Briefly describe the 21 year deemed disposition rule. Your answer should include the objective of this rule.

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The Answer is This rule requires that there be a deemed disposition and reacquisition of trust capital property every 21 years. The disposition is deemed to be at fair market value, resulting in the recognition of any accrued gains on the assets. Like corporations, trusts have an unlimited life. In the absence of this rule, capital gains could accrue for an unlimited period of time inside the trust. This rule is designed to limit the accrual period.

Briefly Describe the 21 Year Deemed Disposition Rule