Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the trustee has a P.O. box, show the box number instead.

If you receive mail for the trust in care of a third party (such as an accountant or an attorney), enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.

Every trust that completes this return must have an employer identification number (EIN). You can use one of the following methods to apply for an EIN.

If the trust has not received its EIN by the time the return is due, write “Applied for” in the space for the EIN. For more details, see Pub. 583, Starting a Business and Keeping Records.

If the charitable remainder trust has any unrelated business taxable income (within the meaning of section 512 and related regulations) for 2006, all of the trust's income is subject to the same taxes (including estimated tax payments) that are imposed on complex trusts under Subchapter J of the Internal Revenue Code. The trust cannot be taxed as a grantor trust.

If you answer “Yes,” in addition to Form 5227, file Form 1041 (if a domestic trust). Use Form 1041 to report all the trust's income (not just the unrelated business income) and its deductions (including the deduction for distributions to beneficiaries) and to compute any tax due. Use the regular trust rules contained in the Instructions for Form 1041. You must also complete Schedule I of Form 1041 to determine whether the trust is subject to any alternative minimum tax.

See the instructions for Part III on page 5 to determine the amount of the current distribution to report to each beneficiary on Form 1041, Schedule K-1.

Report all taxable interest income that was received by the trust. Examples of taxable interest include interest from:

For taxable bonds acquired after December 31, 1987, amortizable bond premium is treated as an offset to the interest income instead of as a separate interest deduction. See Pub. 550, Investment Income and Expenses.

Report on this line all qualified dividends received by the trust. In general, a qualified dividend is a dividend received during the tax year from (a) a domestic corporation or (b) a qualified foreign corporation. A qualified dividend does not include any dividend from a corporation if the corporation is (or was) exempt from income tax under section 501 or 521 for the corporation's current or preceding tax year during which the distribution was made.

Generally, these dividends are reported to the trust in box 1b of Form(s) 1099-DIV, Dividends and Distributions.

Qualified dividends are treated as a separate class of ordinary income for purposes of ordering distributions. See Ordering Rules on page 5 for more information on distributions. See Pub. 550 for additional information on qualified dividends, including holding period requirements.

Enter on line 2b the total of all ordinary dividends, including the qualified dividends reported on line 2a.

If the trust operated a business, report the income and expenses on Schedule C, Profit or Loss From Business (or Schedule C-EZ, Net Profit From Business) of Form 1040. See the instructions for F. Unrelated Business Taxable Income on page 3. Enter the net profit or loss from Schedule C or C-EZ on line 3.

Use Schedule E (Form 1040), Supplemental Income and Loss, to report the trust's income or losses from rents, royalties, partnerships, S corporations, other estates and trusts, and REMICs. Enter the net profit or loss from Schedule E on line 4. See the Instructions for Schedule E (Form 1040) for reporting requirements. If the trust received a Schedule K-1 from a partnership, S corporation, or other flow-through entity, use the corresponding lines on Form 5227 to report the interest, dividends, capital gains, etc., from the flow-through entity.

If the trust operated a farm, use Schedule F (Form 1040), Profit or Loss From Farming, to report farm income and expenses. Enter the net profit or loss from Schedule F on line 5.

Enter from Form 4797, Sales of Business Property, the gain or loss from the sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft). For more information, see the Instructions for Form 4797.

Deductions are to be allocated as follows.

No deduction is ever allowed for:

Any expense that is not deductible in determining taxable income and not allocated to nontaxable income must be allocated to corpus. For a discussion on the allocation of deductions to tax-exempt income, see the Instructions for Form 1041.

All federal income taxes for which the split-interest trust is liable because it has unrelated business taxable income, and all taxes imposed by Chapter 42 of the Internal Revenue Code (relating to private foundations), are allocated to corpus.

The total of long-term capital gains or losses from all classes (described below) is entered on line 17a. The following is a summary of the classes:

As a payer of income, the trust is required under section 6109 to request and provide a proper identifying number for each recipient of income. Enter the recipient's number on the respective Schedule K-1. Individuals and business recipients are responsible for giving you their taxpayer identification numbers upon request. You may use Form W-9, Request for Taxpayer Identification Number and Certification, to request the beneficiary's identifying number.

You do not need prior IRS approval for substitute Schedules K-1 if it is an exact copy of the IRS schedule. The boxes must use the same numbers and titles and must be in the same order and format as on the comparable IRS Schedule K-1. The substitute schedule must include the OMB number. You must request IRS approval to use other substitute Schedules K-1. To request approval, write to:

If there are two or more recipients, each will be treated as receiving his or her pro rata share of the various classes of income or corpus.

Amounts distributed by a charitable remainder annuity trust or a charitable remainder unitrust have the following characteristics in the hands of the recipients:

The accumulation distribution rules do not apply to charitable remainder trusts.

In computing the net fair market value (FMV) of the unitrust's assets, take into account all assets and liabilities without regard to whether particular items are taken into account in determining the income of the trust. The net FMV of the trust's assets may be determined on any one date during the taxable year of the trust, or by taking the average of valuations made on more than one date during the tax year of the trust, as long as the same valuation date or dates and valuation methods are used each year. See Regulations section 1.664-3.

