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New Jersey has significantly revised the trust laws pertaining to accounting income and its application to a tax reporting position. In this download product, you’ll find over 80 practical examples involving the application of these revised rules from a New Jersey state trust accounting point of view as well as an IRS point of view.
The substantial changes in New Jersey law grant the trustee certain discretionary rights in determining the amount of accounting income that is payable to an income beneficiary. In addition, the income beneficiary has significant rights as well and can take certain action to enhance his/her annual income distributions from a trust. As an accountant, it’s important to understand the changes and how they relate to the clients you represent.
In December 2007, the AICPA Tax Division completed a national Practice Guide for Fiduciary (Trust) Accounting as "A Guide for Accountants Who Perform Fiduciary Accounting Services." According to the AICPA Trust Accounting Income Task Force, accountants who prepare fiduciary tax returns must know the difference between taxable income and fiduciary income. An accountant in New Jersey who is involved in trust taxation or trust accounting must become familiar with the Uniform Principal and Income Act in New Jersey in order to perform his/her fiduciary accounting services properly. This applies to an accountant who acts as a trustee as well. The failure to know the rules may inadvertently expose a professional who is involved in this area to both ethical and/or liability issues.
Fundamentals of Trust Accounting Income and Principal Rules Under the Revised New Jersey Uniform Principal and Income Act gives you the information and guidance you need to understand the trust accounting rules. In this Guide, you will find:
UPAIA (Situations 1 -52)
Power to Adjust (Situations 53 -72)
Distributable Net Income (Situations 73 – 83)
Accounting Income and the IRS
The New Jersey Uniform Principal and Income Act
New Jersey Prudent Investor Act
Note: This product is an electronic download file that will be accessible immediately after completing your purchase. Access to this file – from the My Download page – expires 90 days from purchase date.
Please note this product purchase is non-refundable. For more information about this product or service concerns, please contact the AICPA Service Center at service@aicpa.org or call 888-777-7077.
Table of Contents at a Glance
Title Page
Copyright Page
About the Author
Disclaimer and Warning
Introduction
Overview of the Uniform Principal and Income Act (UPAIA)
UPAIA (Situations 1 -52)
Power to Adjust (Situations 53 -72)
Distributable Net Income (Situations 73 - 83)
Accounting Income and the IRS
Appendix A: Letter Ruling 200334025 (Dated August 22, 2003)
Appendix B: Letter Ruling 200446007 (Dated July 14, 2004)
Appendix C: Letter Ruling 200432027 (Dated May 12, 2004)
Appendix D: Revenue Ruling 2006-26 (Dated May 30, 2006)
Appendix E: Ed Slott’s IRA Advisor June 2006 Issue
Appendix F: Ed Slott’s IRA Advisor June 2006 Issue
Appendix G: The New Jersey Uniform Principal and Income Act
Appendix H: New Jersey Prudent Investor Act
Introduction
This manual covers a number of the basic rules that involve the application of the New Jersey Uniform Principal and Income Act.
For the most part, the text consists of many examples and suggested solutions. Most of the answers refer to the appropriate provisions under the New Jersey version of the Uniform Principal and Income Act.
The following citation that is used frequently throughout the manual include:
UPAIA - This refers to the New Jersey Uniform Principal and Income Act under Title 3B:19B. Title 3B covers the Administration of Estates - Decedents and Others
Although the UPAIA in the State of New Jersey is effective as of January 1, 2002, it is possible that technical corrections to the UPAIA may be made from time to time. As a practitioner, you must stay current.
In addition, the author’s suggested drafting language regarding the allocation of capital gains to distributable net income under certain circumstances can be found in the material that discusses distributable net income. The suggested language should be considered by both counsel and the client and modified or ignored if it does not fit the client’s situation. The suggested language is based in part on § 1.643(a)-3(e), example 4 of the IRS final regulations.
Author’s note:
According to the UPAIA, commissions allowed by law to a trustee on income receipts are charged against income. Commissions allowed by law to a trustee on principal receipts are charged against principal. However, according to Title 3B:18-2 and 3B:18-3, the will or trust instrument may provide for alternate methods of compensation of the trustee. For purposes of the examples in this manual, you are to assume that the amount of the trustee commissions as well as the charge of the trustee commissions to income and/or principal is determined pursuant to the terms of the will and/or trust instrument.
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