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TAXABLE FIDUCIARY INCOME TAX RETURNS FOR 1951

SUMMARY DATA

A total of 116,210 taxable fiduciary income tax returns was filed for the income year 1951. This is an increase of 958 returns, or 0.8 percent, over the number filed for the preceding year.

Net income taxable to fiduciary reported for 1951 amounts to $590,847,000, a decrease of $24,767,000, or 4 percent, from the net income for 1950. The current year income tax liability of $210,765,000 shows an increase of $2,009,000, or 1 percent, over the previous all-time high of $208,756,000 for 1950.

The 73,821 returns for the income of trusts constitutes 63.5 percent of the total taxable returns filed. Total income on these returns is $869,892,000 of which $448,513,000 is distributable to beneficiaries who are required to include such income in their personal return of income. Net income remaining in the hands of the fiduciary is $361,142,000 and the income tax thereon is $135,843,000.

There are 42,389 taxable returns for the income of estates showing total income of $332,484,000 of which $62,836,000 is distributable to beneficiaries and reported by them as income. Net income taxable to fiduciary is $229,696,000 resulting in an income tax of $74,916,000.

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property held in trust. Tentative returns are not included and amended returns are used only when the original returns are excluded. Statistical data are taken from each taxable return as filed by the fiduciary, previous to official audit by the Internal Revenue Service, and do not reflect any changes resulting therefrom. Facsimile of the fiduciary income tax return, Form 1041, will be found on pages 181–188.

INCOME TAX PROVISIONS WITH RESPECT TO
FIDUCIARY INCOME

Although only the taxable fiduciary returns are included in this report; nevertheless, every fiduciary, or at least one of joint fiduciaries, is required to file an income tax return, Form 1041, for every estate for which he acts, if the gross income of the estate is $600 or more or if any beneficiary of the estate is a nonresident alien, and for every trust for which he acts, if the net income of the trust is $100 or more, or if the gross income is $600 or more regardless of the amount of net income, or if any beneficiary of the trust is a nonresident alien.

Supplement E of the Internal Revenue Code of 1939 provides that the taxes imposed upon the income of individuals by chapter 1, other than the tax on selfemployment income, shall be applicable to the income of estates and to the income from property held in trust. The rates of tax, the provisions respecting gross income to be reported, the deductions with certain exceptions, and the tax credits provided for the income of individuals apply also to the income of estates and trusts.

The gross income to be reported by the fiduciary includes the entire income of the estate or trust even though a portion, or all, of such income is distributable to beneficiaries. In general, the net income of an estate or trust is computed in the same manner and on the same basis as the net income of an individual, except that, in lieu of the deduction for contributions allowed individuals, there is allowed as a deduction any part of the fiduciary gross income, without limitation, which is set aside to be used exclusively for charitable, religious, scientific, literary, and educational purposes; and there is allowed, as an additional deduction, the amount of income which is to be distributed currently or becomes payable to beneficiaries, as well as amounts which in the discretion of the fiduciary may be distributed to the beneficiary or accumulated, if such amounts are reported in the income of the beneficiary.

Exemption in the form of a credit against net income. taxable to the fiduciary, for both normal tax and surtax, is $600 for an estate and $100 for a trust. Also allowable against net income, for purpose of normal tax only, is a credit for partially tax-exempt interest and dividends remaining in the hands of the fiduciary.

The tax liability is based on the net income taxable to fiduciary less the exemption and credit, mentioned above, and must be paid by the fiduciary with the filing of the return after the close of the income year. Current collection of tax does not apply to the fiduciary income. Tax credits are allowed for the fiduciary's share of income tax paid to a foreign country or possession of the United States as well as for income tax paid at source on interest from tax-free covenant bonds. A synopsis of the filing requirements, exemption, and tax rates for 1944-1951 is set forth in tables A and B, page 156.

BASIC ITEMS

Total income of estates and trust is the gross income received less business expenses and allowable losses from sales of property. The amounts of income, profit, and loss comprising total income are the net amounts from trade or business, from rents and royalties, from partnerships, from sales of capital assets and other property, together with income from dividends, interest, other fiduciaries, and miscellaneous income. If the net amount from any of these sources is a net loss, the loss also comprises a part of the total income. Total income is an approximation of the adjusted gross income tabulated for individual returns.

