Summary of Changes

Major Changes to the 2007 Instructions for Form 5227,
Split-Interest Trust Information Return
•

On page 1, under What’s New, we briefly summarized the following to reflect amendments
made by the Pension Protection Act of 2006:
o Highlights of the major redesign of the 2007 Form 5227,
o Current filing requirements for split-interest trusts,
o New requirements for public inspection and disclosure of Form 5227,
o Increased penalties related to failure to file, and failure to accurately and completely
report required information, and
o The application of increased penalties personally on trustees who knowingly fail to
file a return.

•

On page 1, under Purpose of Form, we revised this section to explain the expanded use of
Form 5227 and the purpose of new Schedule A of Form 5227. These revisions were made
to incorporate the new filing requirements of IRC section 6034.

•

On page 1, under Who Must File, we added text to clarify that under the new filing
requirements of IRC section 6034, certain charitable remainder trusts, pooled income funds,
and charitable lead trusts must now file Form 5227, unless the exception (discussed in the
instructions) applies. The new provision creates this requirement because the exemption for
split-interest trusts that currently distribute all net income is repealed.

•

On page 1, under Exception, we added text which clarifies when a trust is not required to file
Form 5227.

•

On page 1, under Note, we added text to advise split-interest trust trustees of the reporting
requirements for Form 5227 and Form 1041-A.

•

On page 2, under Which Parts To Complete, (continued from the discussion under Who Must
File on page 1), we added text to explain the exceptions to filing certain parts of Form 5227,
which otherwise would be filed by the entity.

•

On page 2, under Definitions, Split-interest trust, we identified three types of split-interest
trusts by code section to clarify their treatment within the Instructions for Form 5227.

•

On page 3, under Where To File, we added the text “Department of the Treasury” to the
address per the Acting Chief, Individual Branch, email dated 9/6/2007.

•

On page 3, we added a new section, entitled Penalty for Failure To File Timely, Completely,
or Correctly, which provides details on the penalty increases imposed on split-interest trusts
for the failure to file and the failure to completely and accurately include required
information on Form 5227. We also added text on the penalties imposed on trustees who
knowingly fail to file Form 5227.

Page 1 of 6

•

On page 3, under Trust Instrument, we added a reference to two new revenue procedures
with sample charitable lead annuity trusts (CLATs). Revenue Procedure 2007-45 provides
guidance for inter vivos charitable lead annuity trusts while Revenue Procedure 2007-46
contains guidance on testamentary charitable lead annuity trusts.

•

On page 4, under A. Employer Identification Number (EIN), the second bullet, we added the
window of time during which trustees may call for live telephone assistance in obtaining an
EIN.

•

On page 4, we added new text, entitled D. Gross Income, which includes the definition of
gross income within the meaning of Code section 61. This change was made to clarify the
amount that filers should report in box D on Form 5227.

•

On page 4, under Initial return, we added text to alert charitable remainder trust entities that
both item E and question 92 (along with submitting a copy of the trust instrument) must be
completed if the entity is filing an initial return.

•

On page 4, we added new text, entitled For charitable remainder trusts, which directs
trustees of charitable remainder trusts to submit additional attachments where the filing of an
amended return results in certain changes.

•

On page 5, under G. Unrelated Business Taxable Income, we revised the instructions to alert
trustees about filing Form 4720 to report the trust’s unrelated business taxable income.
Implan. #67.00203, Tax Relief and Health Care Act of 2006, P.L. 109-432 (Act Section 424),
IRC section 664(c)(2).

•

On page 5, under Line 5. Farm income or (loss), Note, we added instructions on where to
report farm rental income and expenses on tenant-produced crops or livestock.

•

On page 5, we added new text, entitled Line 7. Other income, to clarify for trustees how to
report other income items on line 7.

•

On pages 5 and 6, we added a new section, entitled Section B—Capital Gains (Losses), by
restructuring the instructions from the prior revision (old Line 17 instructions), and adding
text to clarify the capital gains (losses) reporting requirements for a section 664 trust versus a
split-interest trust other than a section 664 trust.

•

On page 6, we added a new section, entitled Section C—Nontaxable Income, to reflect the
addition of this section to Form 5227. The text alerts trustees as to the type of income to
include on lines 14 and 15.

