Split-Interest Trust Information Return

2012

Instructions for Form 5227

Department of the Treasury
Internal Revenue Service

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

Reminders
Reduced tax rates extended. The reduced tax rates on
qualified dividends and long-term capital gains have been
extended for two years. Because of this extension, the
classes in the ordinary income category and the capital gains
category for charitable remainder trusts remain the same
through 2011 and 2012.
Future developments. For the latest information about
developments related to Form 5227 and its instructions, such
as legislation enacted after they were published, go
to www.irs.gov/form5227.

General Instructions
Purpose of Form

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.
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.
Oct 24, 2012

Note. Regulations section 1.6012-3(a)(6) references Form
1041-B, Charitable Remainder Trust. Form 5227 replaces
Form 1041-B. Regulations section 1.6034-1(c) references
Form 1041-A, U.S. Information Return Trust Accumulation of
Charitable Amounts. Form 5227 replaces Form 1041-A for
split-interest trusts.

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, charitable remainder trusts and charitable
lead trusts whose charitable interests involve only war
veterans' posts or cemeteries (as described in sections
170(c)(3) and 170(c)(5)) do not have to complete Parts VI-A
and VI-B.

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).
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
(see Type of Entity later),
Pooled Income Funds described in section 642(c)(5) (see
Type of Entity later), 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.
Disqualified person. A disqualified person is:
1. A substantial contributor;
2. A foundation manager;

Cat. No. 13228E

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.)

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-B, Change of Address—Business.
Form 8868, Application for Extension of Time To File an
Exempt Organization Return.
Form 8870, Information Return for Transfers Associated
With Certain Personal Benefit Contracts.
Form 8886, Reportable Transaction Disclosure Statement.
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
IRS.gov.

Period To Be Covered by Return

File Form 5227 for each calendar year. This revision of the
form is for the 2012 calendar year.

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.

Photographs of Missing Children

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.

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.

When To File

Phone Help

File Form 5227 for calendar year 2012 by April 15, 2013.

Additional Information

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.

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

Other Forms You May Have To File

Where 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, next) 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.

U.S. Address. If you are located in the United States, file
Form 5227 at the following address:
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0027
Outside the U.S. If you are located in a foreign country or a
U.S. possession, file Form 5227 at this address:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
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.
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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.

DHL Express (DHL): DHL Same 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.
PDSs cannot deliver items to P.O. boxes. You must use
the U.S. Postal Service to mail any item to an IRS P.O. box
address.
PDSs deliver to:

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.

Internal Revenue Submission Processing Center
1973 Rulon White Blvd.
Ogden, UT 84404

Attachments

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

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.

Penalty for Failure To File Timely,
Completely, or Correctly

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.

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.

Specific Instructions
Identification Area

Complete the information called for at the top of the form as it
appears on Form SS-4, Application for Employer
Identification Number.

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.

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.

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.

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.

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.

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-Businesses- &-Self-Employed. 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. Assistance provided to
callers from Alaska and Hawaii will be based on the hours of
operation in the Pacific time zone.
By mailing or faxing Form SS-4.

Trust Instrument

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.
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.

Note. The online application process is not yet available for
trusts with addresses in foreign countries.

B. Type of Entity

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.

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.

For sample forms of trusts that meet the requirements of
an inter vivos grantor or nongrantor charitable lead annuity
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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).

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 (FMV) 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 (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.

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).
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-B to notify the IRS of the change.

G. Unrelated Business Taxable Income (Section
664 trusts only)

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 FMV of
the trust's assets 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 (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.

If a charitable remainder trust has any unrelated business
taxable income (within the meaning of section 512 and
related regulations) for 2012, the trust is liable for a tax under
section 664(c)(2) which is treated as a Chapter 42 excise tax.
The amount of the excise tax is equal to the amount of the
trust's unrelated business taxable income. If the trust has any
unrelated business taxable income, answer “Yes” to item G
and file Form 4720, in addition to Form 5227, to report the
trust's unrelated business taxable income and the tax due.

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.

Part I. Income and Deductions
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.

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 3a of Schedule E (Form
1040)),
Royalties (such as the amount on line 3b of Schedule E
(Form 1040)),
Gross income derived from business (such as the amount
on line 7 of Schedule C (Form 1040)), and
Gains (not losses) derived from dealings in property
(figured on each transaction).

E. Initial Return, Final Return, Amended Return;
or Change of Name or Address

Line 2a. Ordinary dividends. Enter on line 2a the total of
all ordinary dividends, including the qualified dividends
reported on line 2b.

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.

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 later, for more
information on distributions. See Pub. 550 for additional
information on qualified dividends, including holding period
requirements.

