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Letter to the Editor

Dear Mr. Brading:

The co-authors of “Cain and Abel: The Fiduciary Income Tax Consequences of a Right of Occupancy,” which was published in the November/December 2019 issue of Probate & Property, have misquoted words of mine and attributed to me an erroneous conclusion based upon the misquotation. My words appear in my book Flexible Trusts and Estates for Uncertain Times published by the American Bar Association. Although the co-authors cited the fifth edition of my book published in 2014, the words at issue also appear in the sixth edition published in 2017.

The proposition that I stated in my book is as follows:

Arguably, the value that a beneficiary receives from his or her rent-free occupancy of a residence which is part of a trust estate is not income for income tax purposes under circumstances in which the beneficial interest includes the rent-free use of the residence.

I explicitly limited, to two discrete situations, my comment about the proposition:

The issue appears to have only academic importance, in any event, in two situations that occur, or can occur, frequently. First, if the residence is the only asset of the trust, the trustee has no income to distribute. Second, if the trust mandates the current payment of all income to the person who occupies the residence, the beneficiary receives all of the income regardless of whether, in other circumstances, the rent-free use of a residence would constitute an indirect distribution that would carry distributable net income to the beneficiary.

After posing the “question: whether the IRS treats a right of occupancy granted by the trustee as a distribution for fiduciary income tax purposes,” the co-authors of “Cain and Abel” omitted my explicit limitation of my comment and applied the misquotation contrary to my written words and thoughts, as follows:

Horn dismisses the question as one of “only academic importance,” but that is incorrect: the fact pattern set out above, confronting Adam as a trustee of a discretionary trust that includes residential real estate, is actually quite common.

Very truly yours,

Jerold I. Horn

Attorney at Law

Peoria, Illinois

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