In general, fiduciaries are treated as individuals, and the chapters of this book on the subject of individual returns apply to them.

LAW. Section 225.

(b)

(2)

Any fiduciary required to make a return under this Act shall be subject to all the provisions of this Act which apply to individuals.

As to the form of return,1 every fiduciary is required to:

LAW. Section 225. (b) . . . . make oath (1) that he has sufficient knowledge of the affairs of the individual, estate or trust for which the return is made, to enable him to make the return, and (2) that the return is, to the best of his knowledge and belief, true and correct. . .

When returns are required.

LAW. Section 225. (a) Every fiduciary (except a receiver appointed by authority of law in possession of part only of the property of an individual) shall make under oath a return for any of the following individuals, estates, or trusts for which he acts, stating

1

See page 1237 for details required where there is capital net gain.

specifically the items of gross income thereof and the deductions and credits allowed under this title 2

(1) Every individual having a net income for the taxable year of $1,500 or over, if single, or if married and not living with husband or wife;

(2) Every individual having a net income for the taxable year of $3,500 or over, if married and living with husband or wife;

(3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income;

(4) Every estate or trust the net income of which for the taxable year is $1,500 or over;

(5) Every estate or trust the gross income of which for the taxable year is $5,000 or over, regardless of the amount of the net income; and (6) Every estate or trust of which any beneficiary is a nonresident alien.

REGULATION. Every fiduciary, or at least one of joint fiduciaries, must make a return of income

(a) For the individual whose income is in his charge, if the gross income of such individual is $5,000 or over, or if the net income of such individual is $1,500 or over if single or if married and not living with husband or wife, or if such individual is married and was living with husband or wife for the entire taxable year and the aggregate gross income of both husband and wife is $5,000 or over, or the aggregate net income of both husband and wife is $3,500 or over, or if such individual is married and was living with husband or wife for a period less than the entire taxable year and the aggregate gross income of both husband and wife is $5,000 or over, or the aggregate net income of both husband and wife is equal to, or in excess of, the credit allowed them by section 216 (f) (2), or

(b) For the estate or trust for which he acts if the net income of such estate or trust is $1,500 or over, or if the gross income of the estate or trust is $5,000 or over, regardless of the amount of the net income, or if any beneficiary of such estate or trust is a nonresident alien.

The return in case (a) shall be on Form 1040 or 1040A. In case (b) a return is required on Form 1040 with respect to any taxable net income of the estate or trust computed in accordance with section 219 (b) and a return on Form 1041 with respect to any income deducted under section 219 (b) (2) or (3). If a portion of the income of the estate or trust is retained by the fiduciary and the remainder is distributable or distributed to beneficiaries, both Forms 1040 and 1041 will be required. (See article 342.) See article 425 for returns in cases where any beneficiary is a nonresident alien. If the net income of a decedent from the beginning of the taxable year to the date of his death was $1,500 or more if unmarried, or $3,500 or more if married, or if his gross income for the same period was $5,000 or over, the executor or administrator shall make a return for such decedent. (See article 305.)

As to duties and liabilities of fiduciaries, see further section 281 and article 1292. (Art. 421.)

If the net income of a decedent for the part of the year in which he lived was less than $1,500 if unmarried, or less than $3.500 if

2 [Former Procedure] See Income Tax Procedure, 1926, page 1741.

married, and if his gross income was less than $5,000, the executor or administrator need not make any return for him, nor is he required to account for such unreported income when he reports for the estate and its beneficiaries. Such income is entirely ignored so far as the income tax is concerned. It is also non-taxable in the hands of the beneficiaries.

In jurisdictions where an administrator takes no title to real property, if the income of a decedent's estate from personal property does not exceed $1,500 a year during the period of administration, no return is required from the fiduciary, even though the net income from real property exceeds $1,500. The heirs should report the income from the realty in their respective returns. (C. B. II-1, 130; I. T. 1596.)

Who shall make returns?-If a fiduciary receives the amount of income specified in section 225 (a), he must make a return even though no tax is imposed upon the estate or trust as an entity. Hence, he must file an information return (form 1041) in the case of a revocable trust, listing the beneficiaries and the grantor. (C. B. IV-1, 44; I. T. 2172.)

If there are two or more fiduciaries, either may make the return, but one of them must do so.

When the tax is assessed against the estate as an entity, the government requires but one return and that from the fiduciary. But where any part of the tax is to be paid by a beneficiary, the law requires returns from both the fiduciary and the beneficiary. In such cases, the fiduciary should make two returns, one of which is an information return on form 1041.

The fiduciary may file the return for his beneficiary, if he has knowledge of all the income of the beneficiary from the estate and all other sources, provided he has been appointed as agent or attorney-in-fact by the beneficiary for the purpose. In doing so he acts in an entirely separate capacity, performs no duty as a fiduciary and is not thereby relieved from any responsibility as a fiduciary.

