State, its Top Marginal Income Tax Rate and Shorthand |
Citations and Hyperlinks to Code, Regulation, Advisory Rulings and Cases (While effort is made to ensure accuracy, practitioners should do their own legal research and conclusions.) |
Alabama (5%)
Trust residency factors: settlor, fiduciary, beneficiary |
AL Code § 40-18-1(21): “A trust is a resident trust for a taxable year if it is a trust which meets both a. and b.:
a. The trust is created by the will of a decedent who was an Alabama resident at death or by a person who was an Alabama resident at the time such trust became irrevocable; and
b. For more than seven months during such taxable year, a person, as defined in this section, who either resides in or is domiciled in
Alabama is either a fiduciary of the trust or a beneficiary of the trust to whom distributions currently may be made.” |
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From Alabama Fiduciary Income Tax Return Form 41 Instructions:
“Nonresident estates and trusts must report Alabama source income in accordance with §40-18-14. Nonresident estates and trust are allowed deductions in computing Alabama taxable income in accordance with §40-18-15.” |
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Ala. Code §40-18-14, in referring to the term gross income for nonresident individuals, states:
“… The term “gross income,” in the case of a resident individual, includes income from sources within and outside Alabama, and in the case of a nonresident individual, includes only income from property owned or business transacted in Alabama…” |
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Ala. Code § 40-18-25: “(3) In the case of a nonresident beneficiary, income derived through an estate or trust is taxable by this state only to the extent it is derived from property owned or business transacted in this state and as determined in accordance with this section. (4) The provisions of 26 U.S.C. §642(h) [pertaining to capital loss carryforwards and excess deductions on termination] shall not apply.
(d) The tax on an electing small business trust, for which an election under 26 U.S.C. §1361(e) is in effect, and on the beneficiaries of such trust shall be determined as follows:
(1) The portion of the trust that consists of stock in one or more Alabama S corporations, as defined in Section 40-18-160, shall be treated as a separate trust. The net income of the separate trust shall be computed including only the items taken into account under Section 40-18-162, gain or loss from the disposition of stock of an Alabama S corporation, and federal income taxes and administrative expenses allocable to the income items treated under this subdivision. The net income shall be taxed at the rate of five percent. The separate trust shall not be allowed any personal exemption. ***(h) For the purpose of determining any income tax due by any nonresident beneficiary of any trust or estate, the income from intangible personal property shall not be construed to arise from sources within the state merely because the title and ownership of such intangible personal property is vested in a resident fiduciary, resident trust, or resident estate or the evidence of ownership thereof is located within the state” |
Source Income:
UDITPA, MSP |
Alabama has adopted the Mulistate Compact (UDITPA) at Ala. Code § 40-27-1: “6. (a) Capital gains and losses from sales of real property located in this state are allocable to this state. (b) Capital gains and losses from sales of tangible personal property are allocable to this state if (1) the property had a situs in this state at the time of the sale, or (2) the taxpayer’s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs. (c)
Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state.” |
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Regarding commercial domicile and sales of business, Alabama further clarified with an addition to UDITPA at ALA CODE §40-27-1.1: “Notwithstanding any other provision of law to the contrary and specifically, Section 40-27-1, for purposes of Article IV of the Multistate Tax Compact, the term “business income” means income arising from transactions or activity in the course of the taxpayer’s trade or business; or income from tangible or intangible property if the acquisition, management, or disposition of the property constitute integral parts of the taxpayer’s trade or business operations; or gain or loss resulting from the sale, exchange, or other disposition of real property or of tangible or intangible personal property, if the property while owned by the taxpayer was operationally related to the taxpayer’s trade or business carried on in Alabama or operationally related to sources within Alabama, or the property was operationally related to sources outside this state and to the taxpayer’s trade or business carried on in Alabama; or gain or loss resulting from the sale, exchange, or other disposition of stock in another corporation if the activities of the other corporation were operationally related to the taxpayer’s trade or business carried on in Alabama while the
stock was owned by the taxpayer. A taxpayer may have more than one trade or business in determining whether income is business income.” |
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Alabama Department of Revenue Website |
Alaska (0%) |
No income tax imposed on trusts. There were proposals to add an income tax in AK to close budget deficits a few years ago but nothing passed. |
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Alaska Department of Revenue website |
Arizona (2.5%) Trust residency factors: fiduciary |
Ariz. Rev. Stat. § 43-1301(5): “5. “Resident trust” means a trust of which the fiduciary is a resident of this state. If a trust has more than one fiduciary, the trust is a resident trust if at least one of the fiduciaries is a resident of this state. If a corporate fiduciary engaged in interstate trust administration is the sole fiduciary of a trust, or is a cofiduciary with a nonresident, the trust is a resident trust only if the corporate fiduciary conducts the administration of the trust in this state.” |
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From Arizona Fiduciary Income Tax Return Form 141AZ Instructions: “The starting point for a nonresident trust is that portion of the trust’s federal taxable income derived from Arizona sources.*********** Intangible income will not be considered to be from Arizona sources except where it is part of a business, trade, or occupation carried on in Arizona.” |
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Ariz. Rev. Stat. §43-1091. Gross income of a nonresident
A. In the case of nonresidents, Arizona gross income includes only that portion of federal adjusted gross income which represents income from sources within this state. |
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Ariz. Rev. Stat. §43-1092. Intangible income of a nonresident
A. Except as provided in subsection B of this section, income of nonresidents from stocks, bonds, notes or other intangible personal property is not income from sources within this state unless the property has acquired a business situs within this state, except that if a nonresident buys or sells such property in this state or places orders with brokers within this state to buy or sell such property so regularly, systematically and continuously as to constitute doing business in this state, the profit or gain derived from such activity is income from sources within this state irrespective of the situs of the property. However, in no case shall transactions extending over a period of less than six months be deemed to constitute doing business in this state.
B. Any income received by nonresidents which is derived from a small business corporation making an election pursuant to section 43-1126 shall be considered taxable income of this state. |
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Ariz. Rev. Stat. §43-1093. Nonresident beneficiary of estate or trust income
Income of estates and trusts distributed or distributable to nonresident beneficiaries is income from sources within this state only if distributed or distributable out of income of the estate or trust derived from sources within this state. |
Arkansas(4.9%, also only 50% of LTCG is taxed, with amounts over $10 million 100% exempt. No, this is not a typo or mistake, see page 2 of Form
AR1002F). 4.4%
top rate in 2024. Trust residency factors: settlor, fiduciary |
AR Code § 26-51-201(a)-(c): (a) For tax years beginning on and after January 1, 2014, a tax is imposed upon, and with respect to, the entire income of every resident, individual, trust, or estate.
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(b) However, no state income tax shall be due this state from a trust or estate created by a nonresident donor, trustor, or settlor, or by a nonresident testator even though administered by a resident trustee or personal representative except on income derived from:
(1) Lands situated in this state, including gains from any sale thereof;
(2) Any interest in lands situated in this state, including, without limitation, chattels real, including gains from any sale thereof; (3) Tangible personal property located in Arkansas, including gains from any sale thereof; and
(4) Unincorporated businesses domiciled in Arkansas.
(c) No income tax shall be due the State of Arkansas from a nonresident beneficiary on income received from a trust being administered by a resident trustee except on income derived by the trust from:
(1) Lands situated in this state, including gains from any sale thereof;
(2) Any interest in lands situated in this state, including, without limitation, chattels real, including gains from any sale thereof; (3) Tangible personal property located in Arkansas, including gains from any sale thereof; and
(4) Unincorporated businesses domiciled in Arkansas. |
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Ark. Code § 26-51-203. Fiduciaries.
(a) The tax imposed by this act shall be imposed upon resident fiduciaries, which tax shall be levied, collected, and paid annually with respect to:
(1) That part of the net income of estates or trusts which has not been distributed or become distributable to beneficiaries during the income year. In the case of two (2) or more joint fiduciaries, part of whom are nonresidents of this state, such part of the net income shall be treated as if each fiduciary had received an equal share;
(2) The net income received during the income year by deceased individuals who at the time of death were residents and who have died during the tax year without having made a return;
(3) The entire net income of resident insolvent or incompetent individuals, whether or not any portion thereof is held for the future use of the beneficiaries, where the fiduciary has complete charge of the net income.
