§4947 Application of Taxes to Certain Nonexempt Trusts

Summary

Treats certain trusts that are not tax-exempt as charities for tax rules when all of the remaining interests are used only for charitable purposes and a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522. Such a trust is treated like a 501(c)(3) organization. For the special public-charity test in section 509(a)(3)(A), the trust is treated as if it was organized on the day it first meets this rule. Says that when a trust is not tax-exempt and only some interests are charitable, but some trust money got a deduction under the same list of sections, then many private-foundation rules apply to those deductible amounts. Those rules include section 507, section 508(e) (if relevant), and sections 4941, 4943, 4944, and 4945. Exceptions: money payable to income beneficiaries is not covered unless a deduction was allowed under specific subparts of the same sections; money that was not deducted is not covered if it is kept separate from the deducted amounts; and money put into the trust before May 27, 1969 is not covered. If amounts are kept separate, the trust must keep separate accounts for them. The Treasury Secretary must write rules to carry this out. For some calculations, only the segregated amounts count. Sections 4943 and 4944 do not apply in two cases: when all income interest goes only to charity and the deducted amounts are not more than 60 percent of the trust’s total value; or when deductions were allowed only for amounts payable to every remainder beneficiary and not to any income beneficiary. Section 507(a) does not apply when qualified employer stock is transferred to an ESOP in a qualified gratuitous transfer.