[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.671-4]

[Page 277-284]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.671-4  Method of reporting.

    (a) Portion of trust treated as owned by the grantor or another 
person. Except as otherwise provided in paragraph (b) of this section, 
items of income, deduction, and credit attributable to any portion of a 
trust which, under the provisions of subpart E (section 671 and 
following), part I, subchapter J, chapter 1 of the Internal Revenue 
Code, is treated as owned by the grantor or another person are not 
reported by the trust on Form 1041, but are shown on a separate 
statement to be attached to that form. Section 301.7701-4(e)(2) of this 
chapter provides guidance on how these reporting rules apply to an 
environmental remediation trust.
    (b) A trust all of which is treated as owned by one or more grantors 
or other persons--(1) In general. In the case of a

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trust all of which is treated as owned by one or more grantors or other 
persons, and which is not described in paragraph (b)(6) or (7) of this 
section, the trustee may, but is not required to, report by one of the 
methods described in this paragraph (b) rather than by the method 
described in paragraph (a) of this section. A trustee may not report, 
however, pursuant to paragraph (b)(2)(i)(A) of this section unless the 
grantor or other person treated as the owner of the trust provides to 
the trustee a complete Form W-9 or acceptable substitute Form W-9 signed 
under penalties of perjury. See section 3406 and the regulations 
thereunder for the information to include on, and the manner of 
executing, the Form W-9, depending upon the type of reportable payments 
made.
    (2) A trust all of which is treated as owned by one grantor or by 
one other person--(i) In general. In the case of a trust all of which is 
treated as owned by one grantor or one other person, the trustee 
reporting under this paragraph (b) must either--
    (A) Furnish the name and taxpayer identification number (TIN) of the 
grantor or other person treated as the owner of the trust, and the 
address of the trust, to all payors during the taxable year, and comply 
with the additional requirements described in paragraph (b)(2)(ii) of 
this section; or
    (B) Furnish the name, TIN, and address of the trust to all payors 
during the taxable year, and comply with the additional requirements 
described in paragraph (b)(2)(iii) of this section.
    (ii) Additional obligations of the trustee when name and TIN of the 
grantor or other person treated as the owner of the trust and the 
address of the trust are furnished to payors. (A) Unless the grantor or 
other person treated as the owner of the trust is the trustee or a co-
trustee of the trust, the trustee must furnish the grantor or other 
person treated as the owner of the trust with a statement that--
    (1) Shows all items of income, deduction, and credit of the trust 
for the taxable year;
    (2) Identifies the payor of each item of income;
    (3) Provides the grantor or other person treated as the owner of the 
trust with the information necessary to take the items into account in 
computing the grantor's or other person's taxable income; and
    (4) Informs the grantor or other person treated as the owner of the 
trust that the items of income, deduction and credit and other 
information shown on the statement must be included in computing the 
taxable income and credits of the grantor or other person on the income 
tax return of the grantor or other person.
    (B) The trustee is not required to file any type of return with the 
Internal Revenue Service.
    (iii) Additional obligations of the trustee when name, TIN, and 
address of the trust are furnished to payors--(A) Obligation to file 
Forms 1099. The trustee must file with the Internal Revenue Service the 
appropriate Forms 1099, reporting the income or gross proceeds paid to 
the trust during the taxable year, and showing the trust as the payor 
and the grantor or other person treated as the owner of the trust as the 
payee. The trustee has the same obligations for filing the appropriate 
Forms 1099 as would a payor making reportable payments, except that the 
trustee must report each type of income in the aggregate, and each item 
of gross proceeds separately. See paragraph (b)(5) of this section 
regarding the amounts required to be included on any Forms 1099 filed by 
the trustee.
    (B) Obligation to furnish statement. (1) Unless the grantor or other 
person treated as the owner of the trust is the trustee or a co-trustee 
of the trust, the trustee must also furnish to the grantor or other 
person treated as the owner of the trust a statement that--
    (i) Shows all items of income, deduction, and credit of the trust 
for the taxable year;
    (ii) Provides the grantor or other person treated as the owner of 
the trust with the information necessary to take the items into account 
in computing the grantor's or other person's taxable income; and
    (iii) Informs the grantor or other person treated as the owner of 
the trust that the items of income, deduction and credit and other 
information