(b) The tax imposed upon a fiduciary by this act shall be a charge against the estate or trust. |
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From Arkansas Fiduciary Income Tax Return Instructions AR1002F: “WHO MUST FILE
The fiduciary return is used to report the income of an estate or trust. Every fiduciary, or at least one of the joint fiduciaries, must file a return for the estate or trust for which they act, provided any of the following apply:
1. Any income is currently distributable;
2. The tax is payable by the beneficiaries or by the grantor;3. The net income is $3,000 or over and/or
4. Any beneficiary is a nonresident. |
Source Income:
UDITPA, MSP |
Arkansas has passed the UDITPA at AR Code §26-51-701 et seq. AR Code § 26-51-706. Capital gains and losses from sales of property: (a) Capital gains and losses from sales of real property located in this state are allocable to this state.
(b) Capital gains and losses from sales of tangible personal property are allocable to this state if:
(1) the property had a situs in this state at the time of the sale, or
(2) the taxpayer’s commercial domicile is in this state, or
(3) the property has been included in depreciation which has been allocated to this state; in which event gains or losses on such sales shall be allocated on the percentage that is used in the formula for allocating income to Arkansas during the year of such sales.
(c) Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state. |
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Arkansas Department of Finance and Administration Website |
California (13.3%, but top rate not reached until $1 million) Trust residency factors: fiduciary, beneficiary, testator |
Cal. Rev. & Tax. Code § 17742: Income taxable to the estate or trust; Residence of decedent or trust fiduciary to control
“(a) Except as otherwise provided in this chapter, the income of an estate or trust is taxable to the estate or trust. The tax applies to the entire taxable income of an estate, if the decedent was a resident, regardless of the residence of the fiduciary or beneficiary, and to the entire taxable income of a trust, if the fiduciary or beneficiary (other than a beneficiary whose interest in such trust is contingent) is a resident, regardless of the residence of the settlor.
(b) For purposes of this article the residence of a corporate fiduciary of a trust means the place where the corporation transacts the major portion of its administration of the trust.” |
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Cal. Rev. & Tax. Code § 17743:
Where the taxability of income under this chapter depends on the residence of the fiduciary and there are two or more fiduciaries for the trust, the income taxable under Section 17742 shall be apportioned according to the number of fiduciaries resident in this state pursuant to rules and regulations prescribed by the Franchise Tax Board. |
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Cal. Rev. & Tax. Code § 17744:
Where the taxability of income under this chapter depends on the residence of the beneficiary and there are two or more beneficiaries of the trust, the income taxable under Section 17742 shall be apportioned according to the number and interest of beneficiaries resident in this state pursuant to rules and regulations prescribed by the Franchise Tax Board. |
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Excerpt from the California Franchise Tax Board website: Taxability of estates and trusts
If the decedent and noncontingent beneficiaries are all nonresidents of California (for an estate), or if the fiduciaries and noncontingent beneficiaries are all nonresidents of this state (for a trust), only the following income is taxable (California Regulation Section 17742):
Income from real or personal property located in this state (Cal. Reg. 17951-3).
Business carried on within this state (Cal. Reg. 17951-4).
Intangible personal property having a business or taxable situs in this state (Cal. Reg.17952).
A noncontingent beneficiary is one whose interest is not subject to a condition precedent (California Regulation 17742(b)).
Taxability of estate and trust based on residency
Income is taxable to the estate or trust; residency of the decedent or the trust fiduciary is the controlling factor:
Under CR&TC Section 17742, the entire income of an estate is taxable if the decedent was a resident, regardless of the fiduciary’s or the beneficiary’s residence.
Under this same section, the entire income of a trust is taxable if the fiduciary or a noncontingent beneficiary is a resident, regardless of the residence of the settler. |
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State of California Franchise Tax Board Estate and Trusts Filing Requirements
California franchise tax board technical advice memorandum 2006-0002, interpreting CA Rev & Tax Code 17742 |
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Paula Trust v. California Franchise Tax Bd., No. CGC-16-556126 (Cal. Super. Ct. 3/7/18) – article on important case that practitioners in CA should follow, currently on appeal, re loopholes in source income taxation of California resident trusts |
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CA Rev & Tax Code § 17952. For purposes of computing taxable income of a nonresident or part-year resident under paragraph (1) of subdivision (i) of Section 17041, income of nonresidents from stocks, bonds, notes, or other intangible personal property is not income from sources within this state unless the property has acquired a business situs in this state, except that if a nonresident buys or sells such property in this state or places orders with brokers in this state to buy or sell such property so regularly, systematically, and continuously as to constitute doing business in this state, the profit or gain derived from such activity is income from sources within this state irrespective of the situs of the property. |
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CR&TC § 25125: “(c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state. (d) Gain or loss on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in the state to the original cost of partnership tangible property everywhere, determined at the time of the sale. In the event that more than 50 percent of the value of partnership’s assets consist of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.” |
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California Franchise Tax Board Internal Procedures Manual Residency & Sourcing Technical Manual Rev.: April 2009, “Section 3350 INTANGIBLE
PERSONAL PROPERTY: R&TC Section 17952 states that income of nonresidents from stocks, bonds, notes, or other intangible personal property is not income from sources within this state unless the property has acquired a business situs in California. The California Supreme Court determined in Merton L. Miller v. Charles J. McColgan, (1941) 17 Cal. 2d 432, that gains from stock had their source in the stock itself and the situs of the stock was the residence of its owner. The court applied the doctrine of mobilia sequuntur personam, which means “movables follow the person.” ***Sale of a partnership interest is considered a sale of an intangible asset. See the Appeal of Amyas and Evelyn P. Ames et al., 1987-SBE-042, June 17, 1987.” |
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Appeal of Amyas and Evelyn P. Ames et al., 1987-SBE-042, June 17, 1987 – taxpayers who were non-CA residents sold a limited partnership interest in a partnership that did business in California (real estate in Los Angeles). The government argued that the partnership interest itself had a CA situs (and could therefore be taxed), but the court found that mobilia sequunter personam applied and the sale of an intangible asset is sourced to the state of residency and therefore not taxed by California. |
Colorado (4.40%), with exclusion for LTCG on real or tangible property held >5yrs on up to
$100,000 |
“Resident trust” means a trust which is administered in this state. “Nonresident trust” means a trust other than a resident trust. Colo. Rev. Stat. § 39-22-103(10) |
From page 6 of Fiduciary Tax Return Instructions: “Interest, dividends, gains or losses from the sale of stocks and bonds, and pension and annuity income shall not be considered Colorado source income for a nonresident estate or trust.” |
Also, Colorado has a provision requiring the trustee to register any trusts that have their principal place of administation in Colorado. Colo. Rev. Stat. §15-16-101 |
Trust residency factors:
administration Source income:
UDITPA, MSP |
Note that for source income, the Colorado tax statute §39-22-109 (1st link below) differs from the regulation under that same statute (3d link below) as to the sale of partnerships or LLC/LPs taxed as partnerships: Regulation §39-22-109(e)(ii) states that: “Sale of Interest in Pass-through entity. Gain or loss from the sale of a Member’s active interest in a Pass-through entity is Colorado-source income in the same proportion as the entity’s average apportionment factor for the immediately prior three tax years. Gain or loss from the sale of a Member’s passive interest in a Pass-through entity is not Colorado-source income. A
Member’s interest is passive if, in the tax year the interest is sold, the Member did not materially participate in the Business of the Pass-through entity as defined in §469(h), I.R.C.” “Pass-through entity” is defined earlier in the regulation as “(e) ‘Pass-through entity’ means a partnership, limited partnership, limited liability partnership, a limited liability company that is treated as a partnership for Colorado tax purposes or a trust that is not taxed at the entity level (e.g., a grantor-type trust).” This differs from the statute, Co. Rev. Stat. § 39-22-109, which generally follows the UDITPA and reads: “(V) Income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property to the extent that such income is from property employed in a business, trade, profession, or occupation carried on in Colorado. A nonresident, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, shall not be deemed to carry on a business, trade, profession, or occupation in Colorado solely by reason of the purchase and sale of property for his own account.” Unlike the regulation, the statute does not differentiate between active and passive interests. Thus, the capital gains on sale of S corp stock or an intest in LLC/LP by a non-resident who is passive (does not materially participate) will escape CO income tax whereas the sale of interest in LLC/LP where the owner materially participates may not. That said, the regulation may not be an appropriate and reasonable interpretation of the statute (or could even be unconstitutional) – this would ultimately have to be decided by a court. Colorado’s regulation is in many respects similar to the source income tax scheme in Oregon – see article linked to below in the Oregon section on how to avoid this trap for sales of LLC/LP/S corps. If the trust does not materially participate, it may avoid CO tax on sale of the LLC/LP interest, but then the income would likely be subject to the federal
3.8% net investment income tax. |
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Colorado Revised Statutes Title 39 Taxation § 39-22-109 Income of a nonresident individual for purposes of Colorado income tax |
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Colorado Revised Statutes Title 39 Taxation § 39-22-403 Income of a nonresident estate or trust subject to income tax
(1) In the case of a nonresident estate or trust, the tax imposed by section 39-22-104 shall be apportioned in the ratio of the Colorado-source federal taxable income to the total federal taxable income, both modified as provided in section 39-22-104.
