AICPA Submits Comments to IRS on Transfers from Irrevocable Trusts

June 28, 2012 /

The American Institute of CPAs responded to an Internal Revenue Service request for comments, Notice 2011-101, about when transfers of principal from one irrevocable trust to another irrevocable trust should not be treated as having an income, gift, estate and/or generation-skipping transfer tax consequence.

Such transfers are often referred to as “decanting.” The Treasury Department and the IRS are studying the tax implications of such transfers, when there is a change in the beneficial interests in the trust, in order to provide guidance to taxpayers.

The AICPA said its comments address relevant federal income tax, gift tax, estate tax and generation-skipping transfer tax issues, as well as certain foreign trust aspects of decanting, as requested in the IRS notice.

The AICPA noted that some states have enacted decanting statutes, but said its letter does not compare or contrast the respective state decanting statutes, nor does it address the effect of state law or the absence of state law as it relates to a decanting action.


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