[[Page 279]]

shown on the statement must be included in computing the taxable income 
and credits of the grantor or other person on the income tax return of 
the grantor or other person.
    (2) By furnishing the statement, the trustee satisfies the 
obligation to furnish statements to recipients with respect to the Forms 
1099 filed by the trustee.
    (iv) Examples. The following examples illustrate the provisions of 
this paragraph (b)(2):

    Example 1. G, a United States citizen, creates an irrevocable trust 
which provides that the ordinary income is to be payable to him for life 
and that on his death the corpus shall be distributed to B, an unrelated 
person. Except for the right to receive income, G retains no right or 
power which would cause him to be treated as an owner under sections 671 
through 679. Under the applicable local law, capital gains must be added 
to corpus. Since G has a right to receive income, he is treated as an 
owner of a portion of the trust under section 677. The tax consequences 
of any items of capital gain of the trust are governed by the provisions 
of subparts A, B, C, and D (section 641 and following), part I, 
subchapter J, chapter 1 of the Internal Revenue Code. Because not all of 
the trust is treated as owned by the grantor or another person, the 
trustee may not report by the methods described in paragraph (b)(2) of 
this section.
    Example 2. (i)(A) On January 2, 1996, G, a United States citizen, 
creates a trust all of which is treated as owned by G. The trustee of 
the trust is T. During the 1996 taxable year the trust has the following 
items of income and gross proceeds:

Interest..........................................................$2,500
Dividends..........................................................3,205
Proceeds from sale of B stock......................................2,000

    (B) The trust has no items of deduction or credit.
    (ii)(A) The payors of the interest paid to the trust are X ($2,000), 
Y ($300), and Z ($200). The payors of the dividends paid to the trust 
are A ($3,200), and D ($5). The payor of the gross proceeds paid to the 
trust is D, a brokerage firm, which held the B stock as the nominee for 
the trust. The B stock was purchased by T for $1,500 on January 3, 1996, 
and sold by T on November 29, 1996. T chooses to report pursuant to 
paragraph (b)(2)(i)(B) of this section, and therefore furnishes the 
name, TIN, and address of the trust to X, Y, Z, A, and D. X, Y, and Z 
each furnish T with a Form 1099-INT showing the trust as the payee. A 
furnishes T with a Form 1099-DIV showing the trust as the payee. D does 
not furnish T with a Form 1099-DIV because D paid a dividend of less 
than $10 to T. D furnishes T with a Form 1099-B showing the trust as the 
payee.
    (B) On or before February 28, 1997, T files a Form 1099-INT with the 
Internal Revenue Service on which T reports interest attributable to G, 
as the owner of the trust, of $2,500; a Form 1099-DIV on which T reports 
dividends attributable to G, as the owner of the trust, of $3,205; and a 
Form 1099-B on which T reports gross proceeds from the sale of B stock 
attributable to G, as the owner of the trust, of $2,000. On or before 
April 15, 1997, T furnishes a statement to G which lists the following 
items of income and information necessary for G to take the items into 
account in computing G's taxable income:

Interest..........................................................$2,500
Dividends..........................................................3,205
Gain from sale of B stock............................................500

    Information regarding sale of B stock:

Proceeds..........................................................$2,000
Basis..............................................................1,500
Date acquired....................................................1/03/96
Date sold.......................................................11/29/96

    (C) T informs G that any items of income, deduction and credit and 
other information shown on the statement must be included in computing 
the taxable income and credits of the grantor or other person on the 
income tax return of the grantor or other person.
    (D) T has complied with T's obligations under this section.
    (iii)(A) Same facts as paragraphs (i) and (ii) of this Example 2, 
except that G contributed the B stock to the trust on January 2, 1996. 
On or before April 15, 1997, T furnishes a statement to G which lists 
the following items of income and information necessary for G to take 
the items into account in computing G's taxable income:

Interest..........................................................$2,500
Dividends..........................................................3,205

    Information regarding sale of B stock:

Proceeds..........................................................$2,000
Date sold.......................................................11/29/96

    (B) T informs G that any items of income, deduction and credit and 
other information shown on the statement must be included in computing 
the taxable income and credits of the grantor or other person on the 
income tax return of the grantor or other person.
    (C) T has complied with T's obligations under this section.
    Example 3. On January 2, 1996, G, a United States citizen, creates a 
trust all of which is treated as owned by G. The trustee of the trust is 
T. The only asset of the trust is an interest in C, a common trust fund 
under section 584(a). T chooses to report pursuant to paragraph 
(b)(2)(i)(B) of this section and therefore furnishes the name, TIN, and 
address of the trust to C. C files a Form 1065 and a Schedule K-1 
(Partner's Share of Income, Credits, Deductions, etc.) showing the

[[Page 280]]

name, TIN, and address of the trust with the Internal Revenue Service 
and furnishes a copy to T. Because the trust did not receive any amounts 
described in paragraph (b)(5) of this section, T does not file any type 
of return with the Internal Revenue Service. On or before April 15, 
1997, T furnishes G with a statement that shows all items of income, 
deduction, and credit of the trust for the 1996 taxable year. In 
addition, T informs G that any items of income, deduction and credit and 
other information shown on the statement must be included in computing 
the taxable income and credits of the grantor or other person on the 
income tax return of the grantor or other person. T has complied with 
T's obligations under this section.

    (3) A trust all of which is treated as owned by two or more grantors 
or other persons--(i) In general. In the case of a trust all of which is 
treated as owned by two or more grantors or other persons, the trustee 
must furnish the name, TIN, and address of the trust to all payors for 
the taxable year, and comply with the additional requirements described 
in paragraph (b)(3)(ii) of this section.
    (ii) Additional obligations of trustee--(A) Obligation to file Forms 
1099. The trustee must file with the Internal Revenue Service the 
appropriate Forms 1099, reporting the items of income paid to the trust 
by all payors during the taxable year attributable to the portion of the 
trust treated as owned by each grantor or other person, and showing the 
trust as the payor and each grantor or other person treated as an owner 
of the trust as the payee. The trustee has the same obligations for 
filing the appropriate Forms 1099 as would a payor making reportable 
payments, except that the trustee must report each type of income in the 
aggregate, and each item of gross proceeds separately. See paragraph 
(b)(5) of this section regarding the amounts required to be included on 
any Forms 1099 filed by the trustee.
    (B) Obligation to furnish statement. (1) The trustee must also 
furnish to each grantor or other person treated as an owner of the trust 
a statement that--
    (i) Shows all items of income, deduction, and credit of the trust 
for the taxable year attributable to the portion of the trust treated as 
owned by the grantor or other person;
    (ii) Provides the grantor or other person treated as an owner of the 
trust with the information necessary to take the items into account in 
computing the grantor's or other person's taxable income; and
    (iii) Informs the grantor or other person treated as the owner of 
the trust that the items of income, deduction and credit and other 
information shown on the statement must be included in computing the 
taxable income and credits of the grantor or other person on the income 
tax return of the grantor or other person.
    (2) Except for the requirements pursuant to section 3406 and the 
regulations thereunder, by furnishing the statement, the trustee 
satisfies the obligation to furnish statements to recipients with 
respect to the Forms 1099 filed by the trustee.
    (4) Persons treated as payors--(i) In general. For purposes of this 
section, the term payor means any person who is required by any 
provision of the Internal Revenue Code and the regulations thereunder to 
make any type of information return (including Form 1099 or Schedule K-
1) with respect to the trust for the taxable year, including persons who 
make payments to the trust or who collect (or otherwise act as middlemen 
with respect to) payments on behalf of the trust.
    (ii) Application to brokers and customers. For purposes of this 
section, a broker, within the meaning of section 6045, is considered a 
payor. A customer, within the meaning of section 6045, is considered a 
payee.
    (5) Amounts required to be included on Forms 1099 filed by the 
trustee--(i) In general. The amounts that must be included on any Forms 
1099 required to be filed by the trustee pursuant to this section do not 
include any amounts that are reportable by the payor on an information 
return other than Form 1099. For example, in the case of a trust which 
owns an interest in a partnership, the trust's distributive share of the 
income and gain of the partnership is not includible on any Forms 1099 
filed by the trustee pursuant to this section because the distributive 
share is reportable by the partnership on Schedule K-1.
    (ii) Example. The following example illustrates the provisions of 
this paragraph (b)(5):