Balance income is the excess of total income over allowable nonbusiness deductions, such as interest, taxes, and casualty losses. It is the amount available for payment of income tax and for disposition to beneficiaries or for accumulation, according to the trust instrument in the case of a trust or the directives of the will or of the jurisdictional court in the case of

an estate.

Amount distributable to beneficiaries is the amount of income allotted to the beneficiaries. It is the total amount which pursuant to the terms of the will or the instrument creating the trust, is paid to, or set aside for, or becomes payable to, legatees, heirs, and beneficiaries. Charitable and similar organizations are beneficiaries as well as individuals. Each beneficiary must include his share of such distributions in his gross income, if required to file a return of income. The amount distributable to beneficiaries, including distributions for charitable purposes without limitation, is an allowable deduction from balance income for the computation of net income taxable to fiduciary.

Net income taxable to fiduciary is the amount of income remaining in the hands of the fiduciary after allowable nonbusiness deductions and setting aside the amount distributable to beneficiaries. This income, after the credits for exemption and partially taxexempt income is the basis for the tax liability of the fiduciary.

Exemption of $600 for an estate and $100 for a trust is allowable against net income taxable to fiduciary for purposes of both normal tax and surtax.

two tax credits relating to income tax paid at source on interest from tax-free covenant bonds and to income tax paid to a foreign country or possession of the United States. The tax consists of the normal tax, surtax, and alternative tax. The rates are the same as those on individual income. Normal tax and surtax are imposed on net income taxable to fiduciary, unless the alternative tax on long-term capital gain is effective. The alternative tax is not effective on returns with surtax net income under $16,000; it is imposed on income that contains a net long-term capital gain or an excess of net long-term capital gain over net short-term capital loss only when such alternative tax is less than the regular normal tax and surtax computed on income which includes all net gain from sales of capital assets.

CLASSIFICATION OF FIDUCIARY RETURNS

The taxable fiduciary returns are classified by total income classes, by net income classes, by types of tax liability, and as returns for estates or for trusts. Various items are tabulated by these classifications but not all items are available for every classification.

Total income classes.-Returns are segregated into total income classes based on the amount of total income reported on the returns and tabulated as such in the tables. The majority of the fiduciary data are distributed by total income classes, in order that these data may be associated with data tabulated for individual returns by adjusted gross income classes, since total income is approximately equivalent to adjusted gross income.

Net income classes. For this distribution, returns are classified on the amount of net income taxable to fiduciary.

Types of tax liability.-Returns with normal tax and surtax are distinguished from returns with alternative tax paid on income which includes long-term capital gain. Returns with normal tax and surtax include all returns with net loss from sales of capital assets and returns with net gain from such sales unless the alternative tax is imposed.

Returns for trusts and for estates.-This classification is based on the fact that certain fiduciary returns are filed for the income from property held in trust while other fiduciary returns are filed for the income of an estate under administration.

TABULATED DATA

Data tabulated for taxable fiduciary returns are taken from each taxable fiduciary return as filed by the fiduciary, before official audit, and therefore, do not include any revisions or changes in values which may result from the audit. Data are tabulated as nearly as possible to conform to similar tabulations for individual returns; however, in view of the fact that there are differences between the two forms and some variations in the method of reporting certain items common to both

In all but two tables, data for taxable fiduciary returns are distributed by total income classes. Total income, being similar in concept to adjusted gross income on individual returns, supplies a basis for classification whereby fiduciary data may be associated with data for individual returns.

In table 1, the number of taxable fiduciary returns, amount of total income, and tax liability, with percentage distributions, are tabulated by total income classes; in table 1a, these data are aggregated from the highest total income class; and in table 1b, the same data are aggregated from the lowest total income class. New stubs are set in tables 1a and 1b as an aid in reading these aggregated data.

