Instructions for Filling Out Form 5227

This comprehensive guide offers detailed instructions for completing Form 5227, "Split-Interest Trust Information Return," for the year 2023. It covers everything from general instructions to specific steps for filling out each part of the form, ensuring trustees accurately report the financial activities of split-interest trusts.

In this article, we'll provide information on Form 5227 and a step-by-step guide on how to fill it out.

What is Form 5227?

Form 5227 is a document used by split-interest trusts to report their financial activities, provide information about charitable deductions and distributions, and determine if the trust is treated as a private foundation subject to certain excise taxes under chapter 42 of the Internal Revenue Code. The form consists of various sections, including introductory material, general instructions, specific instructions, and additional material. It covers essential information such as the purpose of the form, who must file it, key definitions, and guidance on filling out each part of the form, including income and deductions, distributable income, charitable distributions, and balance sheet.

Who Must File Form 5227?

Form 5227 must be filed by all charitable remainder trusts described in section 664, 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), with certain exceptions. An exception is provided for split-interest trusts created before May 27, 1969, under specific conditions.

Form 5227 Tax Filing Deadlines and Due Dates

• For calendar year 2023, Form 5227 is due by April 15, 2024.
• For a final short-year period, the return is due by the 15th day of the 4th month following the date of the trust's termination.

Form 5227 Late Payment Penalty

If a split-interest trust fails to file Form 5227 on time, completely, or correctly, a late payment penalty under section 6652(c)(2)(C) may be imposed, unless the failure is due to reasonable cause. The penalty is $20 for each day the failure continues, with a maximum of $12,000 for any one return. However, if the trust has gross income greater than $302,000, the penalty is $120 for each day the failure continues, with a maximum of $60,000 for any one return.

Step-by-Step Instructions for Form 5227

Step by step instructions for filling out Form 5227:

1. Introductory Material: Review future developments, what's new, and reminders.
2. General Instructions: Understand the purpose of the form, who must file, and complete the sections based on the type of trust (charitable remainder trusts, pooled income funds, etc.).
3. Specific Instructions: Follow the detailed instructions for each part of the form, including:
   • Heading items: Trust and trustee names, addresses, and other identifying information.
   • Part I: Report income and deductions.
   • Part II: Complete the schedule of distributable income for Section 664 trusts only.
   • Part III: Fill out distributions for charitable purposes.
   • Part IV: Provide balance sheet information.
   • Additional parts specific to the type of trust, including charitable remainder annuity trust information, charitable remainder unitrust information, and others as applicable.
4. Notices: Review the Paperwork Reduction Act Notice and ensure compliance with recordkeeping and reporting requirements.
5. Worksheets: Use provided worksheets for calculating capital gains distribution and ordinary income distribution, if applicable.
6. Review and Sign: After completing all relevant sections, review the form for accuracy, sign it, and prepare it for submission according to the filing requirements, including electronic filing if applicable.

How to Submit Form 5227

To submit Form 5227, complete all required sections based on the trust's activities and financial information for the year 2023, attach any required schedules or statements, and sign the form as the trustee or authorized representative. If a paid preparer is used, ensure they sign the form and fill out the "Paid Preparer Use Only" section. File the form with the IRS by the due date, which is April 15, 2024, for calendar year filers. An extension can be requested using Form 8868.

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