•

On page 6, we added a new section, entitled Section D—Deductions, by restructuring some
of the instructions from the prior revision (old Deductions instructions), and adding a section
which discusses how to report deductions for split-interest trusts other than section 664 trusts.

Page 2 of 6

•

On page 6, we added a new section, entitled Section E—Deductions Allocable to Income
Categories (Section 664 trust only), by restructuring some of the instructions from the prior
revision (also from old Deductions instructions), and adding text which explains the amounts
to enter in on lines 24a through 26b in Section E.

•

On page 6, we revised the heading of Part II to read as follows: Schedule of Distributable
Income (Section 664 trust only). This change reflects a change made to Form 5227.

•

On page 6, we added a new section, entitled Part III-A. Distributions of Principal for
Charitable Purposes, by using text similar to that found in Form 1041-A (Rev. December
2000) to give guidance on and an example of how to report principal distributions for
charitable purposes. IRC section 2055.

•

On pages 6 and 7, we added a new section, entitled Part III-B. Accumulated Income Set
Aside and Income Distributions for Charitable Purposes, which discusses when filers would
complete Part III and gives guidance on how to report certain charitable distributions. Reg.
sections 1.6034-1(a)(1), (2), and (3).

•

On page 7, under Part IV. Balance Sheet, we revised the last sentence of the first paragraph
to reflect that “…all charitable remainder unitrusts must complete column (c)” for purposes
of clarity.

•

On page 8, under Line 55. Other liabilities, we added text to clarify what all trusts must
report with respect to advances, and what charitable remainder unitrusts must additionally
report.

•

On page 8, under Parts V-A and V-B. Charitable Remainder Trust Information, Line 66a, we
inserted the term “fiduciary” for purposes of clarity.

•

On page 8, under Parts V-A and V-B. Charitable Remainder Trust Information, Line 67a, we
added text stating that line 67a should be the same amount reported on line 53 of Form 5227.

•

On page 8, immediately after the instructions for Line 67a, we deleted the instructions for
Line 68 (old line 52) as unnecessary for the Form 5227 Instructions.

•

On page 10, we added a new section, entitled Line 95, to reflect the addition of question 95
regarding signature authority over a financial account in a foreign country.

•

On page 11, we added a new section to reflect the addition of Schedule A, entitled
Distributions, Assets, and Donor Information, to Form 5227. We noted that Schedule A is
not open to public disclosure.

•

On page 11, we added a new section, entitled Part I. Accumulation Schedule (Section 664
trust only), with instructions for amounts to be entered on lines 2a and 2b. Within this
section, we also included a TIP icon, which recommends that trustees read and/or complete
certain portions of Part II-A before entering amounts on line 2a or line 2b.
Page 3 of 6

•

On page 11, we added a new section, entitled Part II-A. Current Distributions Schedule
(Section 664 trust only), by restructuring some of the instructions from the prior revision
(from old Part III. Current Distributions Schedule), and adding text which alerts trustees to
further instructions that follow.

•

On page 12, (continued under the discussion Inclusion of Amounts in Recipients’ Income on
page 11), we added a new section, entitled Types of Income, which details how trustees are to
treat distributed amounts where there is more than one type of income in a class. Within this
section, we also included an example to clarify these instructions.

Background Information
For tax year 2005, there were approximately 124,000 Forms 5227 filed. Of the returns filed, the
approximate percentage of filers by entity is as follows:
• 93.5% were charitable remainder trusts,
• 5% were charitable lead trusts, and
• 1.5% were pooled income funds.
Years 1975 - 1980
Form 5227. Form 5227 was filed by section 4947(a)(1) non-exempt charitable trusts (treated as
private foundations) and section 4947(a)(2) split-interest trusts. The design of the form was
similar to Form 990-PF, including the computation of the excise tax based on net investment
income. Basically, the form was an EZ version of Form 990-PF for section 4947(a)(1) trusts.
Split-interest trusts were required to file the form and complete Part I, column (a), income
statement, certain questions on Parts III and V relating to the trusts activities, and the Part IV
balance sheet. Parts III and V addressed the applicability of certain chapter 42 taxes. Form 5227
met the Reg. section 53.6011-1(d) filing requirement for split-interest trusts. Generally, splitinterest trusts are composed of charitable remainder trusts, pooled income funds, and charitable
lead trusts. Pooled income funds and charitable lead trusts are not tax-exempt entities; therefore,
they also have a Form 1041 filing requirement. Charitable remainder trusts are tax-exempt
(under section 664) and were required to file Form 1041-B.
Note: Any chapter 42 taxes that would be owed by split-interest trusts are reported on and paid
with Form 4720.
Form 1041-B. Form 1041-B was filed by charitable remainder trusts. Charitable remainder
trusts are tax-exempt. However, if the trust had any unrelated business taxable income, it
essentially lost its tax exemption for that year, and was treated as a complex trust and required to
file Form 1041. Form 1041-B determined the amount and character of the trust’s income and the
amount of distributions and the character of those distributions to the non-charitable beneficiaries
according to the rules of section 664 and its regulations. Form 1041-B fulfilled the filing
requirements of Reg. section 1.6012-3(a)(6).
Form 1041-A. Form 1041-A was basically the same as the December 2000 revision. It was
filed by split-interest trusts and trusts that paid or set-aside an amount for which a section 642(c)
Page 4 of 6

