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SPECIAL GIFT SITUATIONS§ 9.22 CONTRIBUTIONS BY TRUSTSContributions to charitable organizations may be made by trusts. The federal taxlaw differentiates between simple trusts 500 and complex trusts. 501 A trust mayqualify as a simple trust in one year and be a complex trust in another year. 502(a) General RulesThe terms of a simple trust provide that all of the trust income is to be distributedcurrently and do not provide that any amounts are to be paid, permanently setaside, or used for charitable purposes. 503 A simple trust is not considered to be atrust that may pay, permanently set aside, or use any amount for charitable purposesfor any tax year in which the trust is not allowed a charitable deduction. 504A complex trust is allowed a deduction, in computing its taxable income, foran amount of gross income, without limitation, that pursuant to the terms of thegoverning instrument is, during the tax year, paid for a charitable purpose. 505A trust is allowed a deduction for distributions to beneficiaries up to theamount of distributable net income of the trust for the tax year. A complex trustmay deduct, up to its distributable net income ceiling for the year, the sum ofany income for the tax year required to be distributed currently and any otheramounts, whether income or principal, properly paid or credited or required tobe distributed for that tax year. 506A trust beneficiary must include in income the amount distributed to thebeneficiary, as well as any amount credited or required to be distributed by thetrust to the beneficiary. 507 Any amount paid or permanently set aside or otherwisequalifying for the charitable deduction is not encompassed by these rules.Amounts paid, permanently set aside, or to be used for charitable purposesare deductible by trusts only to the extent provided by the applicable charitablededuction rules. 508 Thus, a trust is not entitled to a charitable contribution deduction(or a distribution deduction) for a contribution to a charitable organizationwhen the gift is of some or all of the trust principal. For example, the IRS ruledthat a trust cannot claim a charitable contribution deduction for gifts of trust principalthat satisfy the requirements of a qualified conservation contribution. 509For a trust to claim a charitable deduction for an amount of gross income thatit contributes for charitable purposes, the governing instrument of the trust mustaccord the trustee(s) the authority to make charitable contributions. In the case ofan investment by a trust in a partnership, the partnership may make a charitablecontribution from the partnership’s gross income. Although that income is never500 This category of trust is a trust subject to IRC §§ 651, 652.501 This category of trust is a trust that is not a simple trust and is subject to IRC §§ 661–663.502 Reg. § 1.651(a)-1.503 IRC § 651(a).504 Reg. § 1.651(a)-4. This charitable deduction is the subject of IRC § 642(c).505 IRC § 642(c)(1). This charitable deduction is in lieu of the more conventional charitable deduction allowed byIRC § 170. See § 2.5(b), text accompanied by note 14.506 IRC § 661(a).507 IRC § 662(a).508 Reg. § 1.663(a)-2. Again, this charitable deduction is that referenced in note 504.509 Rev. Rul. 2003-123, 2003-50 I.R.B. 1200. See § 9.7. 336