total accounts payable to suppliers and others,
and accrued expenses such as salaries payable, accrued
payroll taxes, and interest payable.
Line 52. Deferred revenue. Include revenue that the
organization has received but not yet earned as of the
balance sheet date under its method of accounting.
Line 53. Loans from officers, directors, trustees, and
other disqualified persons. Enter the unpaid balance
of loans received from officers, directors, trustees, and
other disqualified persons. For loans outstanding at the
end of the year, attach a schedule that provides (for each
loan) the name and title of the lender and the information
specified in the line 41 instructions.

Line 54. Mortgages and other notes payable. Enter
the amount of mortgages and other notes payable at the
beginning and end of the year. Attach a schedule
showing, as of the end of the year, the total amount of all
mortgages payable and, for each nonmortgage note
payable, the name of the lender and the other information
specified in the line 41 instructions. The schedule should
also identify the relationship of the lender to any officer,
director, trustee, or other disqualified person.
Line 55. Other liabilities. List and show the amount of
each liability not reportable on lines 51 through 54. Attach
a separate schedule if more space is needed.
All charitable remainder trusts must include any
advances from trustees on line 55. Also, charitable
remainder unitrusts must include any unitrust amounts
applicable to prior periods that are unpaid but required to
be paid as of the valuation date, since such amounts
reduce the net FMV of the trust’s assets. However, do
not include any make-up amount for a net income
charitable remainder unitrust (NIMCRUT).
Line 56. Total liabilities. Columns (a) and (b) (and
column (c) if a unitrust) must always have an entry, even
if it is zero.
Line 60. Total liabilities and net assets. Columns (a)
and (b) must always have an entry, even if it is zero.

Parts V-A and V-B. Charitable
Remainder Trust Information
Line 61b. To figure the total annual annuity amounts for
a short tax year, see Short tax years below.
Line 65a. Enter the unitrust fixed percentage (which
may not be less than 5% or more than 50%).
If there is more than one unitrust recipient, attach a
schedule showing the percentage of the total unitrust
dollar amount payable to each recipient. The sum of
these individual shares should be 100%.
Line 65b. This line must always have an entry, even if it
is zero.
Line 66a. Enter the trust’s 2007 (fiduciary) accounting
income determined under the terms of the governing
instrument and applicable local law. Do not include
extraordinary dividends or taxable stock dividends that
are determined under the governing instrument and
applicable local law to be allocable to corpus. See
section 643(b) and Regulations sections
1.664-3(a)(1)(i)(b)(3) and 1.643(b)-1 for more
information.
Line 67a. This should be the amount from line 53 of the
2006 Form 5227. If not, attach a schedule that supports
the balance in the make-up account. Figure the total
deficiencies from previous years as follows.
1. Aggregate the unitrust’s net asset FMV for each
previous year.
2. Multiply (1) above by the unitrust’s fixed
percentage.
3. From the result in (2), subtract the aggregate trust
income that was distributed for previous years.
Line 69. Use this amount to determine future accrued
distribution deficiencies.
Short tax years. To figure the annuity amount (line 61b)
or the unitrust amount (line 68) for short tax years,
multiply the annuity or unitrust amount by the number of
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days in the trust’s tax year, and then divide the result by
365 (or 366 for leap years).
For a unitrust whose governing instrument provides for
an income exception, if no valuation date occurs before
the end of the trust’s tax year, value the trust’s assets as
of the last day of the trust’s tax year.

one of the exceptions described in sections
4941(d)(2)(D), (E), (F), or (G) applies. You may also
access information about self-dealing at www.irs.gov/
charities/foundations/index.html and click on the link for
Life Cycle of a Private Foundation.
The terms “disqualified person” and “foundation
manager” are defined on page 2.

Parts VI-A and VI-B. Statements
Regarding Activities

Line 75b. If you answered “Yes” to any of the questions
in 75a, you should answer “Yes” to 75b unless all of the
acts engaged in were “excepted” acts. Excepted acts are
described in Regulations sections 53.4941(d)-3 and 4 or
appear in Notices published in the Internal Revenue
Bulletin, relating to disaster assistance. At the time this
form went to print, there were no notices currently in
effect relating to disaster assistance for “excepted” acts
to self-dealing.