Table 2 presents, by total income classes, the amount of each source of income and loss comprising total income, deductions, balance income, amount distributable to beneficiaries, net income taxable to fiduciary, exemption, and tax liability. This table also shows, in juxtaposition, frequency distributions of the number of returns for each source of income and loss comprising total income, for each deduction, for balance income, and amount distributable. Formerly, the frequency distributions were presented in a separate table.

Data in tables 3 and 4 are distributed by net income classes. Table 3 shows the amount of each source of income and loss comprising total income, deductions, balance income, amount distributable to beneficiaries, net income taxable to fiduciary, exemption, and tax liability. In table 4, there is a frequency distribution of taxable fiduciary returns by total income classes cross classified by net income classes.

Data relative to tax liability are tabulated in table 5 by total income classes and by the two types of tax, namely the combined normal tax and surtax, and the alternative tax.

Table 6 contains data for capital gains and losses, by total income classes. Data for returns with net loss from sales of capital assets are shown separately from returns with net gain from sales of capital assets. Returns with net gain from such sales are further segregated to show returns with normal tax and surtax independently from those with alternative tax. In all categories, the net short-term capital gain and loss, the net long-term capital gain and loss, and the capital loss carryover from the prior 5-year period are tabulated. Additional information shows the capital loss before application of the statutory limitation as well as the allowable loss deducted from gross income, the amount of capital gain included in total income, and the excess of net long-term capital gain over net short-term capital loss to which the alternative tax rate is applied.

In table 7, total income, amount distributable to beneficiaries, net income taxable to fiduciary, exemption, and tax liability are tabulated, by total income classes, to show these data separately for trusts and for estates.

Historical data for the period 1944 through 1951 are

Throughout the tables, values in thousand dollars and percentages are rounded and, therefore, may not add to the totals.

SOURCES COMPRISING TOTAL INCOME

The amounts of income, profit, and loss from each of the sources comprising total income are the net amounts to be included in income, that is, the excess of gross receipts over the expenses and costs applicable to the respective sources. If the result is a net loss, the net loss also comprises a part of total income and such losses are tabulated as component parts of total income. These sources of income and loss are described below.

Dividends received include foreign and domestic dividends but exclude dividends received through partnerships and other fiduciaries, such dividends being reported in those sources.

Interest is that received on bank deposits, notes, mortgages, corporation bonds, and taxable and partially taxexempt interest on Government obligations including such interest received through partnerships and other fiduciaries.

Rents and royalties net profit is that reported on returns showing a net profit resulting from the combination of the two sources. Rents and royalties are reported in the same schedule and the separate incomes are not available. A net loss from either source offsets net profit of the other. Deductions against gross rents and gross royalties received are allowable for taxes, interest, repairs, depreciation, depletion, and other expenses pertaining to the respective incomes.

Rents and royalties net loss is that reported on returns showing a net loss resulting from the combination of the two sources. Rents and royalties are reported in the same schedule and the separate incomes are not available. A net profit from either source offsets net loss of the other. Deductions against gross rents and gross royalties received are allowable for taxes, repairs, interest, depreciation, depletion, and other expenses pertaining to the respective incomes.

Trade or business net profit is the net result of all trade and business activities in which the estate or trust is engaged, the combined result of which is a net profit. Net loss from one business offsets the net profit of another.

Deductions from total receipts are allowed for expenses of doing business, such as cost of merchandise sold, employees' salaries, interest, taxes, rent, repairs, depreciation, obsolescence, depletion, bad debts, losses on business property, and other direct business expenses. Net operating loss deduction is not a business deduction but is an allowable authorized deduction from total in

come.

Trade or business net loss is the result of all trade and business activities in which the estate or trust is engaged, the combined result of which is a net loss. Net profit from one business offsets the net loss of another. Allowable business deductions are mentioned in the

Partnership net profit is the estate's or trust's share of net profit (whether received or not) from all partnerships, syndicates, pools, etc., in which the estate or trust is a participant, the combined result of which is a net profit. However, the distributive share of profit reported excludes taxable and partially tax-exempt Government interest and the net gain or loss from sales of capital assets, each being reported in its respective

source.

