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Level 2
posted Jun 1, 2019 12:01:11 AM

Can a simple trust become a complex trust when all income, incl capital gain, is required to be distributed?

As Trustee I've been distributing all royalty income for mineral rights to beneficiaries annually.  I am also one of the beneficiaries.  Last year the mineral rights were sold to a development company. The Trust has been considered a simple trust.  Is it now a complex trust since capital gains were distributed? 

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Level 15
Jun 1, 2019 12:01:11 AM

"Is it now a complex trust since capital gains were distributed?"

Generally, if capital gains are considered to be corpus under the trust instrument and local law (which is usually the case), then the trust would be considered a complex trust (which most are in their final year, anyway).

See Treas. Reg. §1.661(a)-1

1 Replies
Level 15
Jun 1, 2019 12:01:11 AM

"Is it now a complex trust since capital gains were distributed?"

Generally, if capital gains are considered to be corpus under the trust instrument and local law (which is usually the case), then the trust would be considered a complex trust (which most are in their final year, anyway).

See Treas. Reg. §1.661(a)-1