What does grantor trust mean on the CPA exam?
Grantor trust. A trust whose income is taxed to the person who created it, because they kept too much control. For income tax it is ignored; for estate tax it may still be a completed gift.
Defined against Sec. 671.
Which CPA exam sections use grantor trust?
Grantor trust appears in the TCP section of the CPA exam.
Related terms
- straight debt: A written unconditional promise to pay a sum certain whose interest is not contingent on profits, which is not convertible into stock, and whose creditor is an individual other than a nonresident alien, an estate, qualifying trust, or regular lender.
- constructive receipt: Income is taxed when it is made available without substantial restriction, not when it is collected.
- unified credit: The credit that shelters the basic exclusion amount from gift and estate tax.
- distributable net income: The ceiling on what a trust or estate may deduct for distributions and on what the beneficiary must report.
- small business corporation: The eligibility test for an S election: a domestic corporation, not an ineligible corporation, with no more than 100 shareholders, no shareholder other than an individual, estate, qualifying trust, or qualifying exempt organization, no nonresident alien shareholder, and one class of stock.