Partnership net loss is the estate's or trust's share of net loss (whether received or not) from all partnerships, syndicates, pools, etc., in which the estate or trust is a participant, the combined result of which is a net loss. However, the distributive share of net loss reported excludes taxable and partially tax-exempt interest on Government obligations and the net gain or loss from sales of capital assets, each being reported in its respective source.

Net gain from sales or exchanges of capital assets is the net amount included in total income. Net gain from such sales is the excess of capital gains (short- and longterm, the latter reduced 50 percent) over the sum of capital losses (short- and long-term, the latter reduced 50 percent) and the net capital loss carryover. The definitions of capital assets, the treatment of gains and losses, the short- and long-term gains and losses, and the carryover are the same as those described for individual returns, pages 16-17.

Net loss from sales or exchanges of capital assets is the statutory deduction allowed for the computation of net income. Net loss from sales of capital assets is the excess of the sum of the net capital loss carryover and the capital losses (short- and long-term, the latter reduced 50 percent) over the capital gains (short- and long-term, the latter reduced 50 percent); however, deduction for the loss is limited to the amount of the loss, or to the net income computed without regard to capital gains and losses, or to $1,000, whichever is smallest. For definition and treatment of capital assets, see pages 16-17.

Net gain from sales or exchanges of property other than capital assets is the net gain from sales or exchanges of property used in trade or business of a character which is subject to the allowance for depreciation, real property used in trade or business, obligations of the United States or its possessions, or of a State or Territory or any political subdivision thereof, or of the District of Columbia, issued on a discount basis and payable without interest at a fixed maturity date not exceeding 1 year from date of issue, and certain copyrights or artistic compositions.

Net loss from sales or exchanges of property other than capital assets is the net loss from all sales or exchanges of property listed in the preceding paragraph. Net loss from this source is deductible in full.

Income from other fiduciaries is the estate's or trust's share, as beneficiary, of the distributable income from

cludes taxable and partially tax-exempt interest on Government obligations which is reported in interest income.

Miscellaneous income includes taxable income from sources other than those tabulated.

DEDUCTIONS

Interest paid is that paid or accrued on debts, mortgages, and bank loans; it excludes interest reported in schedules for rents and business, and interest on indebtedness incurred to purchase a single premium life insurance or endowment contract, or securities yielding wholly tax-exempt income.

Taxes imposed upon the estate or trust and paid during the year include State and local income taxes, certain retail sales taxes, real estate taxes except those assessed against local benefits which tend to increase the value of property assessed. The deduction excludes taxes deducted in schedules for rents and business, Federal income taxes, estate, inheritance, legacy, succession taxes, gift taxes, and foreign income taxes if any portion thereof is claimed as a tax credit.

Miscellaneous deductions are authorized deductions other than interest and taxes and include bad debts, net operating loss deduction, losses from fire, storm, shipwreck, or other casualty, or from theft, not compensated for by insurance or otherwise, and expenses incurred for the production of taxable income or for the management and maintenance of property held for the production of taxable income.

TYPES OF TAX

The tax liability tabulated for taxable fiduciary returns includes the normal tax, surtax, and alternative tax. The amount of tax liability shown throughout the tables is the tax after the two tax credits are deducted. Tax credits are allowed for the fiduciary's share of income tax paid at source on interest from tax-free covenant bonds and of income tax paid to a foreign country or possession of the United States. The amount of tax credit deducted is not available. For statistical purposes two types of tax are distinguished; normal tax and surtax, and alternative tax.

Normal tax and surtax is the sum of the two separate taxes. The rates are the same as for individual income. The tax rate schedule accompanying the fiduciary return supplies an integrated normal tax and surtax rate from which the combined tax is computed; and the joint tax is reported. If the net income taxable to fiduciary includes partially tax-exempt interest and dividends, the combined tax is reduced by an amount equal to 3 percent of such income in order to give effect to the partially tax-exempt income credit against net income for normal tax purposes. This eliminates from the combined tax the normal tax on such income.

Alternative tax is imposed on net income containing

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