Income Tax Aspects of Residence Trusts
A residence trust (PRT or QPRT) will remain a grantor trust during the grantor’s retained term. Grantor status is important, because it will allow the grantor to take mortgage interest and property tax deductions, and will also avail the grantor of the Code Section 121 gain exclusion.
Following the expiration of the residence term, the grantor status of the trust usually ceases, unless the trust is drafted in a manner to make the trust intentionally grantor following the expiration of the term. This may be advantageous if the trust holds a vacation home and the grantor wishes to deduct mortgage interest and expenses associated with that home.
Read more about this topic: Qualified Personal Residence Trust
Famous quotes containing the words income, tax, aspects, residence and/or trusts:
“I know everybody’s income and what everybody earns,
And I carefully compare it with the income-tax returns;”
—Sir William Schwenck Gilbert (1836–1911)
“If you tax too high, the revenue will yield nothing.”
—Ralph Waldo Emerson (1803–1882)
“An atheist may be simply one whose faith and love are concentrated on the impersonal aspects of God.”
—Simone Weil (1909–1943)
“If you would feel the full force of a tempest, take up your residence on the top of Mount Washington, or at the Highland Light, in Truro.”
—Henry David Thoreau (1817–1862)
“He that trusts to you,
Where he should find you lions, finds you hares;
Where foxes, geese.”
—William Shakespeare (1564–1616)