(2) Colorado-source federal taxable income of an estate or trust means:
(a) Its share of the Colorado-source federal distributable net income as determined in section 39-22-404 ; and
(b) Its share of any Colorado-source income, gain, loss, and deduction recognized for federal income tax purposes but excluded from the definition of federal distributable net income of the estate or trust as determined under section 39-22-109, as in the case of a nonresident individual, and modified as provided in section 39-22-104. |
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Colorado Revised Statutes Title 39 Taxation § 39-22-104 Income tax imposed on individuals, estates, and trusts |
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Colorado Revised Statutes Title 39 Taxation § 39-22-404 Share of a nonresident estate, trust, or beneficiary in income from sources within Colorado |
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Code of Colorado Regulation 39-22-109 COLORADO-SOURCE INCOME (this link is to all regulations, see pages 21-33 for source income regulations) |
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Colorado Rev. Stat. § 39-22-303.5 Single-factor apportionment of business income–allocation of nonbusiness income–rules–definitions |
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Colorado Department of Revenue website |
Connecticut (6.70%, increased to 6.99% as of 2018) Trust residency factors: testator, settlor, beneficiary |
Conn. Gen. Stat. § 12-701(a)(4) “Resident trust or estate” means (A) the estate of a decedent who at the time of his death was a resident of this state, (B) the estate of a person who, at the time of commencement of a case under Title 11 of the United States Code,1 was a resident of this state, (C) a trust, or a portion of a trust, consisting of property transferred by will of a decedent who at the time of his death was a resident of this state, and (D) a trust, or a portion of a trust, consisting of the property of (i) a person who was a resident of this state at the time the property was transferred to the trust if the trust was then irrevocable, (ii) a person who, if the trust was revocable at the time the property was transferred to the trust, and has not subsequently become irrevocable, was a resident of this state at the time the property was transferred to the trust or (iii) a person who, if the trust was revocable when the property was transferred to the trust but the trust has subsequently become irrevocable, was a resident of this state at the time the trust became irrevocable. For purposes of this chapter, if any trust or portion of a trust, other than a trust created by the will of a decedent, has one or more nonresident noncontingent beneficiaries, the Connecticut taxable income of the trust, as defined in subdivision (9) of this subsection, shall be modified as follows: The Connecticut taxable income of the trust shall be the sum of all such income derived from or connected with sources within this state and that portion of such income derived from or connected with all other sources which is derived by applying to all such income derived from or connected with all other sources a fraction the numerator of which is the number of resident noncontingent beneficiaries and the denominator of which is the total number of noncontingent beneficiaries.For purposes of section 12-700a [Connecticut has its own state alternative minimum tax (AMT)], if any trust or portion of a trust, other than a trust created by the will of a decedent, has one or more nonresident noncontingent beneficiaries, its adjusted federal alternative minimum taxable income, as defined in section 12-700a shall be modified as follows: The adjusted federal alternative minimum taxable income of the trust shall be the sum of all such income derived from or connected with sources within this state and that portion of such income derived from or connected with all other sources which is derived by applying to all such income derived from or connected with all other sources a fraction, the numerator of which is the number of resident noncontingent beneficiaries and the denominator of which is the total number of noncontingent beneficiaries. As used in this subdivision, “noncontingent beneficiary” means a beneficiary whose interest is not subject to a condition precedent.
(5) “Nonresident trust or estate” means any trust or estate other than a resident trust or estate or a part-year resident trust. |
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Conn. Agency Reg. Sec. 12-701(a)(9)-1 Connecticut taxable income of a resident trust or estate”***(b)(1) The Connecticut taxable income of a resident nontestamentary trust with one or more nonresident noncontingent beneficiaries shall be the sum of:
(A) all of the Connecticut taxable income of the trust that is derived from or connected with sources within this state, and
(B) the Connecticut taxable income of the trust that is derived from or connected with all other sources multiplied by a fraction, the numerator of which is the number of resident noncontingent beneficiaries, if any, and the denominator of which is the total number of noncontingent beneficiaries, whether resident or nonresident.
(2) “Derived from or connected with sources within this state” is to be so construed so as to accord with the definition of the term “derived from or connected with sources within this state” set forth in Part II in relation to the adjusted gross income of a nonresident individual.
(3) For purposes of this subsection, “noncontingent beneficiary” means every beneficiary whose interest is not subject to a condition precedent and includes every individual to whom a trustee of a nontestamentary trust during the taxable year (i) is required to distribute currently income or corpus (or both) or (ii) properly pays or credits income or corpus (or both) or (iii) may, in the trustee’s discretion, distribute income or corpus (or both). “Noncontingent beneficiary” includes every beneficiary to whom or to whose estate any of the trust’s income for the taxable year is required to be distributed at a specified future date or event and every beneficiary who has the unrestricted lifetime or testamentary power, exercisable currently or at some future specified date or event, to withdraw any of the trust’s income for the taxable year or to appoint such income to any person, including the estate of such beneficiary. The provisions of this subsection also apply to a noncontingent beneficiary which is a trust or an estate, and wherever reference is made in this subsection to an individual who is a noncontingent beneficiary, such reference shall be construed to include a trust or estate which is a noncontingent beneficiary, but shall not be construed to include a corporation which is a noncontingent beneficiary.” |
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CT Gen Stat § 12-711(3): “Income from intangible personal property, including annuities, dividends, interest and gains from the disposition of intangible personal property, shall constitute income derived from sources within this state only to the extent that such income is from (A) property employed in a business, trade, profession or occupation carried on in this state***” |
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Reg. § 12-711(b)-5. Income from intangible personal property
(a) Items of income, gain, loss and deduction derived from or connected with Connecticut sources do not include such items attributable to intangible personal property of a nonresident individual, including annuities, dividends, interest, and gains and losses from the disposition of intangible personal property, except to the extent attributable to property employed in a business, trade, profession or occupation carried on in Connecticut.
Example: Taxpayer A, a resident of New York, owns 100% of the stock of X Corporation, which operates a store in Connecticut. In 1992, the corporation pays A a salary of $20,000, all of which was earned in Connecticut, and a dividend of $2,000. A’s income from Connecticut sources is his salary of $20,000, since the dividend is not income derived from Connecticut sources.
(b) Intangible personal property is employed in a business, trade, profession or occupation carried on in this state if such property’s possession and control have been localized in connection with a business, trade, profession or occupation in Connecticut, so that the property’s substantial use and value attach to and become an asset of such business, trade, profession or occupation. An example is where a nonresident pledges stocks, bonds or other intangible personal property in Connecticut as security for the payment of indebtedness incurred in connection with a business being carried on in Connecticut by the nonresident. Another example is where a nonresident maintains a branch office in Connecticut and an interest-bearing checking account on which the agent in charge of the branch office may draw checks for the payment of expenses in connection with the activities in this state.
