                  T.C. Summary Opinion 2005-15



                     UNITED STATES TAX COURT



                  GARY D. MYERS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3488-04S.              Filed February 16, 2005.


     Gary D. Myers, pro se.

     Joan E. Steele, for respondent.


     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed.1   The decision to

be entered is not reviewable by any other court, and this opinion

should not be cited as authority.


     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2001,
the taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure. All monetary amounts are
rounded to the nearest dollar.
                                 - 2 -

     Respondent determined a deficiency in petitioner’s Federal

income tax for the taxable year 2001 in the amount of $2,402.

     The issue for decision by the Court is whether petitioner is

required to report on his individual income tax return income

that was required to be distributed to him as the sole

beneficiary of a simple trust.

     Whether petitioner is entitled to an earned income credit is

a mechanical matter, the resolution of which is dependent solely

on our disposition of the aforementioned trust issue.

Background

     None of the facts have been stipulated.

     At the time that the petition was filed, petitioner resided

in the State of Colorado.

     Petitioner was born in November 1952.    His mother was Ruth

Irene Myers (hereinafter, either Mrs. Myers or petitioner’s

mother).

     In September 1990, Mrs. Myers created the Ruth Irene Myers

Trust.   Mrs. Myers retained the right to alter, amend, and revoke

the trust during her lifetime.    She also retained the right to

dispose of the net income and principal of the trust in such

manner as she might direct from time to time; however, unless

otherwise directed by her, the net income was payable to her at

least quarterly.   Mrs. Myers named herself and her husband, Carl

Alden Myers, as trustees.
                               - 3 -

     At a time not disclosed in the record, and perhaps because

of the death of her husband, Mrs. Myers became the sole trustee

of the trust.

     By March 2001, the health of Mrs. Myers had seriously

deteriorated.   Accordingly, at that time, Mrs. Myers named

Community First National Bank (currently, Bank of the West) as

successor trustee.   The institutional trustee continued to

administer the trust for the principal benefit of Mrs. Myers.

     On July 16, 2001, petitioner’s mother died.   At that time,

what had been a revocable trust became an irrevocable trust

pursuant to the trust indenture.   Thereupon, petitioner was the

sole beneficiary, and the institutional trustee was required to

distribute all income to him currently.

     During the last 5-1/2 months of 2001, the institutional

trustee made distributions directly to petitioner and, at

petitioner’s direction, to petitioner’s creditors.    However, not

all of the income required to be distributed to petitioner in

2001 was actually distributed to him in that year.2

     As the institutional trustee of the Ruth Irene Myers

Irrevocable Trust, Community First National Bank prepared a

Schedule K-1, Beneficiary’s Share of Income, Deductions, Credits,


     2
        Pursuant to the trust indenture, the Ruth Irene Myers
Irrevocable Trust terminated in 2002. The institutional trustee,
although required to distribute all income currently to
petitioner, deferred complete distribution during the winding up
process for the trust.
                                  - 4 -

etc., for 2001.   On the Schedule K-1, the institutional trustee

identified petitioner as the beneficiary and accurately listed

the following items of income allocable to him:

           Allocable share item                Amount
           Interest                            $3,579
           Ordinary dividends                       6
           Annuity income                      10,827

The total of these three amounts, $14,412, was then correctly

identified as petitioner’s income for regular tax purposes.

     Petitioner filed a Federal income tax return for 2001.    On

his return, petitioner listed his filing status as single.

Petitioner reported adjusted gross income in the amount of

$7,554, consisting almost exclusively of wages.    Petitioner did

not report any allocable share item in respect of his late

mother’s trust as disclosed by the institutional trustee on the

Schedule K-1.

     Also on his 2001 return, petitioner claimed an earned income

credit.   Petitioner claimed the credit in his own right without

regard to a qualifying child.

     In the notice of deficiency, respondent determined that

petitioner failed to report income from his late mother’s trust

in the amount of $14,412 as disclosed by the institutional

trustee on the Schedule K-1.    Respondent also determined that

petitioner was not entitled to an earned income credit based on

(1) the amount of his adjusted gross income, see sec. 32(a), and
                                - 5 -

(2) the amount of his investment income as derived from his late

mother’s trust, see sec. 32(i).

Discussion3

     For tax purposes, trusts are either “simple” or “complex”.

See sec. 1.651(a)-1, Income Tax Regs.    In order to be a simple

trust, a trust must be required to distribute all income

currently.    See secs. 1.651(a)-1, 1.652(a)-1, Income Tax Regs.

In contrast, a complex trust may distribute or accumulate income,

or pay or set aside income for charitable purposes.    Secs.

1.651(a)-1, 1.661(a)-1, Income Tax Regs.

     A simple trust acts as a conduit, with income flowing

through the trust to the beneficiary.    Therefore, for income tax

purposes, a beneficiary of a simple trust is required to include

in the beneficiary’s income the trust’s income that is required

to be distributed to the beneficiary currently, whether the

trust’s income is actually distributed or not.4   Sec. 652(a);

sec. 1.652(a)-1, Income Tax Regs.

     The record in the present case demonstrates that the Ruth

Irene Myers Irrevocable Trust was a simple trust.    Sec. 651; sec.

1.651(a)-1, Income Tax Regs.    Thus, all of the income that the

trust was required to distribute in 2001, i.e., $14,412, is


     3
        We decide the issue in this case without regard to the
burden of proof.
     4
        The conduit theory of trust taxation also instructs that
the income received by a beneficiary retains the same character
in the hands of the beneficiary as in the hands of the trust.
Sec. 652(b).
                              - 6 -

includable in petitioner’s income for that year.    As previously

indicated, the fact that not all of that income was actually

distributed to petitioner in 2001 is of no consequence.

     In view of the foregoing, we hold for respondent on this

issue.

Conclusion

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect our disposition of the disputed issue,



                                           Decision will be

                                      entered for respondent.
