Article on Trustee Material Participation in Businesses

Steven B. Gorin (Thompson Coburn LLP) and Richard E. Barnes (BarnesLaw, LLC) recently published an article entitled, Trustee Material Participation in Businesses, 29 Probate & Property No. 2, 58 (March/April 2015).  Provided below is an excerpt from the article:

Trusts are subject to a 3.8% tax on net investment income (NII) under IRC § 1411. If a trust sufficiently participates in an S corporation or a partnership it owns, generally the trust does not owe NII tax on that entity’s business income flowing through to the trust. The Code and the Regulations do not define how or how much a trust or trustee must participate to avoid NII tax.