[[Page 281]]


    Example. (i)(A) On January 2, 1996, G, a United States citizen, 
creates a trust all of which is treated as owned by G. The trustee of 
the trust is T. The assets of the trust during the 1996 taxable year are 
shares of stock in X, an S corporation, a limited partnership interest 
in P, shares of stock in M, and shares of stock in N. T chooses to 
report pursuant to paragraph (b)(2)(i)(B) of this section and therefore 
furnishes the name, TIN, and address of the trust to X, P, M, and N. M 
furnishes T with a Form 1099-DIV showing the trust as the payee. N does 
not furnish T with a Form 1099-DIV because N paid a dividend of less 
than $10 to T. X and P furnish T with Schedule K-1 (Shareholder's Share 
of Income, Credits, Deductions, etc.) and Schedule K-1 (Partner's Share 
of Income, Credits, Deductions, etc.), respectively, showing the trust's 
name, TIN, and address.
    (B) For the 1996 taxable year the trust has the following items of 
income and deduction:

Dividends paid by M..................................................$12
Dividends paid by N....................................................6
Administrative expense...............................................$20

    Items reported by X on Schedule K-1 attributable to trust's shares 
of stock in X:

Interest.............................................................$20
Dividends.............................................................35

    Items reported by P on Schedule K-1 attributable to trust's limited 
partnership interest in P:

Ordinary income.....................................................$300

    (ii)(A) On or before February 28, 1997, T files with the Internal 
Revenue Service a Form 1099-DIV on which T reports dividends 
attributable to G as the owner of the trust in the amount of $18. T does 
not file any other returns.
    (B) T has complied with T's obligation under paragraph 
(b)(2)(iii)(A) of this section to file the appropriate Forms 1099.

    (6) Trusts that cannot report under this paragraph (b). The 
following trusts cannot use the methods of reporting described in this 
paragraph (b)--
    (i) A common trust fund as defined in section 584(a);
    (ii) A trust that has its situs or any of its assets located outside 
the United States;
    (iii) A trust that is a qualified subchapter S trust as defined in 
section 1361(d)(3);
    (iv) A trust all of which is treated as owned by one grantor or one 
other person whose taxable year is a fiscal year;
    (v) A trust all of which is treated as owned by one grantor or one 
other person who is not a United States person; or
    (vi) A trust all of which is treated as owned by two or more 
grantors or other persons, one of whom is not a United States person.
    (7) Grantors or other persons who are treated as owners of the trust 
and are exempt recipients for information reporting purposes--(i) Trust 
treated as owned by one grantor or one other person. The trustee of a 
trust all of which is treated as owned by one grantor or one other 
person may not report pursuant to this paragraph (b) if the grantor or 
other person is an exempt recipient for information reporting purposes.
    (ii) Trust treated as owned by two or more grantors or other 
persons. The trustee of a trust, all of which is treated as owned by two 
or more grantors or other persons, may not report pursuant to this 
paragraph (b) if one or more grantors or other persons treated as owners 
are exempt recipients for information reporting purposes unless--
    (A) At least one grantor or one other person who is treated as an 
owner of the trust is a person who is not an exempt recipient for 
information reporting purposes; and
    (B) The trustee reports without regard to whether any of the 
grantors or other persons treated as owners of the trust are exempt 
recipients for information reporting purposes.
    (8) Husband and wife who make a single return jointly. A trust all 
of which is treated as owned by a husband and wife who make a single 
return jointly of income taxes for the taxable year under section 6013 
is considered to be owned by one grantor for purposes of this paragraph 
(b).
    (c) Due date for Forms 1099 required to be filed by trustee. The due 
date for any Forms 1099 required to be filed with the Internal Revenue 
Service by a trustee pursuant to this section is the due date otherwise 
in effect for filing Forms 1099.
    (d) Due date and other requirements with respect to statement 
required to be furnished by trustee--(1) In general. The due date for 
the statement required to be furnished by a trustee to the grantor or 
other person treated as an owner of the trust pursuant to this section 
is the date specified by section 6034A(a). The trustee must maintain in 
its

