Coming soon: AICPA practice guide for fiduciary (trust) accounting.

The AICPA Trust Accounting Income (TAI) Task Force was established to provide guidance in performing trust and estate accountings and related tax services. The AICPA Tax Division's Trust, Estate and Gift Tax Technical Resource Panel (chaired by Ruby Sawyers in 2004-2005, and Steven Thorne in 2005-2006) appointed and provided direction and oversight to the Task Force. The tools and best practices for preparation of a fiduciary (or trust) accounting are included in a Practice Guide (Guide) to help CPAs provide better fiduciary accounting services.

The Guide was developed specifically for CPAs, but will be a useful tool for anyone with fiduciary accounting responsibilities. It will provide members with a better understanding of this continually evolving and very technical subject.

Overview

Because the basis of fiduciary accounting is promulgated by statute (i.e., the Uniform Principal and Income Act (UPIA)), which some states have adopted or are considering adopting in whole or in port, one must review several legal sources to understand the principles of fiduciary accounting. As described in the Guide, the Uniform Trust Code (2000), as amended in 2001 and 2003, was drafted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) to provide the states with a comprehensive model for codifying their own Principal and Income Act. Because it would not he practical for the Guide to lake into account each state's individual principal and income statute, it is written based on the NCCUL's UPIA.

In addition, the Guide will emphasize the importance of understanding these legal aspects, as well as the terms provided by the governing instrument (and amendments, if any), before a fiduciary accounting can be prepared.

There are "statutory" differences between "fiduciary accounting income" (FAI) and Federal and state taxable income. The Guide will enable a practitioner to understand these differences. Additionally, it will explain the best practices for the tax adviser undertaking an engagement with a fiduciary, while reminding practitioners of the fiduciary's responsibilities to both income and remainder beneficiaries (which the fiduciary must take into account in preparing an accounting for any given period).

The Guide will emphasize that the tax adviser must be provided with the fiduciary's computation of accounting income to properly complete Form 1041, U.S. Income Tax Return for Estates and Trusts, for the trust.

In addition, the Guide will give the practitioner an understanding of some of the challenges posed when dealing with the UPIA's "power to adjust" and the "unitrast" provisions adopted by several states.

The Guide will include examples and diagrams to illustrate these responsibilities and procedures; an appendix will include examples and references. It is expected to he available to members in fall 2006, at http://tax.aicpa.org/Resources/ Trast+Estate+and+Gift/.

Task Force's Composition

The TAI Task Force included Jim Calzaretta (chair), Jacqueline Patterson (editor), Byrle Abbin, Ted Batson, Barbara Bond, Carol Ann Cantrell, Barbara Jones, John Letourneau, Lewis Linn, Lawrence McNamara, Jr., Howard Niad, Frances Schafer, F. Gordon Spoor and Eileen Sherr (AICPA Tax Division Technical Manager).

by Lawrence H. McNamara, Jr., CPA and member, AICPA Tax Division's Trust, Estate and Gift Tax Technical Resource Panel's Trust Accounting Income Task Force