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).
For charitable remainder trusts. If you check the final
return box, be sure to answer the questions for line 94 and
complete line 31 if you answered “Yes” to line 94b.
Amended return. If you are filing an amended 2012 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
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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 1 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.
All other long-term capital gain class. This class
consists of all other gains or losses from sales, exchanges,
and conversions (including installment payments received) of
assets held more than 12 months.

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. Enter the net profit or loss
from Schedule C or C-EZ on line 3. (Section 664 trusts, see
G. Unrelated Business Taxable Income earlier.)
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. 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. (Section 664 trusts, see G. Unrelated
Business Taxable Income earlier.)

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.

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. (Section 664 trusts, see G.
Unrelated Business Taxable Income earlier.)

Section D—Deductions
For Section 664 Trusts
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.

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 and do not include the net profit
or (loss) from such income and expenses on line 5.
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.

Any expense that is not deductible in determining taxable
income (or not otherwise deductible but for the fact that it
must be allocated to nontaxable income) must be allocated
to corpus.

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. If more space is needed, attach a schedule.
Enter the total of these items in the entry space to the right.

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.

Section B—Capital Gains (Losses)

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. Lines 11 and 12 only apply to a
charitable remainder trust (section 664 trust).

For Split-Interest Trusts Other Than Section 664
Trusts
Include all expenses attributable to gross income that are
deductible for the tax year.

Line 9. Total short-term capital gain or (loss). Complete
lines 1a through 3 and line 5 of the 2012 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.

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.

Line 10. Total long-term capital gain or (loss). Complete
lines 6a through 10 and line 12 of the 2012 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.
For section 664 trust only. 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

Line 23. Charitable Deduction
Enter the amount of any charitable deduction or other
deduction taken under section 642(c) for the tax year.

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

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.
The trust made payment for charitable purposes during the
year but claimed the section 642(c) deduction in the prior
year.
The trust is treated as a grantor trust and made a payment
for charitable purposes during the year, and the grantor
(during the year or a prior year) claimed a charitable
deduction as described in Regulations section 1.170A-6(c)
upon contribution to the trust.

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

Note. The grantor trust completes only lines 35 and 36 for
this part.
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 amounts 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.

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.

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

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.

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).

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.

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).

Column (c)

For information on recordkeeping for long-term capital
gains or ordinary income, see the Capital Gains Distribution
Worksheet or the Ordinary Income Distribution Worksheet
later.

In computing the net 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.

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.

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.

Examples. “Cash payments to buy library material” or
“Grant, paid in cash, to equip the chemistry lab at Magnolia
University.”
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.

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 1 year.

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

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

Complete Part III-B if any of the following apply.

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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.

refundable deposits with suppliers or others may be reported
here if not significant in amount. (Otherwise, report them on
line 49.) 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 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.

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 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.

Lines 45a, b, and c. Investments—U.S. and state government obligations, corporate stock, and 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.

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 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 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 41 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

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
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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.

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 69. Use this amount to determine future accrued
distribution deficiencies.

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.

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 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.

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.

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

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

Part VI-A

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.
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 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 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 later.

Part VI-B

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%.

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.

Line 65b. This line must always have an entry, even if it is
zero.
Line 66a. Enter the trust's 2012 (fiduciary) accounting
income determined under the terms of the governing
instrument and applicable local law. See section 643(b) and
Regulations sections 1.664-3(a)(1)(i)(b)(3) and 1.643(b)-1 for
more information.

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.

Line 67a. Enter the amount, if any, from line 69 of the 2011
Form 5227.
If the amount entered is not the same as line 69 from the
prior year's form, attach an explanation and 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.

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), 642(c), 2055(e)(2)(B), or 2522(c)(2)(B);
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performing services that is an unrelated trade or business
under section 513.
The term “business enterprise” does not include:
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.

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

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

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.

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 long- and short-term
financial needs of the trust in carrying out its charitable
purposes.
For more information on investments that jeopardize
charitable purposes, see Regulations section 53.4944-1.

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.

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.
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.

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

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).
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.

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

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.
Exception. Check “No” if either of the following applies to
the 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, 2012, with the Department of the Treasury at the
address shown on the form. Form TD F 90-22.1 is not a tax
return, so do not file it with Form 5227.

Section A—All Trusts

All trusts are required to answer questions 81 and 82.

Section B—Charitable Lead Trusts
Line 83. The information on this line is used to determine
whether sections 4943 and 4944 apply for 2012.
Line 85. Enter the amount for payments described in
sections 170(f)(2)(B), 2055(e)(2)(B), and 2522(c)(2)(B).

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.

!

CAUTION

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

Section D—Charitable Remainder Trusts

Form 5227 must be signed by the trustee or by an authorized
representative.