Enter the amount of cash on deposit in checking accounts, deposits in transit, change funds, petty cash funds, or any other non-interest-bearing account. Do not include advances to employees or officers or refundable deposits paid to suppliers or others.

Enter the total of cash in savings or other interest-bearing accounts and temporary cash investments, such as money market funds, commercial paper, certificates of deposit, U.S. Treasury bills, or other governmental obligations that mature in less than one year.

Enter the total accounts receivable (reduced by the corresponding allowance for doubtful accounts) that arose from the sale of goods and/or the performance of services. Claims against vendors or refundable deposits with suppliers or others may be reported here if not significant in amount. (Otherwise, report them on line 36, Other assets.) Any receivables due from officers, directors, trustees, foundation managers, or other disqualified persons must be reported on line 28. Receivables (including loans and advances) due from other employees should be reported on line 36.

Enter here (and in an attached schedule described below) all receivables due from officers, directors, trustees, and other disqualified persons and all secured and unsecured loans (including advances) to such persons.

Enter the combined total of notes receivable and net loans receivable.

Enter the amount of materials, goods, and supplies purchased or manufactured by the trust and held for sale or use in some future period.

Enter the amount of short-term and long-term prepayments of future expenses attributable to one or more future accounting periods. Examples include prepayments of rent, insurance, and pension costs, and expenses incurred in connection with a solicitation campaign to be conducted in a future accounting period.

Enter the book value (which may be market value) of these investments. Attach a schedule that lists each security held at the end of the year and shows whether the security is listed at cost (including the value recorded at the time of receipt in the case of donated securities) or end-of-year market value. Do not include amounts shown on line 26. Governmental obligations reported on line 32a are those that mature in 1 year or more. Debt securities of the U.S. Government may be reported as a single total rather than itemized. Obligations of state and municipal governments may also be reported as a lump-sum total. Do not combine U.S. Government obligations with state and municipal obligations on the attached schedule.

Enter the book value (cost or other basis less accumulated depreciation) of all land, buildings, and equipment held for investment purposes, such as rental properties. Attach a schedule listing these investment fixed assets held at the end of the year and showing, for each item or category listed, the cost or other basis, accumulated depreciation, and book value.

Enter the amount of all other investment holdings not reported on line 32 or line 33. Attach a schedule describing each of these investments held at the end of the year. Show the book value for each and indicate whether the investment is listed at cost or end-of-year market value. Do not include program-related investments. See instructions for line 36.

Enter the book value (cost or other basis less accumulated depreciation) of all land, buildings, and equipment owned by the trust and not held for investment. This includes any equipment owned and used by the trust in conducting its charitable activities. Attach a schedule listing these fixed assets held at the end of the year and showing for each item or category listed, the cost or other basis, accumulated depreciation, and book value.

List and show the book value of each category of assets not reportable on lines 25 through 35. Attach a separate schedule if more space is needed.

One type of asset reportable on line 36 is program-related investments made primarily to accomplish a charitable purpose of the trust rather than to produce income.

Columns (a) and (b) (and column (c) if a unitrust) must always have an entry, even if it is zero.

Enter the total accounts payable to suppliers and others, and accrued expenses such as salaries payable, accrued payroll taxes, and interest payable.

Include revenue that the organization has received but not yet earned as of the balance sheet date under its method of accounting.

Enter the unpaid balance of loans received from officers, directors, trustees, and other disqualified persons. For loans outstanding at the end of the year, attach a schedule that provides (for each loan) the name and title of the lender and the information specified in the line 28 instructions.

Enter the amount of mortgages and other notes payable at the beginning and end of the year. Attach a schedule showing, as of the end of the year, the total amount of all mortgages payable and, for each nonmortgage note payable, the name of the lender and the other information specified in the line 28 instructions. The schedule should also identify the relationship of the lender to any officer, director, trustee, or other disqualified person.

List and show the amount of each liability not reportable on lines 38 through 41. Attach a separate schedule if more space is needed.

Both annuity trusts and unitrusts should include any advances from trustees on line 42. Unitrusts should also include any unitrust amounts applicable to prior periods that are unpaid but required to be paid as of the valuation date, since such amounts reduce the net FMV of the trust's assets. However, do not include any make-up amount for a net income charitable remainder trust (NIMCRUT).

Columns (a) and (b) (and column (c) if a unitrust) must always have an entry, even if it is zero.

Columns (a) and (b) must always have an entry, even if it is zero.

To figure the total annual annuity amounts for a short tax year, see Short tax years below, under the line 53 instructions.

Enter the unitrust fixed percentage (which may not be less than 5% or more than 50%).

If there is more than one unitrust recipient, attach a schedule showing the percentage of the total unitrust dollar amount payable to each recipient. The sum of these individual shares should be 100%.

This line must always have an entry, even if it is zero.

