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FORM N-405
(REV. 2009) PAGE 2
General Instructions Specific Instructions Part II—Computation of Tax
(Section references are to the Internal Revenue Attributable to the Accumulation
Code.) Part I—Average Income and Distribution
Determination of Computation
Note: Years Line 17.—Figure the income tax on the income
on line 16 using the tax rates in effect for your
Act 113, Session Laws of Hawaii 1998, in Line 1.—For a nonresident individual or particular earlier tax year shown in each of the
conforming Hawaii’s income tax laws to the foreign corporation, include only the part of the three columns. You may use the Tax Table or Tax
changes made by the Congress in 1997, accumulation distribution that is attributable to Rate Schedules. The Tax Rate Schedules and
repealed the throwback rules applicable to Hawaii sources or is effectively connected with a appropriate prior year forms can be obtained
accumulated distributions of certain domestic trade or business carried on in Hawaii. from any taxation district office.
trusts. For tax years beginning after August 5, Line 2.—Enter any amount from line 1 that Line 18.—Enter your income tax as originally
1997, the tax on accumulation distributions from represents UNI of a domestic trust accumulated reported, corrected, or amended, before
trusts does not apply to most domestic trusts. before you were born or reached age 21. reduction for any credits for your particular earlier
The tax continues to apply to foreign trusts, However, if the multiple trust rule applies, see year shown in each of the three columns.
certain domestic trusts that were once foreign the instructions for line 4.
trusts, and certain domestic trusts created Line 20.—Nonrefundable credits that are limited
before March 1, 1984. For more information, Line 4.—Multiple Trust Rule. If you received to tax liability may be changed because of an
see section 665(c). accumulation distributions from two or more accumulation distribution. If the total allowable
other trusts that were considered to have been credits for any of the three computation years
Purpose of Form made in any of the earlier tax years in which the increases, enter the increase on line 20.
current accumulation distribution is considered However, do not treat as an increase the part of
The beneficiary of a trust that accumulated, to have been made, do not include on line 4 the the credit that was allowable as a carryforward
instead of distributing, its income currently, uses taxes attributable to the current accumulation credit in the current or any preceding year other
Form N-405 to figure the partial tax under section distribution considered to have been distributed than the computation year.
667. The fiduciary notifies the beneficiary of an in the same earlier tax year(s).
“accumulation distribution” by completing Part To refigure these credits, you must consider
IV of Schedule J (Form N-40). For this special rule only count as trusts those the changes to the tax before credits for each
trusts for which the sum of this accumulation of the three computation years due to previous
Thus, if you received a distribution for this distribution and any earlier accumulation accumulation distributions.
tax year from a trust that accumulated its distributions from the trust which are considered
income, instead of distributing it to you each under section 666(a) to have been distributed in Attach the proper form for any credit you
year (and the trust paid taxes on that income), the same earlier tax year, is $1,000 or more. refigure. The amount determined for items on
you must complete Form N-405 to compute any this line is limited to tax law provisions in effect
additional tax liability. The trustee must give you Foreign trust.—If the trust is a foreign trust, in those years involved.
a completed Part IV of Schedule J (Form N-40) see section 665(d)(2).
so you can complete this form. Line 8.—You can determine the number of Line 26.—Attach this form to the current income
years in which the UNI is deemed to have been tax return being filed by the beneficiary and add
If you received accumulation distributions distributed by counting the “throwback years” for the amount (if greater than zero) on line 26 to
from more than one trust during the current tax which there are entries on line 26 through 30 the total tax liability (before any tax credits) on
year, prepare a separate Form N-405 for each of Part IV of Schedule J (Form N-40). These the current income tax return of the beneficiary.
trust from which you received an accumulation throwback rules apply even if you would not If Hawaii estate taxes or Hawaii generation-
distribution. You can arrange the distributions have been entitled to receive a distribution in skipping transfer taxes apply to the accumulation
in any order you want them considered to have the earlier tax year if the distribution had actually distribution, reduce the partial tax proportionately
been made. been made then. for those taxes. See section 667(b)(6), for the
Definitions Note: There can be more than five computation and adjust the numerator and
“throwback years.” denominator accordingly for Hawaii taxes paid.
Undistributed Net Income (UNI).—
Undistributed net income is the distributable Line 11.—From the number of years entered on
net income (DNI) of the trust for any tax year line 8, subtract any year in which the distribution
less: (1) the amount of income required to be from column (a), Part IV of Schedule J (Form
distributed currently and any other amounts N-40) is less than the amount on line 10 of Form
properly paid or credited or required to be N-405. If the distribution for each throwback
distributed to beneficiaries in the tax year; and year is more than line 10, then enter the same
(2) the taxes imposed on the trust attributable number on line 11 as you entered on line 8.
to such DNI. Line 13.—Enter your taxable incomes for years
Accumulation Distribution.—An accumulation 2003 - 2007, even if less than five years of the
distribution is the excess of amounts properly trust had accumulated income after you became
paid, credited, or required to be distributed 21. Use the taxable income as reported,
(other than income required to be distributed amended by you, or as changed by the Hawaii
currently) over the DNI of the trust reduced by Department of Taxation. Include in the taxable
the amount of income required to be distributed income amounts considered distributed in
currently. that year as a result of prior accumulation
distributions whether from the same or another
Generally, except for tax-exempt interest, the trust, and whether made in an earlier year or the
distribution loses it character upon distribution to current year.
the beneficiary. See section 667(d) for special
rules for foreign trusts. If your taxable income as adjusted is less
than zero, enter zero.
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