Answer every question in these sections. If a line does
not apply, enter “N/A.”

Part VI-A
Line 73. A split-interest trust must have a governing
instrument that requires the trust to act or refrain from
acting so as not to engage in an act of self-dealing under
section 4941 or subject it to the excise taxes under
section 4943, 4944, or 4945. The trust may satisfy the
requirements either by express language in its governing
instrument or by the operation of state law which imposes
the above requirements on the trust or treats these
requirements as being contained in the governing
instrument. If a trust claims it satisfies the requirements
of section 508(e) by operation of state law, the provisions
of state law must effectively impose the requirements of
section 508(e) on the trust.
If, however, the state law does not apply to a
governing instrument which contains mandatory
directions conflicting with any of its requirements and the
trust has such mandatory directions in its governing
instrument, then the trust has not satisfied the
requirements of section 508(e) by the operation of that
state law.

Line 76. Under section 4947(b)(3)(A), a split-interest
trust is not subject to the excess business holdings tax
(section 4943) or tax on investments that jeopardize the
trust’s charitable purpose (section 4944) if all the income
interest (and none of the remainder interest) of the trust
is devoted solely to one or more of the charitable
purposes described in section 170(c)(2)(B). In addition,
all amounts in the trust for which a charitable contribution
deduction was allowed under section 170 (for individual
taxpayers) or similar section for personal holding
companies, foreign personal holding companies, estates
or trusts (including a deduction for estate or gift tax
purposes), cannot have a total value of more than 60% of
the total FMV of all amounts in the trust.
Under section 4947(b)(3)(B), a split-interest trust is not
subject to the section 4943 or 4944 taxes if a deduction
was allowed under section 170 (and related provisions
for other entities) for amounts payable under the terms of
the trust to every remainder beneficiary but not to any
income beneficiary.

Part VI-B
Complete Part VI-B to determine whether the trust has
complied with the applicable Chapter 42 rules relating to
private foundations and whether the trust, trustee,
disqualified persons, or some combination of these, may
be liable for certain foundation excise taxes. These
excise taxes include:
• The section 4941 tax on self-dealing between the trust
and “disqualified persons,”
• The section 4943 tax on excess business holdings,
• The section 4944 tax on investments that jeopardize
the trust’s charitable purposes, and
• The section 4945 tax on taxable expenditures.
The split-interest trust pays these taxes on Form 4720.
For a detailed explanation of each of these taxes, see the
Instructions for Form 4720.
The excise taxes on private foundations do not apply
to any amounts:
1. Payable under the terms of the trust to income
beneficiaries, unless a deduction was allowed under
section 170(f)(2)(B), 2055(e)(2)(B), or 2522(c)(2)(B);
2. In trust for which a charitable contribution deduction
was not allowed under any provision of the Code, if the
amounts are segregated (as defined in section
4947(a)(3)) from amounts for which a deduction was
allowable; or
3. Transferred in trust before May 27, 1969.

Line 77. In general, excess business holdings are the
amount of stock or other interest in a business enterprise
that the trust must dispose of to a person other than a
disqualified person in order for the trust’s remaining
holdings in the enterprise to be permitted holdings.
In general, the combined permitted holdings of a trust
and all disqualified persons may not be more than 20% of
the voting power (or beneficial or profits interest, in the
case of a trust or a partnership) in any business
enterprise.
There were grace periods of 15 or 20 years for certain
excess business holdings that the trust held on May 26,
1969. These holdings were considered held by
disqualified persons rather than the trust during the grace
period. The 15-year grace period expired on May 25,
1984. This period applied when a trust and all disqualified
persons together held 75% or more (but not more than
95%) interest in a business enterprise. The 20-year grace
period expired on May 25, 1989. It applied if the
combined holdings were more than 95%.
In general, a business enterprise means the active
conduct of a trade or business, including any activity that
is regularly conducted to produce income from selling
goods or performing services, that is an unrelated trade
or business under section 513.

Line 75. The activities listed on lines 75a(1) through (6)
are considered self-dealing under section 4941 unless

The term “business enterprise” does not include:
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1. A functionally related business, defined in section
4942(j)(4), or
2. A trade or business if at least 95% of its gross
income is derived from passive sources.

