65-Day Rule Valuable in 2013

The income tax election with regard to the timing of trust distributions for non-grantor trusts is commonly referred to as the “’65-day rule.'”  Distributions to a beneficiary are deemed to carry out the trust’s taxable income to the beneficiaries, and the trust treats the distribution as a deduction, which reduces the trust’s taxable income.  

Non-grantor trusts can use the 65-day rule to treat distributions made on or before the 65th day of the trust’s tax year as if they had been made in the prior tax year.  March 6, 2013 was the deadline for making a trust distribution that could be treated as a 2012 distribution by employing the 65-day rule.

The 65-day rule was helpful for many earlier this year because 2013 has brought in some higher tax rates. The rule allowed distributions that were made by March 6, 2013 to be subject to the 2012 rates, which are lower than the current ones.  

See Trust Income Tax Election Just Became More Valuable, Lexology, Feb. 27, 2013.