State Income Tax Treatment of Nonresident Trusts: Compliance Challenges and Planning Opportunities
Determining Residency, Allocating Income Between Trust and Beneficiary, Apportionment Questions
Note: CLE credit is not offered on this program
Recording of a 110-minute CPE webinar with Q&A
This course will provide tax professionals and advisers with a practical guide into various states' rules governing nonresident trusts' income tax treatment with multistate income or beneficiary connections. The panel will address state taxation of trusts in light of the Supreme Court's grant of certiorari to North Carolina Department of Revenue v. the Kaestner 1992 Family Trust. The panel will discuss critical topics relevant to resident and nonresident trusts, focusing on the allocation of state-sourced income between trust and beneficiaries in nonresident trusts with resident beneficiaries. The webinar will also identify states that deviate from federal treatment and those states whose definitions conform to federal but have different calculation bases.
Outline
- State taxation of resident trusts
- Which states impose an income tax on resident nongrantor trusts
- Filing requirements
- Grantor vs. nongrantor trust tax treatment
- Determining whether a trust is resident or nonresident
- Key issues for nonresident trusts
- Allocating income between nongrantor trust and beneficiaries in multistate contact situations
- State apportionment issues for trusts holding active business income
- States that deviate from the federal treatment of grantor trust income
- Potential trustee issues in determining trust resident status
- The impact of federal tax reform on state taxation of resident and nonresident trusts
- Planning steps
- Avoiding issues with multiple settlors where settlers live in different states
- Establishing separate trusts in cases where beneficiaries are based in different states
Benefits
The panel will discuss these and other relevant topics:
- Critical factors in determining whether a trust is resident or nonresident for state income tax purposes
- How do some key states approach allocating income between a nonresident trust and its beneficiaries?
- Issues when trusts receive active business income from multiple states outside their resident state
- Which states deviate from the federal tax treatment of grantor trusts?
- How does North Carolina Department of Revenue v. the Kaestner 1992 Family Trust impact residency?
Faculty
Julian A. Fortuna
Partner
Taylor English Duma
Mr. Fortuna focuses his practice on domestic and international tax planning and tax controversy matters. His industry... | Read More
Mr. Fortuna focuses his practice on domestic and international tax planning and tax controversy matters. His industry experience spans clean energy, entertainment, health care, higher education, hospitality, manufacturing, non-profit, real estate and retail. Mr. Fortuna represents business entities, owners and executives, fiduciaries and beneficiaries of trusts and estates, and non-profit entities regarding all types of federal and state income, estate, and gift taxes. In tax controversies, he represents taxpayers in civil and criminal tax audits, investigations and administrative appeals before the Internal Revenue Service (IRS) and various state, local and foreign taxing authorities and in tax litigation before federal and state courts and tax tribunals.
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Kirsten Wolff
Partner
Sideman Bancroft
Ms. Wolff represents individual clients in the areas of estate planning, estate and trust administration, estate and... | Read More
Ms. Wolff represents individual clients in the areas of estate planning, estate and trust administration, estate and gift taxation, charitable gift planning, and probate. She previously practiced in the area of state and local taxation and frequently draws from that experience in her current work with clients, particularly with respect to property and income tax issues, in planning for the tax-efficient transfer of wealth. Ms. Wolff has administered trusts with complex assets in multiple international jurisdictions.
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Jeannette Yazedjian
Of Counsel
Karlin & Peebles
Ms. Yazedjian's practice focuses on estate and gift tax planning and individual and foreign income tax planning for... | Read More
Ms. Yazedjian's practice focuses on estate and gift tax planning and individual and foreign income tax planning for multigenerational and multinational families and high net worth individuals. She has extensive experience counseling clients on their cross-border financial and personal interests involving the United States, both inbound and outbound. This can include business succession planning, acquisition or disposition of U.S. real estate, tax structuring prior to entering the United States, structuring the ownership of global assets and family wealth transfers between generations and advising on the U.S. income, estate and gift tax consequences particular to the ownership of U.S. and global assets. Ms. Yazedjian is often coordinating strategies with overseas counsel to develop structures that holistically address and manage a client's worldwide tax exposure and compliance.
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