Part VII. Questionnaire for Charitable
Lead Trusts, Pooled Income Funds,
and Charitable Remainder Trusts

See section 4943(d)(3) for additional items that are
included in gross income from passive sources.

Section A—All Trusts
All trusts are required to answer questions 81 and 82.

Line 77a. A private foundation is not treated as having
excess business holdings in any enterprise if, together
with related foundations, it owns 2% or less of the voting
stock and 2% or less in value of all outstanding shares of
all classes of stock. A similar exception applies to a
beneficial or profits interest in any business enterprise
that is a trust or partnership.

Section B—Charitable Lead Trusts
Line 83. The information on this line is used to
determine whether sections 4943 and 4944 apply for
2007.
Line 85. Enter the amount for payments described in
sections 170(f)(2)(B), 2055(e)(2)(B), and 2522(c)(2)(B).

Line 78. In general, an investment which jeopardizes
any of the charitable purposes of a trust is one in which a
foundation manager did not exercise ordinary business
care in making the investment to provide for the longand short-term financial needs of the trust in carrying out
its charitable purposes.

Section C—Pooled Income Funds
Line 87. Upon termination of the income interest
retained or created by a donor, the trustee is required to
sever from the fund an amount equal to the value of the
remainder interest in the property upon which the income
interest is based. The amount severed from the fund
must either be paid to, or retained for the use of, the
designated public charity, as provided in the governing
instrument. See Regulations section 1.642(c)-5(b)(8) for
valuation procedures.

For more information on investments which jeopardize
charitable purposes, see Regulations section 53.4944-1.
Line 79. Grants by a trust to a public charity are not
taxable expenditures if the grants are not earmarked for
use for any of the activities described on lines 79a(1)
through (5) and there is no oral or written agreement by
which the trust may cause the public charity to engage in
any such prohibited activity or to select the grant
recipient.

Section D—Charitable Remainder Trusts
Line 91. If a charitable remainder annuity trust or certain
charitable remainder unitrusts pay the annuity or unitrust
amount after the close of the tax year, and:
1. The payment is made within a reasonable time
after the close of the tax year, and
2. To the extent the payment is characterized as
corpus from a property distribution (other than cash), the
trustee treats any income generated by the distribution as
occurring on the last day of the tax year for which the
annuity or unitrust amount is due, then, the annuity trust
or certain unitrusts will not be deemed to have:

Grants made to exempt operating foundations (as
defined in section 4940(d)(2)) are not subject to the
expenditure responsibility provisions of section 4945. If
the trust made grants to such organizations, you do not
have to file Form 4720 for those grants. See the section
4945 regulations for more information.
Line 79b. If you answered “Yes” to any of the questions
in 79a, you should answer “Yes” to 79b unless all of the
transactions engaged in were “excepted” transactions.
Excepted transactions are described in Regulations
section 53.4945 or appear in Notices published in the
Internal Revenue Bulletin, relating to disaster assistance.
At the time this form went to print, there were no notices
currently in effect relating to disaster assistance for
“excepted” transactions to taxable expenditures.

• Engaged in self-dealing (section 4941),
• Unrelated debt-financed income (section 514),
• Received an additional contribution (Regulations

section 1.664-2(b) and 1.664-3(b)), or
• Failed to function exclusively as a charitable remainder
trust (Regulations section 1.664-1(a)(4)).
See Regulations sections 1.664-2(a)(1) and
1.664-3(a)(1) for more information.

Line 80a. A personal benefit contract is, in general, any
life insurance, annuity, or endowment contract that
benefits, directly or indirectly, a transferor, a transferor’s
family member, or a transferor designee that is not an
organization described in section 170(c).

Under Regulations section 1.664-1(d)(5), a distribution
of property (other than cash) is treated as a sale by the
trust.
Note. You must report income (gain) generated by the
property distribution (discussed above) on Part I of Form
5227 for the current tax year.

Line 80b. Enter the total of all premiums paid by the
split-interest trust on any personal benefit contract if the
payment of premiums is in connection with a transfer for
which a deduction is not allowed under section
170(f)(10)(A). Also, if there is an understanding or
expectation that any person will directly or indirectly pay
any premium on a personal benefit contract for the
transferor, include those premium payments in the
amount entered on this line. For more information, see
the Instructions for Form 8870.