[[Page 282]]

records a copy of the statement furnished to the grantor or other person 
treated as an owner of the trust for a period of three years from the 
due date for furnishing such statement specified in this paragraph (d).
    (2) Statement for the taxable year ending with the death of the 
grantor or other person treated as the owner of the trust. If a trust 
ceases to be treated as owned by the grantor, or other person, by reason 
of the death of that grantor or other person (decedent), the due date 
for the statement required to be furnished for the taxable year ending 
with the death of the decedent shall be the date specified by section 
6034A(a) as though the decedent had lived throughout the decedent's last 
taxable year. See paragraph (h) of this section for special reporting 
rules for a trust or portion of the trust that ceases to be treated as 
owned by the grantor or other person by reason of the death of the 
grantor or other person.
    (e) Backup withholding requirements--(1) Trustee reporting under 
paragraph (b)(2)(i)(A) of this section. In order for the trustee to be 
able to report pursuant to paragraph (b)(2)(i)(A) of this section and to 
furnish to all payors the name and TIN of the grantor or other person 
treated as the owner of the trust, the grantor or other person must 
provide a complete Form W-9 to the trustee in the manner provided in 
paragraph (b)(1) of this section, and the trustee must give the name and 
TIN shown on that Form W-9 to all payors. In addition, if the Form W-9 
indicates that the grantor or other person is subject to backup 
withholding, the trustee must notify all payors of reportable interest 
and dividend payments of the requirement to backup withhold. If the Form 
W-9 indicates that the grantor or other person is not subject to backup 
withholding, the trustee does not have to notify the payors that backup 
withholding is not required. The trustee should not give the Form W-9, 
or a copy thereof, to a payor because the Form W-9 contains the address 
of the grantor or other person and paragraph (b)(2)(i)(A) of this 
section requires the trustee to furnish the address of the trust to all 
payors and not the address of the grantor or other person. The trustee 
acts as the agent of the grantor or other person for purposes of 
furnishing to the payors the information required by this paragraph 
(e)(1). Thus, a payor may rely on the name and TIN provided to the payor 
by the trustee, and, if given, on the trustee's statement that the 
grantor is subject to backup withholding.
    (2) Other backup withholding requirements. Whether a trustee is 
treated as a payor for purposes of backup withholding is determined 
pursuant to section 3406 and the regulations thereunder.
    (f) Penalties for failure to file a correct Form 1099 or furnish a 
correct statement. A trustee who fails to file a correct Form 1099 or to 
furnish a correct statement to a grantor or other person treated as an 
owner of the trust as required by paragraph (b) of this section is 
subject to the penalties provided by sections 6721 and 6722 and the 
regulations thereunder.
    (g) Changing reporting methods--(1) Changing from reporting by 
filing Form 1041 to a method described in paragraph (b) of this section. 
If the trustee has filed a Form 1041 for any taxable year ending before 
January 1, 1996 (and has not filed a final Form 1041 pursuant to Sec. 
1.671-4(b)(3) (as contained in the 26 CFR part 1 edition revised as of 
April 1, 1995)), or files a Form 1041 for any taxable year thereafter, 
the trustee must file a final Form 1041 for the taxable year which ends 
after January 1, 1995, and which immediately precedes the first taxable 
year for which the trustee reports pursuant to paragraph (b) of this 
section, on the front of which form the trustee must write: ``Pursuant 
to Sec. 1.671-4(g), this is the final Form 1041 for this grantor 
trust.''.
    (2) Changing from reporting by a method described in paragraph (b) 
of this section to the filing of a Form 1041. The trustee of a trust who 
reported pursuant to paragraph (b) of this section for a taxable year 
may report pursuant to paragraph (a) of this section for subsequent 
taxable years. If the trustee reported pursuant to paragraph 
(b)(2)(i)(A) of this section, and therefore furnished the name and TIN 
of the grantor to all payors, the trustee must furnish the name, TIN, 
and address of

