2 Summary
The Shipman family has a tradition of sending their children to Yale University to receive an education that would prepare them for successful careers in their chosen fields. Amy's late grandmother, Wilma Shipman, established the Wilma Shipman Trust in the 1950s, and since then, it has amassed a sizeable corpus of assets. It only distributes dividends to Wilma's descendants on rare occasions and only when those descendants have significant financial needs. For instance, the trust sent $500,000 to Jonathan Shipman two years ago so that he might use it to assist him in launching a legal firm specializing in retirement and elder law. The family usually gives all the revenue from the trust to a single charitable organization. According to the trust rules, Amy's uncle and legal guardian, Leonard Shipman, can name the trust beneficiaries and the amounts to give each person. He also can replace the trustee and choose the organization to donate to at the end of the year. The grantor trusts regulations of section 678 govern the trust, and Leonard is responsible for reporting the transactions associated with the trust on his Form 1040. Amy has shown an interest in attending the prominent local Preparatory High School; however, the total tuition and fees for four years are about $80,000, which must be paid in advance. She negotiates with the trustee of the Wilma Shipman estate and asks for the distribution of this sum in the current year to be made payable straight to the Academy. Per the state's regulations, the parent or legal guardian must ensure that their child receives a free education in the public school system until age 16. If they make the payment to the Academy, how does it comply with the regulations of Subchapter J? Does it count as a charity contribution to the Academy? Does it count as a corpus distribution to Amy? Or does it count as something else entirely?