Trusts created before December 10, 1998. The
election in Regulations sections 1.664-2(a)(1)(i)(a)(2) and
1.664-3(a)(1)(i)(g)(2) does not apply to charitable
remainder annuity trusts and certain charitable remainder
unitrusts whose annuity or unitrust amount is 15% or
less.
Line 95. Check the “Yes” box and enter the name of the
foreign country if either (1) or (2) on page 11 applies.
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1. The trust owns more than 50% of the stock in any
corporation that owns one or more foreign bank
accounts.
2. At any time during the year the trust had an interest
in or signature or other authority over a bank, securities,
or other financial account in a foreign country.

Part II-A. Current Distributions
Schedule (Section 664 trust only)
You must give each recipient listed in Part II-A a
Schedule K-1 (Form 1041) that reflects that recipient’s
current distribution. The following rules and worksheets
will help you figure the type of income a private
beneficiary receives from the trust’s distributions. Also,
attach a copy of each Schedule K-1 to Form 5227. See
the Specific Instructions for Schedule K-1 (Form 1041)
for more information.

Exception. Check “No” if either of the following applies
to the estate or trust:
• The combined value of the accounts was $10,000 or
less during the whole year, or
• The accounts were with a U.S. military banking facility
operated by a U.S. financial institution.
Get Form TD F 90-22.1, Report of Foreign Bank and
Financial Accounts, to see if the trust is considered to
have an interest in or signature or other authority over a
bank, securities, or other financial account in a foreign
country. You can get Form TD F 90-22.1 from the IRS
website at www.irs.gov/pub/irs-pdf/f90221.pdf.
If you checked “Yes” on line 95, file Form TD F
90-22.1 by June 30, 2008, with the Department of the
Treasury at the address show on the form. Form TD F
90-22.1 is not a tax return, so do not file it with Form
5227.

!

CAUTION

Column (b). Beneficiary’s Identifying
Number
As a payer of income, the trust is required under section
6109 to request and provide a proper identifying number
for each recipient of income. Enter the recipient’s number
on the respective Schedule K-1. Individuals and business
recipients are responsible for giving you their taxpayer
identification numbers upon request. You may use Form
W-9, Request for Taxpayer Identification Number and
Certification, to request the beneficiary’s identifying
number.
Penalty. Under section 6723, the payer is charged a
$50 penalty for each failure to provide a required
taxpayer identification number, unless reasonable cause
is established for not providing it. Explain any reasonable
cause in a signed affidavit and attach it to this return.

If you are required to file Form TD F 90-22.1 but
do not, you may have to pay a penalty of up to
$10,000 (more in some cases).

Signature

Substitute Forms

Form 5227 must be signed by the trustee or by an
authorized representative.
If you, as trustee (or an employee or officer of the
trust), fill in Form 5227, the Paid Preparer’s space should
remain blank. If someone prepares this return without
charge, that person should not sign the return.
Generally, anyone who is paid to prepare a tax return
must sign the return and fill in the other blanks in the Paid
Preparer’s Use Only area of the return.
If you have questions about whether a preparer is
required to sign the return, please contact an IRS office.
The person required to sign the return as the preparer
must:
• Complete the required preparer information,
• Sign it in the space provided for the preparer’s
signature (a facsimile signature is acceptable), and
• Give the trustee a copy of the return in addition to the
copy to be filed with the IRS.

You do not need prior IRS approval for substitute
Schedules K-1 if it is an exact copy of the IRS schedule.
The boxes must use the same numbers and titles and
must be in the same order and format as on the
comparable IRS Schedule K-1. The substitute schedule
must include the OMB number. You must request IRS
approval to use other substitute Schedules K-1. To
request approval, write to:

Schedule A—Distributions, Assets,
and Donor Information

If there are two or more recipients, each will be treated as
receiving his or her pro rata share of the various classes
of income or corpus.
Amounts distributed by a charitable remainder annuity
trust or a charitable remainder unitrust have the following
characteristics in the hands of the recipients:
• First, as ordinary income to the extent of ordinary
income for the current year and undistributed ordinary
income for prior years of the trust. Ordinary income is
computed without regard to any net operating loss
deductions under section 172. See the Ordering Rules
for Ordinary Income on page 12.
• Second, as capital gains to the extent of the trust’s
undistributed capital gains. Undistributed capital gains of
the trust are determined on a cumulative net basis

Internal Revenue Service
Attention: Substitute Forms Program Coordinator
SE:W:CAR:MP:T:T:SP, IR-6526
1111 Constitution Avenue, NW
Washington, DC 20224
You may be subject to a penalty if you file a
Schedule K-1 that does not conform to the
CAUTION specifications in Pub. 1167, General Rules and
Specifications for Substitute Forms and Schedules.