(c) If intangible personal property of a nonresident is employed in a business, trade, profession or occupation carried on in Connecticut, the entire income from such property, including gains from its sale, regardless of where the sale is consummated, is income derived from or connected with sources within this state. However, where a nonresident individual sells real or tangible personal property located in Connecticut and, as a result of such sale, receives intangible personal property (e.g., a note) which generates interest income and capital gain income, such interest income is generally not attributable to the sale of the real or tangible personal property but is attributable to the intangible personal property; however, such capital gain income is attributable to the sale of the real or tangible personal property located in Connecticut. See §§ 12-711(b)-3 and 12-711(b)-8 of this Part. Therefore, such interest income to a nonresident does not constitute income derived from or connected with Connecticut sources. However, interest income derived from an instrument received as a result of a sale of real or tangible personal property located in Connecticut, where the instrument is employed in a business, trade, profession or occupation carried on in this state, does constitute income derived from or connected with Connecticut sources. |
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Connecticut Income Tax Return Form CT-1041 Instructions for Trusts and Estates |
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Connecticut Department of Revenue Services website |
Delaware (6.60%) Trust residency factors: testator, settlor, fiduciary (but only if also a resident beneficiary) |
30 DE Code § 1601: ***(8) “Resident trust” means a trust:
a. Created by the will of a decedent who at death was domiciled in this State;
b. Created by, or consisting of property of, a person domiciled in this State; or
c. With respect to which the conditions of 1 of the following paragraphs are met during more than ½ of any taxable year:
1. The trust has only 1 trustee who or which is:
A. A resident individual of this State, or
B. A corporation, partnership or other entity having an office for the conduct of trust business in this State;
2. The trust has more than 1 trustee, and 1 of such trustees is a corporation, partnership or other entity having an office f or the conduct of trust business in this State; or
3. The trust has more than 1 trustee, all of whom are individuals and ½ or more of whom are resident individuals of this State .
(9) “Trust” means an entity classified as a trust for federal income tax purposes, other than a trust of which the grantor or another person is treated as the owner of the entire trust under §§ 672 through 679 of the Internal Revenue Code [26 U.S.C. §§ 672-679]. |
Source Income:
MSP |
30 DE Code § 1124 Income derived from sources in Delaware: “***(c) Intangibles. — Income from intangible personal property, including annuities, dividends, interest and gains from the disposition of intangible personal property, shall constitute income derived from sources within this State only to the extent that such income is from property employed by the taxpayer in a business, trade, commerce, profession or vocation carried on in this State. For purposes of this subsection, intangible assets of the taxpayer which are treated as held for investment for federal income tax purposes (or would be so treated if such assets were held by an individual) shall not be considered as property employed by the taxpayer in a business, trade, commerce, profession or vocation carried on in this State. Notwithstanding the foregoing and for purposes of this subsection, assets whose acquisition, management and disposition constitute integral parts of the taxpayer’s regular trade or business operations (other than the operations of a taxpayer whose trade or business is that of investing) shall not be considered held for investment.“ |
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State of Delaware Division of Revenue |
District of Columbia (10.75%) Trust Residency Factors: testator, settlor |
D.C. Code § 47-1809.01: “For the purposes of this subchapter, estates and trusts are: (1) Resident estates or trusts, or (2) nonresident estates or trusts. If the decedent was at the time of his death domiciled within the District, his estate is a resident estate, and any trust created by his will is a resident trust. If the decedent was not at the time of his death domiciled within the District, his estate is a nonresident estate, and any trust created by his will is a nonresident trust. If the creator of a trust was at the time the trust was created domiciled within the District, or if the trust consists of property of a person domiciled within the District, the trust is a resident trust. If the creator of the trust was not at the time the trust was created domiciled within the District, the trust is a nonresident trust. If the trust resulted from the dissolution of a corporation organized under the laws of the District of Columbia the trust is a resident trust. If the trust resulted from the dissolution of a foreign corporation, the trust is a nonresident trust.” |
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D.C. Code § 47-1809.02: “The residence or situs of the fiduciary shall not control the classification of estates and trusts as resident or nonresident under the provisions of § 47-1809.01.” |
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DC Code § 47–1810.02. Allocation and apportionment of District and non-District income.
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“(3)(A) Capital gains and losses from sales of real property located in the District are allocable to the District.
(B) Capital gains and losses from sales of tangible personal property are allocable to the District if:
(i) The property had a situs in the District at the time of the sale; or
(ii) The taxpayer’s commercial domicile is in the District and the taxpayer is not taxable in the state in which the property had a situs.
(C) Capital gains and losses from the sales of intangible personal property are allocable to the District if the taxpayer’s commercial domicile is in the District. |
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District of Columbia Office of Tax and Revenue |
Florida (0%) |
No income tax; however, real estate transfer taxes are higher than most states – contact FL counsel for such transfers, even if transferring LLC/LP |
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Florida Department of Revenue |
Georgia (5.75%) Trust Residency Factors: beneficiary |
GA Code § 48-7-22: (a) The tax imposed by this chapter shall be:
(1) Imposed upon resident fiduciaries and upon nonresident fiduciaries:
(A) Receiving income from business done in this state;
(B) Managing funds or property located in this state; or
(C) Managing funds or property for the benefit of a resident of this state;
(2) Imposed upon fiduciaries subject to the tax at the rates provided in this article for single individuals;
(3) Levied, collected, and paid annually with respect to:
(A) That part of the net income of an estate or trust which has not become distributable during the taxable year. It is the purpose of this Code section to tax fiduciaries or beneficiaries on all income otherwise taxable under this chapter. Income received by a resident fiduciary shallnot be subject to the tax imposed by this chapter when the income is accumulated for, is distributed, or becomes distributable during the taxable year to a nonresident of this state and when the income was received from business done outside this state, property held outside this state, or intangible property, other than from the licensing for use of the property, held by a fiduciary, including, but not limited to, gains from the sale or exchange of the property. No return of income exempt under this subparagraph shall be required;
(B) The taxable net income received during the taxable year by a deceased individual who at the time of death was a taxpayer and who died during the taxable year or subsequent to the taxable year without having made a return; and
(C) The entire taxable net income of an insolvent or incompetent person, whether or not any portion of the taxable net income is held for the future use of the beneficiaries, when the fiduciary has complete charge of the net income. |
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From 2017 Georgia Fiduciary Income Tax Return Instructions: ***Every resident and nonresident fiduciary having income from sources within Georgia or managing funds or property for the benefit of a resident of this state is required to file a Georgia income tax return on Form 501 |
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O.C.G.A. § 48-7-1 Definitions: ***(11) “Taxable nonresident” means:
(A) Every individual who is not otherwise a resident of this state for income tax purposes and who regularly and not casually or intermittently engages within this state, by himself or herself or by means of employees, agents, or partners, in employment, trade, business, professional, or other activity for financial gain or profit, including, but not limited to, the rental of real or personal property located within this state or for use within this state. “Taxable nonresident” does not include a legal resident of another state whose only activity for financial gain or profit in this state consists of performing services in this state for an employer as an employee when the remuneration for the services does not exceed the lesser of 5 percent of the income received by the person for performing services in all places during any taxable year or $5,000.00;
(B) Every individual who is not otherwise a resident of this state for income tax purposes and who sells, exchanges, or otherwise disposes of tangible property which at the time of the sale, exchange, or other disposition has a taxable situs within this state or who sells, exchanges, or otherwise disposes of intangible personal property which has acquired at the time of the sale, exchange, or other disposition a business or commercial situs within this state;
(C) Every individual who is not otherwise a resident of this state for income tax purposes and who receives the proceeds of any lottery prize awarded by the
Georgia Lottery Corporation; *** |
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Georgia Department of Revenue website |
Hawaii (11.0%) Trust Residency Factors: fiduciary, administration |
Haw. Rev. Stat. §§ 235-1 Definitions: “Resident estate” means an estate of a resident decedent the fiduciary of which was appointed by a court of this State and the administration of which is carried on in this State, and “resident trust” means a trust of which the fiduciary is a resident of the State or the administration of which is carried on in the State. |
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Hawaii Administrative Rule §18-235-1.17
“Resident trust”, defined. “Resident trust” means the same as in section 235-1, HRS.
(1) If the administration of the trust is carried on wholly in the State the trust shall be deemed a resident trust irrespective of the place of residence of the fiduciary or fiduciaries.
(2) If the sole fiduciary, or all of the fiduciaries if more than one, are residents, domestic corporations, or partnerships formed under Hawaii law, the trust shall be deemed a resident trust irrespective of the place where the trust is administered.
