CPA Responds to IRS Request for 5227 Comments

CPA Responds to IRS Request for 5227 Comments

News story posted in IRS Notices on 23 October 2006| comments
audience: National Publication | last updated: 18 May 2011


In response to a recent IRS request for comments regarding Form 5227, Split-Interest Trust Information Return, Ted R. Batson, Jr., MBA, CPA of Renaissance, Inc. has made several suggestions to streamline and clarify the use of such forms.

Full Text:


October 12, 2006

Glenn P. Kirkland
Internal Revenue Service
Room 6516
1111 Constitution Avenue, NW.
Washington, DC 20224

Dear Mr. Kirkland:

I am writing in response to a request for comments regarding Form 5227, Split-Interest Trust Information Return (OMB Number: 1545-0196). My firm prepares over 5,000 Form 5227's each year.

Comment 1
Section 1201(b) of the Pension Protection Act of 2006 (P.L. 109-280), signed into law on August 17, 2006, contains an amendment to IRC Sec. 6034 which now requires that split-interest trusts described in IRC Sec. 4947(a)(2) "furnish such information with respect to the taxable year as the Secretary may by forms or regulations require." Previously, the statute required such trusts to furnish specific information that was also required for any trust claiming a deduction under IRC Sec. 642(c). Form 1041-A, Trust Accumulation of Charitable Amounts, was used to satisfy this statutory requirement. Much of the information required by Form 1041-A is duplicative of information already required to be reported on Form 5227.

The Pension Protection Act of 2006's change to the statute opens the door for the Treasury to remove the duplicative reporting inherent in Forms 5227 and 1041-A. This would be accomplished by making Form 5227 the form that furnishes the information required by IRC Sec. 6034(a). However, for this change to be acceptable a few changes must be made to Form 5227:

  1. The information regarding the noncharitable beneficiaries of the trust should be moved from Part III (Current Distributions Schedule) to a separate schedule that is not open to public inspection. This separate schedule would be analogous to the Form 990, Schedule B.

    This change is necessary in order to comply with IRC Sec. 6104(b) (as amended by the Pension Protection Act of 2006), which exempts information regarding the noncharitable beneficiaries of a split-interest trust from the public inspection requirement of IRC Sec. 6104(b).
  2. The information regarding contributions to the trust should similarly be moved to a separate schedule for the same reason.

Assuming this change is made, Notice 83-32 which identifies the filing requirements for split-interest trusts should be updated.

Comment 2
The instructions to Form 5227 should indicate that trustees of grantor charitable lead trusts must obtain a taxpayer identification number and may not use the alternate filing method available to grantor trusts under Treas. Reg. 1.671-4(b)(2)(i)(A) with respect to Form 5227.

Comment 3
Form 5227 should be amended to allow the trustee to grant permission for the IRS to speak with the paid preparer of the return. If this requires the identification of a specific individual in a firm, the form should allow for more than one firm representative to be listed.

If you have any questions or comments about these suggestions, please contact me at 800-479-5142 ext. 5286.


Ted R. Batson, Jr., MBA, CPA
Senior Vice President

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