!

Inclusion of Amounts in Recipients’ Income

Note. Schedule A is not open to public inspection.

Part I. Accumulation Schedule
(Section 664 trust only)
Line 2a. Enter the total of all distributions for 2007.
Line 2b. Enter the amount distributed from each income
category.
You may want to read the Part II-A instructions
TIP and complete all worksheets (as necessary) and
complete Part II-A before you make an entry here.
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Page 12 of 15

Instructions for Form 5227

13:51 - 7-NOV-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

1st draft circulation as of November 7, 2007
• Gain from the section 1250 long-term capital gain
class, then
• Net gain from the all other long-term capital gain
class, and finally
• Gain from the qualified 5-year long-term capital gain
class.
3. An overall net long-term capital loss reduces any
net short-term capital gain.

without regard to any capital loss carrybacks and
carryovers. See the Netting Rules, Ordering Rules for
Capital Gains and Losses, and Carryover Rules below for
capital gains.
• Third, as nontaxable income to the extent of the trust’s
nontaxable income for the current year and undistributed
nontaxable income for prior years.
• Fourth, as a distribution of trust corpus. For this
purpose, trust corpus means the net fair market value of
the trust assets less the total undistributed income (but
not loss) in each of the above categories.

Though the qualified 5-year gain provision has
been repealed for sales and other dispositions
CAUTION after May 5, 2003, these gains remain in a
separate class because the 5-year gain provision is
scheduled to come back into existence in 2011.

!

Ordering Rules for Ordinary Income
Ordinary income is composed of two classes for
purposes of characterizing and ordering distributions: (a)
qualified dividends, and (b) all other ordinary income. If
the trust has both classes of ordinary income,
distributions are treated as made first from the all other
ordinary income class, and second from the qualified
dividends class.

No additions may be made to this class for
dispositions after May 5, 2003, and before 2011, but
distributions may continue to be made from this class
during that period.

Types of Income

Ordering Rules for Capital Gains and Losses

If there is more than one type of income in a class, treat
an amount distributed from that class as consisting of the
same proportion of each type of income that makes up all
current and undistributed income for that class.

The following rules apply to undistributed long-term
capital gains on assets held more than one year.
If, in any tax year of the trust, the trust has both
undistributed short-term capital gain and undistributed
long-term capital gain, the short-term capital gain is
deemed distributed before any long-term capital gain.

Example. For 2007, if trust A has interest income and
rental income, both are types of income that belong to
the All Other Ordinary Income class. If the amount on line
5 of the Ordinary Income Distribution Worksheet is $150
for the All Other Income class which consists of $60 of
interest and $90 of rent and $100 is distributed to private
beneficiaries for 2007, then $40 of the distribution is
interest and $60 of the distribution is rent.

For 2007, any long-term capital gains are deemed to
be distributed in the following order:
1. The 28% long-term capital gain class is deemed
distributed prior to any other class.
2. The section 1250 long-term capital gain class is
deemed distributed prior to the all other long-term capital
gain class and the qualified 5-year long-term capital gain
class.
3. The all other long-term capital gain class is deemed
distributed prior to the qualified 5-year long-term capital
gain class.
4. The qualified 5-year long-term capital gain class is
deemed distributed last of any class.