(3) If the administration of the trust is partly carried on in the State, the trust shall be deemed to be a resident trust if one-half or more of the fiduciaries are residents, domestic corporations, or partnerships formed under Hawaii law. |
Source Income: UDITPA, MSP but
see partnership rule
highlighted |
HI Rev Stat §235-26 Allocation of capital gains and losses. (a) Capital gains and losses from sales of real property located in this State are allocable to this State. (b) Capital gains and losses from sales of tangible personal property are allocable to this State if: (1) The property had a situs in this State at the time of the sale; or (2) The taxpayer’s commercial domicile is in this State and the taxpayer is not taxable in the state in which the property had a situs. (c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible personal property are allocable to this State if the taxpayer’s commercial domicile is in this State. (d) Gain or loss from the sale of a partnership interest is allocable to this State in the ratio of the original cost of partnership tangible property in the State to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than fifty per cent of the value of a partnership’s assets consists of intangibles, gain or loss from the sale of the partnership interest shall be allocated to this State in accordance with the sales factor of the partnership for its first full tax period immediately preceding its tax period during which the partnership interest was sold. |
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Hawaii Administrative Rules and Regulations under Title 18 Chapter 235 Income Tax Law |
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State of Hawaii Department of Taxation |
Idaho (5.8%) Trust Residency Factors: testator, settlor, fiduciary, assets, law, administration |
ID Code § 63-3015. estates and trusts. “(1) An estate is treated as a resident estate if the decedent was a resident of Idaho on the date of death.
(2) A trust, other than a qualified funeral trust, is treated as a resident trust if three (3) or more of the following conditions existed for the entire taxable year:
(a) The domicile or residency of the grantor is in Idaho;
(b) The trust is governed by Idaho law;
(c) The trust has real or tangible personal property located in Idaho;
(d) The domicile or residency of the trustee is in Idaho;
(e) The administration of the trust takes place in Idaho. Administration of the trust includes conducting trust business, investing trust assets, making administrative decisions, recordkeeping and preparation and filing of tax returns.”*** |
Source Income:
Although Idaho has passed UDITPA, see deviation in paragraph (vii) of the statute and paragraph d. of the administrative rule |
Id. Code § 63-3026A: COMPUTING IDAHO TAXABLE INCOME OF PART-YEAR OR NONRESIDENT INDIVIDUALS, TRUSTS AND ESTATES. (1) For
nonresident individuals, trusts, or estates the term “Idaho taxable income” includes only those components of Idaho taxable income as computed for a resident which are derived from or related to sources within Idaho. ***(a) Income shall be considered derived from or relating to sources within Idaho when such income is attributable to or resulting from:***(iii) The ownership or disposition of any interest in intangible personal property only to the extent that such property is employed in a business, trade, profession or occupation conducted or carried on in this state. Provided however, that interest income from an installment sale of real or tangible personal property shall constitute income from sources within this state to the extent that the property sold was located within this state. Provided further, that interest income received by a partner or shareholder of a partnership or S corporation from such partnership or S corporation shall constitute income from sources within this state to the extent that the partnership or S corporation is transacting business within this state;***(vii) Gains or losses realized from the sale or other disposition of a partnership interest or stock in an S corporation to the extent of the partnership’s or S corporation’s Idaho apportionment factor in the taxable year immediately preceding the year of sale. In the case of a nonresident individual who sells the nonresident’s interest in a publicly traded partnership defined in section 7704 of the Internal Revenue Code doing business in Idaho, the gains or losses shall be determined using the amount described in section 751 of the Internal Revenue Code, multiplied by the apportionment factor for the year in which the sale occurred. |
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Idaho Income Tax Administrative Rule 35.01.01.266 01. In General. Gross income from intangible property generally is sourced to the state of the owner’s domicile. The following are exceptions to this rule. Effective Date (4-11-06)
a. If the intangible property is employed in the owner’s trade, business or profession carried on within Idaho, any income derived from or related to the property, including gains from the sale thereof, constitutes income from Idaho sources. For example, if a nonresident pledges stocks, bonds or other intangible personal property as security for the payment of indebtedness incurred in connection with the nonresident’s Idaho business operations, the intangible property has an Idaho situs and the income derived therefrom constitutes Idaho source income. Effective Date (7-1-99)
b. Interest income from the sale of real or tangible personal property on the installment method is treated as income from the sale of the underlying property and is therefore sourced to Idaho if the underlying property was located in Idaho when sold. Effective Date (7-1-99)
c. Interest income paid by an S corporation to a shareholder or by a partnership to a partner is sourced to Idaho in proportion to the Idaho apportionment factor of the partnership or S corporation. Effective Date (7-1-99)
d. Gains or losses from the sale or other disposition of a partnership interest or stock in an S corporation are sourced to Idaho by using the Idaho apportionment factor for the entity for the taxable year immediately preceding the year of the sale of the interest or stock. However, a gain or loss from the sale of an interest in a publicly traded partnership transacting business in Idaho is Idaho source income to the extent of the gain or loss determined under Section 751, Internal Revenue Code, multiplied by the Idaho apportionment factor of the partnership for the year in which the sale occurred. Effective Date (2-27-12) |
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Idaho Tax Commission website |
Illinois (4.95% as of July 1, 2017, flat not progressive) Trust residency factors:
testator, settlor |
35 Ill. Comp. Stat. 5/1501(a)(20)(C)–(D)
(20) Resident. The term “resident” means:
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(C) A trust created by a will of a decedent who at his death was domiciled in this State; and
(D) An irrevocable trust, the grantor of which was domiciled in this State at the time such trust became irrevocable. For purpose of this subparagraph, a trust shall be considered irrevocable to the extent that the grantor is not treated as the owner thereof under Sections 671 through 678 of the Internal Revenue Code. |
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IITA Section 301 a) General definition. The term “resident” is defined in IITA Section 1501(a)(20) to mean:
1) an individual who is in Illinois for other than a temporary or transitory purpose during the taxable year or who is domiciled in Illinois but is absent from Illinois for a temporary or transitory purpose during the taxable year;
2) the estate of a decedent who, at his or her death, was domiciled in Illinois;
3) a trust created by the will of a decedent who, at his or her death, was domiciled in Illinois; and
4) an irrevocable trust, the grantor of which was domiciled in Illinois at the time the trust became irrevocable. For the purpose of this subsection (a)(4), a trust is considered irrevocable to the extent that the grantor is not treated as the owner of the trust under 26 USC 671 through 678. |
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86 Ill. Adm. Code §100.9720 – Nexus: ***e) U.S. Constitutional Jurisprudence. If not protected by U.S. or Illinois statute, an income-producing activity may, nonetheless, be protected from State taxation by principles of U.S. Constitutional jurisprudence. Controlling decisions that assert protections afforded by the Interstate Commerce Clause, the Foreign Commerce Clause and the Due Process Clause are accepted by this State as limitations on the reach of its income tax and personal property tax replacement income tax statutes. However, nothing stated in this subsection (e) shall prevent Illinois from challenging taxpayer assertions of U.S. Constitutional protection.
f) Application of the Joyce Rule. In determining whether the activity of a nonresident taxpayer conducted in this State is sufficient to create nexus for application of Illinois income tax or replacement tax, the principles established in Appeal of Joyce Inc., Cal. St. Bd. of Equal.(11/23/66), commonly known as the “Joyce rule,” shall apply. Only activity conducted by or on behalf of the nonresident taxpayer shall be considered for this purpose. Because the income of a partnership, a Subchapter S corporation or any other pass-through entity is treated as income of its owners, activity of a pass-through entity is conducted on behalf of its owners. Activity conducted by any other person, whether or not affiliated with the nonresident taxpayer, shall not be considered attributable to the taxpayer, unless the other person was acting in a representative capacity on behalf of the taxpayer. |
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Link to Linnv. Department of Revenue, 2013 IL App (4th) 121055 discussed in material. |
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35 ILCS 5/303: “(b) Capital gains and losses.
(1) Real property. Capital gains and losses from sales or exchanges of real property are allocable to this State if the property is located in this State.
(2) Tangible personal property. Capital gains and losses from sales or exchanges of tangible personal property are allocable to this State if, at the time of such sale or exchange:
(A) The property had its situs in this State; or
(B) The taxpayer had its commercial domicile in this State and was not taxable in the state in which the property had its situs.