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the trust to all payors for such subsequent taxable years. If the 
trustee reported pursuant to paragraph (b)(2)(i)(B) or (b)(3)(i) of this 
section, and therefore furnished the name and TIN of the trust to all 
payors, the trustee must indicate on each Form 1096 (Annual Summary and 
Transmittal of U.S. Information Returns) that it files (or appropriately 
on magnetic media) for the final taxable year for which the trustee so 
reports that it is the final return of the trust.
    (3) Changing between methods described in paragraph (b) of this 
section--(i) Changing from furnishing the TIN of the grantor to 
furnishing the TIN of the trust. The trustee of a trust who reported 
pursuant to paragraph (b)(2)(i)(A) of this section for a taxable year, 
and therefore furnished the name and TIN of the grantor to all payors, 
may report pursuant to paragraph (b)(2)(i)(B) of this section, and 
furnish the name and TIN of the trust to all payors, for subsequent 
taxable years.
    (ii) Changing from furnishing the TIN of the trust to furnishing the 
TIN of the grantor. The trustee of a trust who reported pursuant to 
paragraph (b)(2)(i)(B) of this section for a taxable year, and therefore 
furnished the name and TIN of the trust to all payors, may report 
pursuant to paragraph (b)(2)(i)(A) of this section, and furnish the name 
and TIN of the grantor to all payors, for subsequent taxable years. The 
trustee, however, must indicate on each Form 1096 (Annual Summary and 
Transmittal of U.S. Information Returns) that it files (or appropriately 
on magnetic media) for the final taxable year for which the trustee 
reports pursuant to paragraph (b)(2)(i)(B) of this section that it is 
the final return of the trust.
    (4) Example. The following example illustrates the provisions of 
paragraph (g) of this section:

    Example. (i) On January 3, 1994, G, a United States citizen, creates 
a trust all of which is treated as owned by G. The trustee of the trust 
is T. On or before April 17, 1995, T files with the Internal Revenue 
Service a Form 1041 with an attached statement for the 1994 taxable year 
showing the items of income, deduction, and credit of the trust. On or 
before April 15, 1996, T files with the Internal Revenue Service a Form 
1041 with an attached statement for the 1995 taxable year showing the 
items of income, deduction, and credit of the trust. On the Form 1041, T 
states that ``pursuant to Sec. 1.671-4(g), this is the final Form 1041 
for this grantor trust.'' T may report pursuant to paragraph (b) of this 
section for the 1996 taxable year.
    (ii) T reports pursuant to paragraph (b)(2)(i)(B) of this section, 
and therefore furnishes the name, TIN, and address of the trust to all 
payors, for the 1996 and 1997 taxable years. T chooses to report 
pursuant to paragraph (a) of this section for the 1998 taxable year. On 
each Form 1096 (Annual Summary and Transmittal of U.S. Information 
Returns) which T files for the 1997 taxable year (or appropriately on 
magnetic media), T indicates that it is the trust's final return. On or 
before April 15, 1999, T files with the Internal Revenue Service a Form 
1041 with an attached statement showing the items of income, deduction, 
and credit of the trust. On the Form 1041, T uses the same TIN which T 
used on the Forms 1041 and Forms 1099 it filed for previous taxable 
years. T has complied with T's obligations under paragraph (g)(2) of 
this section.

