Briefly answer the following questions:
With regard to non-spousal trusts:
A) What is the purpose of the 21-Year Rule?
B) What event occurs on the 21^st anniversary of a trust?
C) What types of properties are subject to the 21-Year Rule?
D) How can the consequences of the 21-Year Rule be avoided?
With regard to spousal trusts:
E) What is the exception to the 21-Year Rule for spousal trusts?

Question

Quizplus · Accepted Answer

The Answer is A) The 21 Year Rule prevents trusts from escaping tax on specific types of property held for long periods of time. B) The specific properties of the trust are deemed to be sold and reacquired at their market values, realizing tax gains and losses on the deemed disposition. C) Capital properties (non-depreciable), depreciable properties, land that is inventory, and resource property are subject to the 21 Year Rule. D) Properties can be transferred to the beneficiaries prior to the 21^st anniversary, at their tax cost, thereby deferring the tax effects. E) Spousal trusts are exempt from realizing a deemed disposition of the properties at the first 21 Year anniversary.

Briefly Answer the Following Questions