§247 Contributions to Alaska Native Settlement Trusts

Summary

A Native Corporation can deduct contributions it makes to a Settlement Trust if the corporation makes an annual election on its tax return for that year. Cash gifts are deductible for the dollar amount given. Gifts of property are deductible only up to the smaller of the corporation’s adjusted basis in the property or the property’s fair market value. The deduction cannot be larger than the corporation’s taxable income for that year before the deduction. Any excess can be carried forward and treated as a contribution in each of the 15 succeeding years, in order. A Native Corporation may make or revoke its election by filing or amending its tax return for the year. Native Corporation — the Alaska Native corporation named under section 646(h). Settlement Trust — the trust defined under section 646(h) that holds settlement benefits. The corporation’s earnings and profits are reduced by the deduction, and the corporation recognizes no gain or loss on the contributed property. The Settlement Trust generally must include the amount of the deduction in income when it actually receives the contribution. The trust’s holding period for the property includes the time the corporation held it, and the trust’s basis is the lesser of the corporation’s adjusted basis or the property’s fair market value immediately before contribution. The trust may elect to delay income for noncash property until it sells or exchanges the property; if it does, some or all gain on sale will be taxed as ordinary income and the rest keeps its normal character. The trust must identify elected property on its return and may revoke the election. If the trust disposes of the property within the first taxable year after contribution, the election is treated as never made, the income must be included for the year of contribution, the trust must pay the extra tax with interest plus 10 percent of that increase with interest, and such amounts may be assessed within 4 years after the return filing. No deduction is allowed for contributions that violate subsection (a)(2) or (c)(2) of section 39 of the Alaska Native Claims Settlement Act (43 U.S.C. 1629e).