    (h) Reporting rules for a trust, or portion of a trust, that ceases 
to be treated as owned by a grantor or other person by reason of the 
death of the grantor or other person--(1) Definition of decedent. For 
purposes of this paragraph (h), the decedent is the grantor or other 
person treated as the owner of the trust, or portion of the trust, under 
subpart E, part I, subchapter J, chapter 1 of the Internal Revenue Code 
on the date of death of that person.
    (2) In general. The provisions of this section apply to a trust, or 
portion of a trust, treated as owned by a decedent for the taxable year 
that ends with the decedent's death. Following the death of the 
decedent, the trust or portion of a trust that ceases to be treated as 
owned by the decedent, by reason of the death of the decedent, may no 
longer report under this section. A trust, all of which was treated as 
owned by the decedent, must obtain a new TIN upon the death of the 
decedent, if the trust will continue after the death of the decedent. 
See Sec. 301.6109-1(a)(3)(i) of this chapter for rules regarding 
obtaining a TIN upon the death of the decedent.
    (3) Special rules--(i) Trusts reporting pursuant to paragraph (a) of 
this section for the taxable year ending with the decedent's death. The 
due date for the filing of a return pursuant to paragraph (a) of this 
section for the taxable year ending

[[Page 284]]

with the decedent's death shall be the due date provided for under Sec. 
1.6072-1(a)(2). The return filed under this paragraph for a trust all of 
which was treated as owned by the decedent must indicate that it is a 
final return.
    (ii) Trust reporting pursuant to paragraph (b)(2)(B) of this section 
for the taxable year of the decedent's death. A trust that reports 
pursuant to paragraph (b)(2)(B) of this section for the taxable year 
ending with the decedent's death must indicate on each Form 1096 
``Annual Summary and Transmittal of the U.S. Information Returns'' that 
it files (or appropriately on magnetic media) for the taxable year 
ending with the death of the decedent that it is the final return of the 
trust.
    (iii) Trust reporting under paragraph (b)(3) of this section. If a 
trust has been reporting under paragraph (b)(3) of this section, the 
trustee may not report under that paragraph if any portion of the trust 
has a short taxable year by reason of the death of the decedent and the 
portion treated as owned by the decedent does not terminate on the death 
of the decedent.
    (i) Effective date and transition rule--(1) Effective date. The 
trustee of a trust any portion of which is treated as owned by one or 
more grantors or other persons must report pursuant to paragraphs (a), 
(b), (c), (d)(1), (e), (f), and (g) of this section for taxable years 
beginning on or after January 1, 1996.
    (2) Transition rule. For taxable years beginning prior to January 1, 
1996, the Internal Revenue Service will not challenge the manner of 
reporting of--
    (i) A trustee of a trust all of which is treated as owned by one or 
more grantors or other persons who did not report in accordance with 
Sec. 1.671-4(a) (as contained in the 26 CFR part 1 edition revised as 
of April 1, 1995) as in effect for taxable years beginning prior to 
January 1, 1996, but did report in a manner substantially similar to one 
of the reporting methods described in paragraph (b) of this section; or
    (ii) A trustee of two or more trusts all of which are treated as 
owned by one or more grantors or other persons who filed a single Form 
1041 for all of the trusts, rather than a separate Form 1041 for each 
trust, provided that the items of income, deduction, and credit of each 
trust were shown on a statement attached to the single Form 1041.
    (3) Effective date for paragraphs (d)(2) and (h) of this section. 
Paragraphs (d)(2) and (h) of this section apply for taxable years ending 
on or after December 24, 2002.
    (j) Cross-reference. For rules relating to employer identification 
numbers, and to the obligation of a payor of income or proceeds to the 
trust to furnish to the payee a statement to recipient, see Sec. 
301.6109-1(a)(2) of this chapter.

[T.D. 8633, 60 FR 66087, Dec. 21, 1995, as amended by T.D. 8668, 61 FR 
19191, May 1, 1996; T.D. 9032, 67 FR 78381, Dec. 24, 2002]