Additional Rules for Capital Gains and
Losses
Netting Rules
Gains and losses are netted within each class to arrive at
a net gain or loss for that class. After you net within a
class, the following additional netting rules apply to the
capital gains category.
1. Among the long-term capital gain and loss classes:
a. A net loss from the 28% long-term capital gain
class reduces net gains in the following order:
• First, gain from the section 1250 long-term capital
gain class, then
• Net gain from the all other long-term capital gain
class, and finally
• Gain from the qualified 5-year long-term capital gain
class.
b. A net loss from the all other long-term capital gain
class reduces net gains in the following order:
• First, net gain from the 28% long-term capital gain
class, then
• Gain from the section 1250 long-term capital gain
class, and finally
• Gain from the qualified 5-year long-term capital gain
class.
2. A net short-term capital loss is applied to reduce
the net long-term capital gain classes as follows:
• First, net gain from the 28% long-term capital gain
class, then

Carryover Rules
1. If the trust has capital losses in excess of capital
gains for any tax year:
a. The excess of the net short-term capital loss over
the net long-term capital gain for that year is a
short-term capital loss carryover to the next tax year.
b. The excess of the net long-term capital loss over
the net short-term capital gain for that year is a
long-term capital loss carryover to the next tax year.
2. If the trust has capital gains in excess of capital
losses for any tax year:
a. The excess of the net short-term capital gain over
the net long-term capital loss for that year is, to the
extent not deemed distributed, a short-term capital
gain carryover to the next tax year.
b. The excess of the net long-term capital gain over
the net short-term capital loss for that year is, to the
extent not deemed distributed, a long-term capital gain
carryover to the next tax year.
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Page 13 of 15

Instructions for Form 5227

13:51 - 7-NOV-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

1st draft circulation as of November 7, 2007
Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.

Part II-B. Current Distributions
(charitable lead trusts or pooled income
funds only)

The time needed to complete and file this form will
vary depending on individual circumstances. The
estimated average time is:

Line 5. Enter the amount for payments permitted by
Regulations sections 1.170A-6, 20.2055-2, and
25.2522(c)-3.
Privacy Act and 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. Section 6109
requires return preparers to provide their identifying
numbers on the return.
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

Recordkeeping . . . . . . . . .

65 hr., 17 min.

Learning about the law or
the form . . . . . . . . . . . . . .

11 hr., 24 min.

Preparing the form . . . . . .

19 hr., 24 min.

Copying, assembling, and
sending the form to IRS . .

1 hr., 52 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. You can
write to the Internal Revenue Service, Tax Products
Coordinating Committee, SE:W:CAR:MP:T:T:SP,
IR-6526, 1111 Constitution Ave. NW, Washington, DC
20224. Do not send the tax form to this address. Instead,
see Where To File on page 3.

-13-

-14-

9. Carryforward to 2007 (line 7
less line 8) . . . . . . . . . . . . . . . .

8. 2006 distributions . . . . . . . . . .

28% long-term
capital gain class

Section 1250
long-term capital
gain class

All other
long-term capital
gain class

Qualified 5-year
long-term capital
gain class

Instructions for Form 5227

7. Total undistributed gains . . . . .

6. Adjustments for netting any
short-term capital gain or
(loss) on line 3 (see netting
rules on page 5) . . . . . . . . . . . .

5. Total . . . . . . . . . . . . . . . . . . . . .

4. Adjustments for netting any
long-term capital (losses) on
line 3 . . . . . . . . . . . . . . . . . . . . .

3. Total combined gain or (loss)
by class . . . . . . . . . . . . . . . . . .

2. Current year net gain or (loss)

1. Prior years undistributed gain
or (loss) . . . . . . . . . . . . . . . . . .

Short-term

Long-term

(KEEP FOR YOUR RECORDS)

Use this worksheet to determine the ordering of any capital gains distributions

Capital Gains Distribution Worksheet

1st draft circulation as of November 7, 2007
Page 14 of 15
13:51 - 7-NOV-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

(KEEP FOR YOUR RECORDS)

Carryforward to 2007 (line 5 less line 6) . . . .

Total undistributed ordinary income . . . . . . .

5.

7.

Adjustments for netting any ordinary (losses)
on line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

2006 distributions . . . . . . . . . . . . . . . . . . . . . .

Total combined ordinary income or (loss) by
class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

6.

Current year ordinary income or (loss) . . . . .

2.

1. Prior years undistributed ordinary income or
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All other ordinary income

Use this worksheet to determine the ordering of any ordinary income distributions

Ordinary Income Distribution Worksheet

1st draft circulation as of November 7, 2007

Qualified dividends

Page 15 of 15
Instructions for Form 5227
13:51 - 7-NOV-2007

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

-15-