charitable deduction was claimed. Form 1041-A required information about income, deductions,
a balance sheet, and information about charitable payments and set-asides if a section 642(c)
charitable deduction had been claimed.
Summary. Charitable remainder trusts had to file 3 annual returns: Form 1041-B, Form 5227,
and Form 1041-A. Under certain circumstances, charitable remainder trusts may have been
required to file Form 1041 and Form 4720.
Charitable lead trusts and pooled income funds had to file 3 annual returns: Form 5227, Form
1041, and Form 1041-A. Under certain circumstances, these trusts may also be required to file
Form 4720.
Years 1981 to 2006
Form 1041-B. This form was obsoleted in 1981.
Form 5227. Section 4947(a)(1) nonexempt charitable trusts no longer filed Form 5227. Instead,
in 1981 these filers began filing Form 990-PF. Form 5227 was revised and the core of Form
5227 became the former Form 1041-B. Additionally, the Statements Regarding Activities
(questions concerning sections 4941 through 4945) from the old Parts III and V of Form 5227
became new Parts VI-A and VI-B. Additional information was requested in new Part VII. The
revenue and expense requirement was dropped 1 but the balance sheet requirement continued.
Form 5227 now met the filing requirements of Reg. section 1.6012-3(a)(6) and Reg. section
53.6011-1(d).
Summary. Charitable remainder trusts had 2 annual returns to file instead of 3 annual returns:
Form 5227 and Form 1041-A. Also, under certain circumstances, charitable remainder trusts
may be required to file, Form 1041 and Form 4720.
Charitable lead trusts and pooled income funds continued filing the same returns.
Announcement 82-14 listed the filing requirement changes for 1981. In 1983, the Service
issued Rev. Proc. 83-32 that reflected the filing requirements for various charitable trusts.
Subsequently, T.D. 8026 amended the Regulations for the changes in filing requirements except
for Reg. section 1.6012-3(a)(6). This section should have been amended to change Form 1041-B
to Form 5227.

Year 2007
Form 5227. In addition to meeting the filing requirements of Reg. section 1.6012-3(a)(6) and
Reg. section 53.6011-1(d), Form 5227 will also meet the Reg. section 1.6034-1 filing
requirement for split-interest trusts. New Parts III-A and III-B and changes in the format of the
form were made to accommodate Reg. section 1.6034-1 and the new disclosure requirements.
Also, a few new information requests were added and Part V-B was simplified. Additional
1

However, the income and deduction section from Form 1041-B carried over for charitable remainder trusts.

Page 5 of 6

formatting changes were made due to disclosure requirements and new information requests
were added.
Form 1041-A. Form 1041-A will only be filed by trusts that are not split-interest trusts but
either set aside or paid amounts in which a section 642(c) charitable deduction was claimed.
Summary. Charitable remainder trusts are now required to file one annual return: Form 5227.
Also, because of Public Law 109-432, act section 424(a), charitable remainder trusts, under
certain circumstances, may now be required to file 1 additional return, Form 4720. (Form 1041
will no longer be used to report the tax on a charitable remainder trusts unrelated business
taxable income.)
Charitable lead trusts and pooled income funds are now required to file 2 annual returns, Form
5227 and Form 1041. Also, Form 4720 may be required under certain circumstances.
Therefore, all split-interest trusts have one less annual return to file and charitable remainder
trusts, under certain circumstances, have one less additional return they may be required to file
than under previous requirements.

Page 6 of 6