Page 436 - Small Business IRS Training Guides

Summary

Main Points

• Alaska Native Corporations may assign certain payments, in writing, to a §646 Settlement Trust without including

these payments in gross income.

• Native Corporations may elect to deduct contributions of properties to a Settlement Trust.

 If a Native Corporation contributes cash to a Settlement Trust, then the corporation receives a deduction equal

to the amount of cash contributed to the trust.

 If a Native Corporation contributes non-cash property to a Settlement Trust, then the corporation receives a

deduction equal to the lesser of its basis in the property or the fair market value of the property.

 The Native Corporation does not recognize gain or loss on the contributions.

 The corporate deduction is limited to taxable income, and any excess may be carried forward for 15 years.

 The earnings and profits of the corporation for the taxable year are reduced by the amount of the deduction.

 The Settlement Trust’s basis in non-cash property received from a Native Corporation is the lesser of the

contributing corporation’s basis in the property or the fair market value of the property at the time of contribution.

 A Settlement Trust may elect to defer the recognition of income for non-cash property until such property is sold.

 When a Settlement Trust disposes of property for which it made an election to defer the gain, then the income

that would have been recognized by the trust if the election were not made is ordinary income, and any excess
is treated in the same manner had the election not been made.

 An early disposition of non-cash property by a Settlement Trust invalidates the election and the trust must pay
the tax due on the previously-deferred income, plus an additional 10 percent tax, and interest.

 A Native Corporation must provide a statement to the Settlement Trust that contains information specified in
the statute.

73233-102 13821-7 Tax Cuts and Jobs Act