Where a taxpayer makes an assignment in trust for the benefit of creditors and is subsequently brought into involuntary bankruptcy, the trustee for creditors and the receiver in bankruptcy must make separate returns of the income respectively received by them. (C. B. I-2, 178; I. T. 1540.)

It has been held that where a life-tenant and remainderman sell

property under an agreement whereby the life-tenant is to have the income from the proceeds of the sale for life, the life-tenant is a trustee for the remainderman and must make a return of any income realized on the sale. (C. B. 5, 186; O. D. 1040.)

A testator created a trust in favor of his wife by which the bulk of the trust fund was to revert to his estate one year after her death. One year following the death of the widow, the trustees transferred the trust fund to the administrators c. t. a. of the testator. It was held that the trustees should file an information return and the administrators c. t. a. a tax return. (C. B. 4, 223; O. D. 806.)

RETURNS BY GUARDIANS FOR MINORS, OR BY COMMITTEES FOR

REGULATION. A fiduciary acting as the guardian of a minor having a net income of $1,500 or more, or $3,500 or more, according to the marital status of such person, or having a gross income of $5,000 or over, must make a return for such minor on Form 1040 or 1040A and pay the tax, unless such minor himself makes a return or causes it to be made. A fiduciary acting as a guardian or the committee of an insane person having an income of $1,500 or more, or $3,500 or more, according to the marital status of such person, or having a gross income of $5,000 or over, must make a return for such incompetent on Form 1040 or 1040A and pay the

tax.

For the purpose of determining the liability of a fiduciary to render a return under the provisions of the preceding paragraph in cases where the minor or the incompetent is married and was living with husband or wife during the entire taxable year, the aggregate gross income or the aggregate net income of both husband and wife must be taken into consideration. (See article 401.) If the individual for whom the fiduciary is acting as guardian marries during the taxable year, a return must be made if the aggregate gross income of both husband and wife is $5,000 or over, or if the aggregate net income of both husband and wife is equal to, or in excess of, the credit allowed by section 216 (f) (2). (See article 305.) (Art. 422.)

RULING. Where a father has made a bona fide and absolute gift of property to his minor child, the income there from need not be included in the father's return of gross income for the purpose of normal tax and surtax, even though the father administers the property and collects the income for the child. In such a transaction there is no presumption that the gift is or is not bona fide, but the burden should be upon the father in each case to show that it is an absolute gift to the child. (C. B. 3, 116; Sol. Op. 14.)

On the theory that a father is not entitled to the income from a minor's separate estate, even though he is not emancipated, the Bureau has ruled that a minor's income from a trust, amounting to less than his personal exemption, need not be returned by anyone.

(Ruling to A. M. Hamburg, New York, signed D. H. Blair, Commissioner; dated March 30, 1923.)

When there has been a change of guardians during the year, the fiduciary in charge on the last day of the taxable year is responsible for filing the return for the full year. (C. B. I-1, 242; I. T. 1185.)

The committee of an incompetent was discharged prior to the end of the year. It was held that as the former incompetent was under no disability at the end of of the year, it was his duty to report his income for the entire year, but that the committee should file an information return if the net income received by it was sufficient to require such a return. (C. B. I-2, 178; I. T. 1480.)

ESTATES FOR WHICH NO FIDUCIARIES ARE APPOINTED.

RULING. In case no necessity exists for the appointment of an administrator, the beneficiaries may act jointly, or may duly appoint one of their number as the agent of the estate for the purpose of filing the income-tax return of the decedent. In doing so, however, the agent assumes the responsibility for making the return and incurs the liability to the specific penalties provided for in the case of the filing of erroneous, false, and fraudulent returns. (C. B. 3, 229; O. D. 702.)

ANCILLARY REPRESENTATIVES.

REGULATION. . The domiciliary representative is required to include in the return rendered by him as such domiciliary representative the entire income of the estate. Consequently the only return required to be filed by the ancillary representative is on Form 1041, which shall be filed with the collector for his district and shall show the name and address of the domiciliary representative, the amount of gross income received by the ancillary representative, and the deductions to be claimed against such income, including any amount of income properly paid or credited by the ancillary representative to any legatee, heir, or other beneficiary. If the ancillary representative for the estate of a nonresident alien is a citizen or resident of the United States, and the domiciliary representative is a nonresident alien, such ancillary representative is required to render the return otherwise required of the domiciliary representative. (Art. 442.)

3

RETURNS BY PERSONAL REPRESENTATIVES OF DECEASED FIDUCI

ARIES.

RULING. Under the terms of A's will, B was given the residue of A's estate for B's life, subject to the payment of certain annuities to two persons, both of whom are still alive. Fiduciary returns were previously filed by B as life tenant of the estate. B died in February, 1922, and her executrix qualified in March, 1922. Under the terms of the will, title to the property upon the death of B vested in C as trustee. [Former Procedure] See Income Tax Procedure, 1926, page 1745.