Enter the trust's 2006 accounting income determined under the terms of the governing instrument and applicable local law. Do not include extraordinary dividends or taxable stock dividends that are determined under the governing instrument and applicable local law to be allocable to corpus.

Figure the total accrued distribution deficiencies from previous years as follows.

Enter the total 2006 unitrust distributions reported in Part III.

Use this amount to determine future accrued distribution deficiencies.

A split-interest trust must have a governing instrument that requires the trust to act or refrain from acting so as not to engage in an act of self-dealing under section 4941 or subject it to the excise taxes under section 4943, 4944, or 4945. The trust may satisfy the requirements either by express language in its governing instrument or by the operation of state law which imposes the above requirements on the trust or treats these requirements as being contained in the governing instrument. If a trust claims it satisfies the requirements of section 508(e) by operation of state law, the provisions of state law must effectively impose the requirements of section 508(e) on the trust.

If, however, the state law does not apply to a governing instrument which contains mandatory directions conflicting with any of its requirements and the trust has such mandatory directions in its governing instrument, then the trust has not satisfied the requirements of section 508(e) by the operation of that state law.

The activities listed on lines 1a(1) through (6) are considered self-dealing under section 4941 unless one of the exceptions described in sections 4941(d)(2)(D), (E), (F), or (G) applies. You may also access information about self-dealing at www.irs.gov/charities/foundations/index.html and click on the link for Life Cycle of a Private Foundation.

The terms “disqualified person” and “foundation manager” are defined on page 1.

Under section 4947(b)(3)(A), a split-interest trust is not subject to the excess business holdings tax (section 4943) or tax on investments that jeopardize the trust's charitable purpose (section 4944) if all the income interest (and none of the remainder interest) of the trust is devoted solely to one or more of the charitable purposes described in section 170(c)(2)(B). In addition, all amounts in the trust for which a charitable contribution deduction was allowed under section 170 (for individual taxpayers) or similar section for personal holding companies, foreign personal holding companies, estates or trusts (including a deduction for estate or gift tax purposes), cannot have a total value of more than 60% of the total FMV of all amounts in the trust.

Under section 4947(b)(3)(B), a split-interest trust is not subject to the section 4943 or 4944 taxes if a deduction was allowed under section 170 (and related provisions for other entities) for amounts payable under the terms of the trust to every remainder beneficiary but not to any income beneficiary.

In general, excess business holdings are the amount of stock or other interest in a business enterprise that the trust must dispose of to a person other than a disqualified person in order for the trust's remaining holdings in the enterprise to be permitted holdings.

In general, the combined permitted holdings of a trust and all disqualified persons may not be more than 20% of the voting power (or beneficial or profits interest, in the case of a trust or a partnership) in any business enterprise.

There were grace periods of 15 or 20 years for certain excess business holdings that the trust held on May 26, 1969. These holdings were considered held by disqualified persons rather than the trust during the grace period. The 15-year grace period expired on May 25, 1984. This period applied when a trust and all disqualified persons together held 75% or more (but not more than 95%) interest in a business enterprise. The 20-year grace period expired on May 25, 1989. It applied if the combined holdings were more than 95%.

In general, a business enterprise means the active conduct of a trade or business, including any activity that is regularly conducted to produce income from selling goods or performing services, that is an unrelated trade or business under section 513.

The term “business enterprise” does not include:

See section 4943(d)(3) for additional items that are included in gross income from passive sources.

In general, an investment which jeopardizes any of the charitable purposes of a trust is one in which a foundation manager did not exercise ordinary business care in making the investment to provide for the long- and short-term financial needs of the trust in carrying out its charitable purposes.

For more information on investments which jeopardize charitable purposes, see Regulations section 53.4944-1.

Grants by a trust to a public charity are not taxable expenditures if the grants are not earmarked for use for any of the activities described on lines 5a(1) through (5) and there is no oral or written agreement by which the trust may cause the public charity to engage in any such prohibited activity or to select the grant recipient.

Grants made to exempt operating foundations (as defined in section 4940(d)(2)) are not subject to the expenditure responsibility provisions of section 4945. If the trust made grants to such organizations, you do not have to file Form 4720 for those grants. See the section 4945 regulations for more information.

If you answered “Yes” to any of the questions in 5a, you should answer “Yes” to 5b unless all of the transactions engaged in were “excepted” transactions. Excepted transactions are described in Regulations section 53.4945 or appear in Notices published in the Internal Revenue Bulletin, relating to disaster assistance. At the time this form went to print, there were no notices currently in effect relating to disaster assistance for “excepted” transactions to taxable expenditures.

A personal benefit contract is, in general, any life insurance, annuity, or endowment contract that benefits, directly or indirectly, a transferor, a transferor's family member, or a transferor designee that is not an organization described in section 170(c).

Enter the total of all premiums paid by the split-interest trust on any personal benefit contract if the payment of premiums is in connection with a transfer for which a deduction is not allowed under section 170(f)(10)(A). Also, if there is an understanding or expectation that any person will directly or indirectly pay any premium on a personal benefit contract for the transferor, include those premium payments in the amount entered on this line. For more information, see the Instructions for Form 8870.