Accounting

Article Summary

This article examines the issues dealing with the application of the federal tax code of Estates. An income tax is a tax levied on the income of individuals or businesses corporations or other legal entities. Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual with some deductions permitted, while corporate income taxes often tax net income the difference between gross receipts, expenses, and additional write-offs. Various systems define income differently, and often allow notional reductions of income such as a reduction based on number of children supported.

In common law legal systems, a trust is a relationship whereby property including real, tangible and intangible is managed by one person or persons, or organizations for the benefit of another. A trust is created by a settler, who entrusts some or all of their property to people of their choice. The trustees hold legal title to the trust property or trust corpus, but they are obliged to hold the property for the benefit of one or more individuals or organizations, usually specified by the settler, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property. The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law.

Nongrantor trusts must file income tax returns just as individuals do, but with some important differences. For one, their income is taxed at either the entity or beneficiary level depending on whether it is...