RSM424H1 Lecture Notes - Lecture 17: Inter Vivos, Settlor, Net Income
11 Jun 2017
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Beneficiaries may be entitled to enjoy the income or the capital of the trust, or both: trusts have certain unique features. Income earned by a trust can be taxed in the trust itself as a separate taxpayer or all or some of its income can be allocated to beneficiaries and taxed as part of their income. Any income allocated to beneficiaries is deducted from the trust"s income, and therefore trust income is only taxed once either as trust income or as beneficiary income. However, in a partnership, the allocation is mandatory and all income must be allocated, whereas in a trust, the allocation is discretionary. Types of trusts: the two primary types of trusts are: Inter vivos trust: it is created by the settlor during his/her lifetime. It includes inter vivos and testamentary trusts whose beneficiaries did not purchase their trust interests.
