[WSBAPT] QTIP loss carryovers on distribution to beneficiary

[Sam Furgason]

[originally posted under QDOT topic]

Surviving Spouse, beneficiary of QTIP and Credit Shelter Trusts, enters into agreement with remainder beneficiaries whereby SS receives all of QTIP plus a cash payment from CST in exchange for termination of both trusts and payment of remainder in CST to remainder beneficiaries. There are capital assets loss carryovers in QTIP attributable to prior securities sales from that trust in years past. Client is trustee of both trusts, and asks if losses can be allocated, in whole or in part, to remainder beneficiaries. My view is that since, pursuant to IRC Sec. 2056(b)(7) all QTIP income must pass to surviving spouse for life (she is still alive), losses must follow the assets, and are, in essence, a form of negative income which must be allocated entirely to SS. The theory additionally is that the losses can actually add to income by becoming tax deductions on distributed income and future gains on asset sales, as well as the logical idea that the losses must follow the assets distributed to SS. 

Anybody think the losses can be allocated to anyone other than the SS? 

 

Samuel L. Furgason

Samuel L. Furgason, Inc, PS

(Not accepting new business)

10655 N.E. 4th Street, Suite 701

Bellevue, Washington 98004

MAIL TO:

PO Box 102

Medina, WA 98039-0102

Work:    (425) 649-1122

Cell:       (425) 445-9909

Email: sam at furgasons.com <mailto:sam at furgasons.com> 

 

 

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