(3) Intangibles. Capital gains and losses from sales or exchanges of intangible personal property are allocable to this State if the taxpayer had its commercial domicile in this State at the time of such sale or exchange.” |
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Illinois Dept of Tax letter ruling IT 16-0006-GIL 11/23/2016 confirming section 35 ILCS 5/303 applies: no tax on sale of stock by non-resident |
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Illinois Department of Revenue Opinion Letter re Trust Residency IT 20-0009-GIL |
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Ill. Adm. Code §100.3220(b)(3): “Intangible Personal Property. Capital gains and losses from sales or exchanges of intangible personal property are allocated to Illinois if the taxpayer has its commercial domicile in Illinois at the time of the sale or exchange. (IITA Section 303(b)(3)) For the tests of commercial domicile, see Section 100.3210” |
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Illinois Department of Revenue website |
Indiana (3.15%. 3.05% in 2024 and 3% in 2025) Counties may also have income tax rates of 1% to 3.13% that may apply to non-wage income such as capital gains, unlike most states.Trust residency factors:
administration |
Ind. Admin. Code tit. 45, r. 3.1-1-12: Determination of Indiana Taxable Adjusted Gross Income for Fiduciaries. For purposes of the taxes imposed upon the income of estates or trusts and paid by the fiduciary thereof, estates and trusts are classified as either resident or nonresident.The residence of an estate or trust is the place where it is administered. Resident estates or trusts are taxable on all income regardless of where earned. Deductions are limited to those deductions taken and allowable on the Federal Fiduciary Return, Form 1041. Nonresident estates and trusts are taxable in Indiana on all income derived from Indiana sources.
Income derived from sources within Indiana is divided into business and non business income.
(A)Business income is income derived from transactions in the regular course of the taxpayer’s trade or business, including income from intangibles where intangibles are an integral part ofthat business. Business income from a business located in Indiana would be included as income for a nonresident estate or trust. Such income would include rents or leases from property located in Indiana.
(B)Nonbusiness income would include all other income other than business income. Such income shall be considered as derived from sources within Indiana if the property from which the income is derived has a situs in Indiana, and the property does not have a situs in any other state and the taxpayer has a commercial domicile in Indiana, or in the case of patent, or copyright royalties, the patent or trademark is either utilized in Indiana or utilized in a state in which the taxpayer is not taxable and the taxpayer’s commercial domicile is in Indiana. (Department of State Revenue; Reg 6-3-1-3.5(c)(030); filed Oct 15, 1979, 11:15 am: 2 IR 1518; errata, 2 IR 1743) |
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From Indiana Department of Revenue Fiduciary Income Tax FAQs (Frequently Asked Questions)***7. Is the estate or trust a resident or nonresident of Indiana?
For purposes of filing the Indiana Fiduciary Income Tax Return, estates and trusts are classified as either resident or nonresident. For Indiana, the estate or trust residence is determined by the place where it is administered. Therefore, you must determine where the trustee or personal representative is located and where the records are kept for the trust or estate.
Resident estates or trusts are taxable on all income from all sources regardless of where it is earned. Therefore, resident fiduciaries must report all income wherever derived.
Nonresident estates and trusts are taxable in Indiana on all income derived from Indiana sources. Nonresident estates and trusts must adjust federal taxable income (or loss) to reflect taxable income allocable to Indiana.
Income received from Indiana sources is considered Indiana income to nonresidents, except certain types of Indiana source income that are subject to tax only by the taxpayer’s legal state of residence. Interest, dividends, royalties and gains from the sale of capital assets are subject to tax only by the taxpayer’s state of legal residence unless such income results from the conduct of a trade or business in Indiana. If a trade or business is conducted in Indiana, the income should be reported as Indiana income. |
Source Income: although Indiana has not passed UDITPA, this rule is similar |
Ind. Code Ann. § 6-3-2-2 (i) (1) Capital gains and losses from sales of real property located in this state are allocable to this state.
(2) Capital gains and losses from sales of tangible personal property are allocable to this state if:
(i) the property had a situs in this state at the time of the sale; or
(ii) the taxpayer’s commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs.
(3) Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer’s commercial domicile is in this state. |
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Indiana Department of Revenue |
Iowa (6.00%, lowered to 5.7% in 2024 then 3.8% in 2025) Trust Residency Factors: testator, fiduciary, administration, |
IA Code § 422.6 Income from estates or trusts
The tax imposed by section 422.5 less the amounts of nonrefundable credits allowed under this division apply to and are a charge against estates and trusts with respect to their taxable income, and the rates are the same as those applicable to individuals. The fiduciary shall make the return of income for the estate or trust for which the fiduciary acts, whether the income is taxable to the estate or trust or to the beneficiaries. ***
The beneficiary of a trust who receives an accumulation distribution shall be allowed credit without interest for the Iowa income taxes paid by the trust attributable to the accumulation distribution in a manner corresponding to the provisions for credit under the federal income tax relating to accumulation distributions as contained in the Internal Revenue Code. The trust is not entitled to a refund of taxes paid on the distributions. The trust shall maintain detailed records to verify the computation of the tax. |
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Iowa Admin. Code r. 701-89.3(1) Testamentary trusts. The situs of a testamentary trust for tax purposes is the state of the decedent’s residence at the time of death until the jurisdiction of the court in which the trust proceedings are pending is terminated. In the event of termination and the trust remains open, the situs of the trust is governed by the same rules as pertain to the situs of inter vivos trusts.(2) Inter vivos trusts. If an inter vivos trust is created by order of court or makes an accounting to the court, its situs is the state where the court having jurisdiction is located until the jurisdiction is terminated. The situs of an inter vivos trust which is subject to the grantor trust rules under 26 U.S.C. Sections 671 to 679 is the state of the grantor’s residence, or the state of residence of the person other than the grantor deemed the owner, to the extent the income of the trust is governed by the grantor trust rules. If an inter vivos trust (other than a trust subject to the grantor trust rules in 26 U.S.C. Sections 671 to 679) is not required to make an accounting to and is not subject to the control of a court, its situs depends on the relevant facts of each case. The relevant facts include, but are not limited to: the residence of the trustees or a majority of them; the location of the principal office where the trust is administered; and the location of the evidence of the intangible assets of the trust (such as stocks, bonds, bank accounts, etc.). The residence of the grantor of a trust, not subject to the grantor trust rules under 26 U.S.C. Sections 671 to 679, is not a controlling factor as to the situs of the trust, unless the person is also a trustee. A statement in the trust instrument that the law of a certain jurisdiction shall govern the administration of the trust is not a controlling factor in determining situs. The residence of the beneficiaries of a trust is also not relevant in determining situs. |
Source Income:
Iowa is not a UDITPA state, see differentiations between sales of entities noted |
Iowa Administrative Code §40.16(9): “Capital gains or losses from sales or exchanges of ownership interests in Iowa business entities by nonresidents of Iowa.
Nonresidents of Iowa who sell or exchange ownership interests in various Iowa business entities will be subject to Iowa income tax on capital gains and capital losses from those transactions for different entities as described in the following paragraphs: a. Capital gains from sales or exchanges of stock in C corporations and S corporations. When a nonresident of Iowa sells or exchanges stock in a C corporation or an S corporation, that shareholder is selling or exchanging the stock, which is intangible personal property. The capital gain received by a nonresident of Iowa from the sale or exchange of capital stock of a C corporation or an S corporation is taxable to the state of the personal domicile or residence of the owner of the capital stock unless the stock attains an independent business situs apart from the personal domicile of the individual who sold the capital stock. The stock may acquire an independent business situs in Iowa if the stock had been used as an integral part of some business activity occurring in Iowa in the year in which the sale or exchange of the stock had taken place. Whether the stock has attained an independent business status is determined on a factual basis.
