§ 91.101. Definitions.
The following words and terms, when used in this chapter, have the following meanings:
Association—(i) An unincorporated enterprise owned or conducted by two or more persons, including, but not limited to, a partnership, limited partnership, limited liability partnership or restricted professional company that is deemed to be a limited partnership under 15 Pa.C.S. § 8997 (relating to taxation of restricted professional companies) or joint venture.
(ii) The term does not include an ordinary or living trust, limited liability company, decedent’s estate, tenancy in common, tenancy by the entireties or joint tenancy.
Child—A son or daughter by either natural birth or adoption. The term does not include:(i) A stepson or stepdaughter.
(ii) A son or daughter of an individual whose parental rights have been terminated.
Conservancy—An entity which possesses a tax exempt status under section 501(c)(3) of the Internal Revenue Code (26 U.S.C.A. § 501(c)(3)) and which has as its primary purpose, the preservation of land for historic, recreational, scenic, agricultural or open space opportunities.
Conversion—A change of an entity’s:(i) Form of organization.
(ii) Place of organization.
(iii) Name or identity.
Corporation—A corporation, joint-stock association, limited liability company, business trust or banking institution which is organized under the laws of the Commonwealth, the United States or any other state, territory or foreign country or dependency.
Debt—A legally enforceable obligation arising out of a genuine debtor-creditor relationship to pay a fixed or determinable sum of money at a future date.
Document—A deed, quitclaim deed, ground rent, lease, occupancy agreement, contract or other writing evidencing an interest in realty other than:(i) A will.
(ii) A conventional mortgage or assignment, extension, release or satisfaction thereof.
(iii) A contract for a deed or agreement of sale for the sale of realty whereby the legal title does not pass to the grantee until the total consideration specified in the contract or agreement has been paid, and the consideration is payable over a period of time not exceeding 30 years.
(iv) An instrument which solely grants, vests or confirms a public utility easement.
Entity—An association or corporation.
Family farm realty—One of the following:(i) Realty devoted to the business of agriculture which was transferred without tax to a family farm corporation by document accepted after July 1, 1986, or recorded after July 31, 1986, by a member of the same family which directly owns at least 75% of each class of the stock of that family farm corporation.
(ii) Realty which was transferred to a family farm corporation without tax after February 15, 1986, under a document accepted prior to July 2, 1986, and recorded prior to August 1, 1986, by a sole proprietor family member.
Financing transaction—An arrangement in which the following apply:(i) Realty is transferred by the debtor solely for the purpose of serving as security for the payment of a debt.
(ii) No sale or gift is intended.
(iii) The debtor retains possession and beneficial ownership of the real estate transferred before default.
(iv) The transferee obtains title or ownership to the real estate only so far as is necessary to render the instrument of transfer effective as security for the debt.
(v) The transferee or the transferee’s successor is obligated to return the transferred real estate at no or only nominal consideration to the debtor upon payment of the debt before default.
Living trust—An ordinary trust:(i) Which, throughout the settlor’s lifetime, is wholly revocable by the settlor without the consent of an adverse party.
(ii) Which vests no present interest in any of the trust corpus or income in any person other than the settlor or trustee until the settlor dies.
(iii) All the corpus and income of which can be reached or materially affected by the settlor without revocation of the trust or the consent of an adverse party.
(iv) From which no transfer of corpus or income may be made by the trustee at any time prior to the death of the settlor to any person in the capacity of a beneficiary other than the settlor.
(v) Under which the trustee exercises no discretion as to the disposition of the trust corpus or income during the settlor’s lifetime to any person other than the settlor without the express direction of the settlor to make the specific disposition.
(vi) Which the trustee or, if the settlor was the trustee, the successor trustee is required under the governing instrument to distribute the corpus and retained income upon the death of the settlor.
Example 1. If a trust agreement provides that the income of the trust is distributable one-half to the settlor and one-half to another person, at least annually, the trust is not a living trust because income of the trust is required to be transferred to someone other than the settlor in the capacity as a beneficiary during the settlor’s lifetime.
Example 2. If a trust agreement provides that during the settlor’s lifetime, the trustee may in the trustee’s sole and absolute discretion, make distributions to members of the settlor’s family (or other persons), the trust does not qualify as a living trust because someone other than the settlor can receive trust corpus or income without the settlor’s consent prior to the settlor’s death.
Example 3. If a trust agreement provides that during the settlor’s lifetime, the trustee, solely at the direction of the settlor, may transfer trust corpus or income to a person other than the settlor, the provision will not in itself disqualify the trust as a living trust. Because the trustee has the authority to distribute trust corpus or income to someone other than the settlor only at the settlor’s direction, effectively the settlor is making the transfer. Thus, the settlor is the party who is reaching and materially affecting the trust corpus or income. Further, the transfer is not made to the other person in the capacity as a trust beneficiary.
Ordinary trust—(i) A private trust which takes effect during the lifetime of the settlor of the trust and for which the trustees of the trust take title to property primarily for the purpose of protecting, managing or conserving trust assets, under the ordinary rules applied in the orphan’s court division of the court of common pleas or in other chancery or probate courts, until distribution to the beneficiaries of the trust.
(ii) The term does not include:
(A) Business trusts organized under Pennsylvania law or the law of any state or foreign jurisdiction, or any form of trust that has either of the following features:
(I) The treatment of beneficiaries as associates.
(II) Beneficial interests in the trust estate or profits that are evidenced by transferable shares, similar to corporate shares, or are otherwise treated as personal property.
(B) Minors’ estates.
(C) Incompetents’ estates.
(D) A resulting or constructive trust created by operation of law.
(E) A testamentary trust.
Settlor—One who creates and furnishes the consideration for the creation of a trust by the transfer of property to the trust.
Testamentary trust—A private trust that is established by will or takes effect only at or after the death of the settlor.
Authority The provisions of this § 91.101 issued under section 1107-C of the Tax Reform Code of 1971 (72 P. S. § 8107-C).
Source The provisions of this § 91.101 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4096; amended December 14, 2007, effective December 15, 2007, 37 Pa.B. 6516. Immediately preceding text appears at serial pages (233356) to (233357).
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