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:

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.
Paid Preparer. Generally, anyone who is paid to prepare a
tax return for a charitable remainder trust must sign the return
and fill in the other blanks in the Paid Preparer Use Only area
of the return. For all other trusts, completion of Form 5227's
Paid Preparer Use Only area is optional.
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.

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.
Under Regulations section 1.664-1(d)(5), a distribution of
property (other than cash) is treated as a sale by the trust.

Anyone who is paid to prepare a charitable
remainder trust return must enter their PTIN in the
CAUTION
Paid Preparer Use Only section. The PTIN entered
must have been issued after September 27, 2010. For
information, see Form W-12, IRS Paid Preparer Tax
Information Number (PTIN) Application and Renewal.

!

Note. You must report income (gain) generated by the
property distribution (discussed above) on Part I of Form
5227 for the current tax year.
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.

Schedule A—Distributions, Assets,
and Donor Information
Note. Schedule A is not open to public inspection.

Part I. Accumulation Schedule
(Section 664 trust only)

Line 95. Check the “Yes” box and enter the name of the
foreign country if either (1) or (2) below applies.
1. The trust owns more than 50% of the stock in any
corporation that owns one or more foreign bank accounts.

Line 2a. Enter the total of all distributions for 2012.

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regard to any net operating loss deductions under section
172. See the Ordering Rules for Ordinary Income next.
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 without regard
to any capital loss carrybacks and carryovers. See the
Netting Rules, Ordering Rules for Capital Gains and Losses
and Carryover Rules later 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 FMV of the trust assets less the
total undistributed income (but not loss) in each of the above
categories.

Line 2b. Enter the amount distributed from each income
category.

TIP

You may want to read the Part II-A instructions and
complete all worksheets (as necessary) before you
make an entry on Part II-A of Schedule A.

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.

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.

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.

Types of Income
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.

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.

Example. For 2012, 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 ordinary income class which consists of $60 of interest
and $90 of rent and $100 is distributed to private
beneficiaries for 2012, then $40 of the distribution is interest
and $60 of the distribution is rent.

Substitute Forms

You do not need prior IRS approval for a substitute
Schedule 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:

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:

Internal Revenue Service
Attention: Substitute Forms Program Coordinator
SE:W:CAR:MP:T:M:S, 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

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
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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.

First, net gain from the 28% long-term capital gain class,
then
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.

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

Though the qualified 5-year gain provision has been
repealed for sales and other dispositions after May
CAUTION
5, 2003, these gains remain in a separate class
because the 5-year gain provision is scheduled to come back
into existence in 2013.

Line 5. For charitable lead trusts, enter the amount for
payments permitted by Regulations sections 1.170A-6,
20.2055-2, and 25.2522(c)-3.
For pooled income funds, enter the amount for payments
permitted by Regulations section 1.642(c)-5(b)(7).

!

Part III. Assets and Donor Information

No additions may be made to this class for dispositions after
May 5, 2003, and before 2013, but distributions may continue
to be made from this class during that period.

Line 7. Pooled income funds do not complete lines 6 and 7.
For trusts that answered “Yes” to question 6, complete all
columns on line 7 for all donors to the trust in 2012. For
additional donors to the trust that did not contribute to the
trust in 2012, complete column (a) only.
For trusts that answered “No” to question 6, complete only
column (a) for all donors to the trust.

Ordering Rules for Capital Gains and Losses
The following rules apply to undistributed long-term capital
gains on assets held more than 1 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.

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.

For 2012, 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.

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
average time is:

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.

Recordkeeping . . . . . . . .

73 hr., 53 min.

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

20 hr., 45 min.

Preparing the form

42 hr., 23 min.

. . . . .

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

5 hr., 37 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:M:S, IR-6526, 1111
Constitution Ave. NW, Washington, DC 20224. Do not send
the tax form to this address. Instead, see Where To File.

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.....................

.........

..

9. Carryforward to 2013 (line 7
less line 8) . . . . . . . . . . . . . . . .

8. 2012 distributions

7. Total undistributed gains

6. Adjustments for netting any
short-term capital gain or
(loss) on line 3 (see Netting
Rules earlier) . . . . . . . . . . . . .

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 capital

capital gain class
gain class

Section 1250

28% long-term

Long-term

(KEEP FOR YOUR RECORDS)

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

Capital Gains Distribution Worksheet

All
other
long-term
capital
gain
class

gain class

Qualified
5-year
long-term capital

-14-

(KEEP FOR YOUR RECORDS)

Current year ordinary income or (loss)

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

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

Total undistributed ordinary income

2012 distributions

Carryforward to 2013 (line 5 less
line 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3.

4.

5.

6.

7.

......................

.....

...

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

1.

All other ordinary income

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

Ordinary Income Distribution Worksheet
Qualified dividends