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b. Capital gains from sales or exchanges of interests in partnerships. When a nonresident of Iowa sells or exchanges the individual’s interest in a partnership, the nonresident is actually selling an intangible since the partnership can continue without the nonresident partner and the assets used by the partnership are legally owned by the partnership and an individual retains only an equitable interest in the assets of the partnership by virtue of the partner’s ownership interest in the partnership. However, because of the unique attributes of partnerships, the owner’s interest in a partnership is considered to be localized or “sourced” at the situs of the partnership’s activities as a matter of law. Arizona Tractor Co. v. Arizona State Tax Com’n., 566 P.2d 1348, 1350 (Ariz. App. 1997); Iowa Code chapter 486 (unique attributes of a partnership defined). Therefore, if a partnership conducts all of its business in Iowa, 100 percent of the gain on the sale or exchange of a partnership interest would be attributable to Iowa. On the other hand, if the partnership conducts 100 percent of its business outside of Iowa, none of the gain would be attributable to Iowa for purposes of the Iowa income tax. In the situation where a partnership conducts business both in and out of Iowa, the capital gain from the sale or exchange of an interest in the partnership would be allocated or apportioned in and out of Iowa based upon the partnership’s activities in and out of Iowa in the year of the sale or exchange. Note that if a partnership is a publicly traded partnership and is taxed as a corporation for federal income tax purposes, any capital gains realized on the sale or exchange of a nonresident partner’s interest in the partnership will receive the same tax treatment as the capital gain from the sale or exchange of an interest in a C corporation or an S corporation as specified in paragraph “a” of this subrule.
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d. Capital gains from sales or exchanges of interests in limited liability companies. Limited liability companies are hybrid business entities containing elements of both a partnership and a corporation. If a limited liability company properly elected to file or would have been required to file a federal partnership tax return, a capital gain from the sale or exchange of an ownership interest in the limited liability company by a nonresident member of the company would be taxable to Iowa to the same extent as if the individual were selling a similar interest in a partnership as described in paragraph “c” of this subrule. However, if the limited liability company properly elected or would have been required to file a federal corporation tax return, a nonresident member who sells or exchanges an ownership interest in the limited liability company would be treated the same as if the nonresident were selling a similar interest in a C corporation or an S corporation as described in paragraph “a” of this subrule.” |
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Iowa Department of Revenue website |
Kansas(5.70%) |
Kan. Stat. Ann. §§ 79-32,109(d): “Resident trust” means a trust which is administered in this state. A trust shall not be deemed to be administered in this state solely because it is subject to the jurisdiction of a district court within this state. “Nonresident trust” means a trust other than a resident trust. |
Trust residency factors:
administration Source income: UDITPA, MSP |
Kan. Stat. § 79-32,109(h): ”Modified Kansas source income” means that part of a nonresident individual’s Kansas adjusted gross income as set forth in K.S.A. 79-32,117, and amendments thereto, derived from sources in Kansas. Items of income*** shall be considered derived from sources in Kansas to the extent that they are attributable to: (1) The ownership of any interest in real or tangible personal property in this state; (2) a business, trade, profession or occupation carried on in this state; (3) a business, trade, profession or occupation carried on partly within and partly without this state as determined by the uniform division of income for tax purposes act as set forth in K.S.A. 79-3271 through K.S.A. 79-3293, and amendments thereto; (4) the distributive share of partnership income, gain, loss and deduction determined under this section as if the partnership were a nonresident individual; (5) the share of estate or trust income, gain, loss and deduction determined under K.S.A. 79-32,137, and amendments thereto; (6) prizes won from lottery games conducted by the Kansas lottery; (7) any winnings from parimutuel wagering derived from the conduct of parimutuel activities within this state; or (8) income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property to the extent that such income is from property employed in a trade, business, profession or occupation carried on in Kansas. A nonresident, other than a dealer holding property primarily for sale to customers in the ordinary course of such dealer’s trade or business, shall not be deemed to carry on a business, trade, profession or occupation in Kansas solely by reason of the purchase and sale of property for such nonresident’s own account. “Modified Kansas source income” shall not include: *** (2) such individual’s share of distributed or undistributed taxable income or net operating loss of a corporation which is an electing small business corporation unless an agreement is filed as provided in K.S.A. 79-32,139, and amendments thereto, in which event, the “modified Kansas source income” of such nonresident individual shall include such individual’s share of such corporation’s distributed and undistributed taxable income or net operating loss as such share is determined under the internal revenue code only to the extent, however, that such income, gain or loss is at the corporate level, derived from sources within Kansas. |
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Kansas Department of Revenue website |
Kentucky (4.5% over $75,000, with change to 5% flat + add back 199A deduction, starting Jan 1, 2018 per HB 366/487, see KRS §141.020) |
103 KAR 19:010. “Computation of income; estates and trusts: Section 1. General. All provisions of KRS Chapter 141 (and related administrative regulations) that apply to individuals shall also apply to fiduciaries and returns filed by fiduciaries, except when such provisions conflict with provisions dealing specifically with fiduciaries. ***Section 4. Resident Estate or Trust. A resident estate or trust shall report and pay tax on all taxable income except that portion of net income distributable or distributed during the taxable year, and that portion of the net income from intangible personal property attributable to a nonresident beneficiary. Section 5. Resident Beneficiary. A resident beneficiary must report and pay tax on his share of the distributed or distributable income from a resident or nonresident estate or trust.
Section 6. Nonresident Estate or Trust and Nonresident Beneficiaries. A nonresident estate, trust, or beneficiary is subject to tax only on income received from real or tangible personal property located in Kentucky.” |
Trust residency factors: fiduciary, administration |
KRS §386B.1-060 Principal place of administration.
(1) Without precluding other means for establishing a connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if:
(a) A trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction; or (b) All or part of the administration occurs in the designated jurisdiction.
(2)A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries.
(3)Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (2) of this section, may transfer the trust’s principal place of administration to another state or to a jurisdiction outside of the United States.
(4)The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust’s principal place of administration not less than sixty (60) days before initiating the transfer. The notice of proposed transfer shall include:
(a)The name of the jurisdiction to which the principal place of administration is to be transferred;
(b)The address and telephone number at the new location at which the trustee can be contacted;
(c)An explanation of the reasons for the proposed transfer;
(d)The date on which the proposed transfer is anticipated to occur; and
(e)The date, not less than sixty (60) days after the giving of the notice, by which the qualified beneficiary shall notify the trustee of an objection to the proposed transfer.
(5) The authority of a trustee under this section to transfer a trust’s principal place of administration ends if a qualified beneficiary notifies the trustee of an objection to the proposed transfer on or before the date specified in the notice. |
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Kentucky Fiduciary Income Tax Return Instructions |
Source income: Kentucky has passed UDITPA, but see modifications |
KRS §141.020(4): “***A nonresident individual shall be taxable only upon the amount of income received by the individual from labor performed, business done, or from other activities in this state, from tangible property located in this state, and from intangible property which has acquired a business situs in this state; provided, however, that the situs of intangible personal property shall be at the residence of the real or beneficial owner and not at the residence of a trustee having custody or possession thereof. The remainder of the income received by such nonresident shall be deemed nontaxable by this state.” |
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103 KAR 17:060 “Section 4. Taxation of Nonresidents. (1) Any net income of a nonresident shall be subject to Kentucky income tax if it is derived from services performed in Kentucky, from property located in Kentucky, or from income received from a pass-through entity doing business in Kentucky. Income from sources outside Kentucky shall not be subject to Kentucky income tax. Losses incurred outside Kentucky shall not be deductible in computing Kentucky adjusted gross income.” |
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103 KAR 19:010: “Section 5. Income from Kentucky Sources. Income from Kentucky sources shall include income arising from all: (1) Activities carried on in this state, including labor performed or business done in this state; (2) Services performed in this state; (3) Real or tangible property located in this state; or (4) Intangible property that has acquired a business situs in this state.
Section 6. Nonresident Estate or Trust. A nonresident estate with gross income for the taxable year from Kentucky sources of $1,200 or more and a nonresident trust with gross income for the taxable year from Kentucky sources of $100 or more shall pay tax on all taxable income from Kentucky sources, except that portion of net income distributable or distributed during the taxable year and that portion of the net income from intangible personal property attributable to a nonresident beneficiary.
Section 7. Nonresident Beneficiaries. Nonresident beneficiaries shall pay tax on income derived from Kentucky sources.” |
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Kentucky Department of Revenue |
Louisiana (4.25%, lowering to 3% in 2025) Trust Residency Factors: testator,
law |
LA Rev Stat § 47:300.10: “(3)(a) “Resident trust” means a trust or a portion of a trust created by last will and testament of a decedent who at his death was domiciled in this state.
