Last month, the IRS released the 2020 inflation adjustments for several tax provisions in Rev. Proc. 2019-44. The adjustments apply to tax years beginning in 2020 and transactions or events occurring during the 2020 calendar year. A select group of key provisions relative to trusts and estates are identified below.
Income Tax of Trusts and Estates
The taxable income thresholds on trusts and estates under Section 1(e) are:
| If Taxable Income is: | The Tax is: |
| Not over $2,600 | 10% of the taxable income |
| Over $2,600 but not over $9,450 | $260 plus 24% of excess over $2,600 |
| Over $9,450 but not over $12,950 | $1,904 plus 35% of excess over $9,450 |
| Over $12,950 | $3,129 plus 37% of excess over $12,950 |
The alternative minimum tax exemption amount for estates and trusts under Section 55(d)(1)(D) is:
| Filing Status | Exemption Amount |
| Estates and Trusts ((§55(d)(1)(D)) | $25,400 |
The phase-out amounts of alternative minimum tax for estates and trusts under Section 55(d)(3)(C) are:
| Filing Status | Threshold Phase-out |
| Estates and Trusts ((§55(d)(3)(C)) | $84,800 |
Estate and Gift Tax
For an estate of a decedent dying in 2020, the basic exclusion amount, for purposes of determining the Section 2010 credit against estate tax, is $11,580,000.
The Section 2503(b) annual gift tax exclusion for gifts made in 2020 is $15,000 per donee.
For an estate of a decedent dying in 2020 that elected to use the Section 2032A special valuation method for qualified property, the aggregate decrease in value must not exceed $1,180,000.
For gifts made to a non-citizen spouse in 2020, the annual gift tax exclusion under Section 2523(i)(2) is $157,000.
Additionally, recipients of gifts from certain foreign persons may be required to report these gifts under Section 6039F if the aggregate value of the gifts received in 2020 exceeds $16,649.
For an estate of a decedent dying in 2020 that elect to extend the payment of estate tax under Section 6166, the 2% portion for determining the interest rate under Section 6601(j) is $1,570,000.
2020 Penalty Amounts
In the case of failure to file a return, the addition to tax under Section 6651(a)(1) is not less than the lesser of $215 or 100% of the amount required to be shown on the return.
The penalties under Section 6652(c) for certain exempt organizations and trusts failing to file returns, disclosures, etc., which are required to be filed in calendar year 2020, are:
| Returns Under §6033(a)(1) (Exempt Organizations) or §6012(a)(6) (Political Organizations) | ||
| Scenario | Daily Penalty | Maximum Penalty |
| Penalty on Organization (§6652(c)(1)(A)) | $20 | Lesser of (i) $10,500 or (ii) 5% of gross receipts for year |
| Penalty on Organization with Gross Receipts Greater than $1,049,000(§6652(c)(1)(A)) | $105 | $54,000 |
| Penalty on Managers (§6652(c)(1)(B)(ii)) | $10 | $5,000 |
| Public Inspection of Annual Returns and Reports (§6652(c)(1)(C)) | $20 | $10,500 |
| Public Inspection of Applications for Exemption and Notice of Status (§6652(c)(1)(D)) | $20 | No limits |
| Returns Under §6034 (Certain Trust) or §6043(b) (Terminations, etc., of exempt organizations) | ||
| Scenario | Daily Penalty | Maximum Penalty |
| Penalty on Organization or Trust (§6652(c)(1)(A)) | $10 | $5,000 |
| Penalty on Managers (§6652(c)(2)(B)) | $10 | $5,000 |
| Penalty on Split Interest Trust (§6652(c)(2)(C)) | $20 | $10,500 |
| Split Interest Trust with Gross Income Greater than $262,000 (§6652(c)(2)(C)(ii)) | $105 | $54,000 |
| Disclosure Under §6033(a)(2) | ||
| Scenario | Daily Penalty | Maximum Penalty |
| Penalty on Tax-Exempt Entity (§6652(c)(3)(A)) | $105 | $54,000 |
| Failure to Comply with Demand (6652(c)(3)(B)(ii)) | $105 | $10,500 |
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