(b) A trust other than a trust described in Subparagraph (3)(a) shall be considered a resident trust if the trust instrument provides that the trust shall be governed by the laws of the state of Louisiana. If the trust instrument provides that the trust is governed by the laws of any state other than the state of Louisiana, then the trust shall not be considered a resident trust. If the trust instrument is silent with regard to the designation of the governing law, then the trust shall be considered a resident trust only if the trust is administered in this state.(4) “Nonresident estate” and “nonresident trust” means any estate or trust that is not considered a resident estate or a resident trust as defined in this Section.” |
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LA Rev Stat § 47:300.3 “Residents and nonresidents
The tax imposed by R.S. 47:300.1 upon the income of estates or trusts shall apply to residents and nonresidents as follows:
(1)Resident estates or trusts are subject to the tax upon income from whatever source derived.
(2)Nonresident estates or trusts are subject to the tax upon the income earned within or derived from sources within this state. Income earned within or derived from sources within this state means income allocated and apportioned to Louisiana pursuant to R.S. 47:241 through 247.”*** |
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LA Rev Stat § 47:181 Imposition of tax on estates and trusts
A. Application of tax. The taxes imposed by this Chapter upon individuals shall apply to the income of estates or of any kind of property held in trust including:
(1)Income accumulated in trust for the benefit of unborn or unascertained person or persons with contingent interests, and incomes accumulated or held for future distribution under the terms of will or trust;
(2)Income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a tutor of a minor which is to be held or distributed as the court may direct;
(3)Income received by estates of deceased persons during the period of administration or settlement of the estate; and
(4)Income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated. B. Computation and payment.
(1) The tax shall be computed upon the net income of the estate or trust, and shall be paid by the fiduciary, except as provided in R.S. 47:186, relating to revocable trusts, and R.S. 47:187 relating to income for benefit of the grantor. For return made by the beneficiary see R.S. 47:162.*** |
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LA Rev Stat § 47:300.7: Louisiana taxable income of nonresident estate or trust
A. Definition. “Louisiana taxable income” of a nonresident estate or trust means such portion of the taxable income of the nonresident estate or trust determined in accordance with federal law for the same taxable year, as specifically modified by the provisions contained in Subsection C of this Section, that was earned within or derived from sources within this state, less a federal income tax deduction to be computed following the provisions of R.S. 47:287.83 and 287.85. B. Computation. Louisiana taxable income of a nonresident estate or trust for a taxable year is computed by applying the allocation and apportionment provisions of R.S. 47:241 through 247 to the estate’s or trust’s federal taxable income for the same taxable year as specifically modified by Subsection C of this
Section.*** |
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LA Rev Stat § 47:243 Computation of net allocable income from Louisiana sources
A. Items of gross allocable income shall be allocated directly to the states from which such items of income are derived, as follows:
(1)Rents and royalties from immovable or corporeal movable property, and profits from sales and exchanges of capital assets consisting of immovable or corporeal movable property, shall be allocated to the state where such property is located at the time the income is derived.
(2)Interest on customers’ notes and accounts shall be allocated to the state in which such customers are located.
(3)Profits from sales or exchanges not made in the regular course of business, of property, other than capital assets consisting of incorporeal property or rights, shall be allocated to the state where such property is located at the time of the sale. A mineral lease, royalty interest, oil payment or other mineral interest shall be located in the state in which the property subject to such mineral interest is situated.
(4)Other interest, dividends and profits from sales and exchanges of capital assets consisting of incorporeal property or rights shall be allocated to the state in which the securities or credits producing such income have their situs, which shall be at the business situs of such securities or credits if they have been so used in connection with the taxpayer’s business as to acquire a business situs, or, in the absence of such a business situs, shall be at the legal domicile of the taxpayer in the case of an individual or at the commercial domicile of the taxpayer in the case of a corporation; provided that dividends upon stock having a situs in Louisiana received by a corporation from another corporation which is controlled by the former, through ownership of fifty percent or more of the voting stock of the latter, shall be allocated to the state or states in which is earned the income from which the dividends are paid, such allocation to be made in proportion to the respective amounts of such income earned in each state; and provided, further, that interest on securities and credits having a situs in Louisiana received by a corporation from another corporation which is controlled by the former through ownership of fifty percent or more of the voting stock of the latter, shall be allocated to the state or states in which the real and tangible personal property of the controlled corporation is located, on the basis of the ratio of the value of such property located in Louisiana to the total value of such property within and without the state.
(5)Royalties or similar revenue from the use of patents, trademarks, copyrights, secret processes and other similar intangible rights shall be allocated to the state or states in which such rights are used.
(6)Estates, trusts and partnerships having a non-resident individual or a corporation as a member or beneficiary shall allocate and apportion their income within and without this state in accordance with the processes and formulas prescribed in this Part, and the share of any such non-resident or corporation member or beneficiary in the net income from sources in this state as so computed, shall be allocated to this state in the return of such member or beneficiary. |
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Louisiana Department of Revenue website |
Maine (7.15%) |
36 ME Rev Stat § 5102(4): “Resident estate or trust. “Resident estate or trust” shall mean:
A. The estate of a decedent who at his death was domiciled in this State;
B. A trust created by will of a decedent who at death was domiciled in this State; or
C. A trust created by, or consisting of property of, a person domiciled in this State.” |
Trust Residency Factors: testator, settlor |
36 ME Rev. Stat. § 5142. Adjusted gross income from sources in this State ******** 3. Intangibles. Income from intangible personal property including annuities, dividends, interest and gains from the disposition of intangible personal property, shall constitute income derived from sources within this State only to the extent that such income is from property employed in a business, trade, profession, or occupation carried on in this State. 3-A. Gain or loss on sale of partnership interest. Notwithstanding subsection 3, the gain or loss on the sale of a partnership interest is sourced to this State in an amount equal to the gain or loss multiplied by the ratio obtained by dividing the original cost of partnership tangible property located in Maine by the original cost of partnership tangible property everywhere, determined at the time of the sale. Tangible property includes property owned or rented and is valued in accordance with section 5211, subsection 10. If more than 50% of the value of the partnership’s assets consist of intangible property, gain or loss from the sale of the partnership interest is sourced to this State in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold.*** |
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Maine Revenue Services website |
Maryland (5.75%) Trust residency factors:
testator, settlor, administration |
MD Tax-Gen Code § 10-101(k)(1): “Resident” means***
(iii) a fiduciary, other than a personal representative, of a trust if:
1. the trust was created, or consists of property transferred, by the will of a decedent who was domiciled in the State on the date of the decedent’s death;
2. the creator or grantor of the trust is a current resident of the State; or
3. the trust is principally administered in the State. |
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Maryland Income Tax Administrative Release No. 16: Subject: Subject: Fiduciaries, Including Estates and Trusts “B. Who is a Resident Fiduciary?
Chapter 1 of the Acts of 1992 clarified and broadened the rules for determining who is a resident fiduciary. See § 10-101 of the Tax-General Article of the Annotated Code of Maryland.
1. Personal Representative of an Estate.
A fiduciary who is a personal representative of an estate is considered a resident of Maryland if the decedent was domiciled in this State on the date of the decedent’s death.
2. A Fiduciary Other than a Personal Representative.
A fiduciary, other than a personal representative, is considered a resident of Maryland if:
a. The trust was created, or consists of property transferred, by the will of a decedent who was domiciled in this State on the date of the decedent’s death; b. The creator or grantor of the trust is a current resident of this State; or
c. The trust is principally administered in this State.” |
Source Income: not a UDITPA or MSP state, see divergent analysis |
Maryland Income Tax Administrative Release No. 6: Subject: Taxation of Pass-through Entities Having Nonresident Members, page 2:
“The pass-through entity’s nonresident taxable income includes any income derived from real or tangible personal property in Maryland, any
income from business that is in part or wholly carried on in Maryland, any income derived from an occupation, profession or trade carried on in part or wholly in Maryland, and any income derived from Maryland wagering. This includes any income derived from the sale or other disposition of an ownership interest in a pass-through entity where the pass-through entity owns real or personal property in Maryland or conducts a business in Maryland.“ |
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Despite the administrative guidance above, Maryland’s statute and administative code are quite vague on the issue of sales of intangible pass through entities, see Code of Maryland Regulations 03.04.02.06(C): “Subtractions from Federal Adjusted Gross Income. To the extent included in computing federal adjusted gross income, the following are subtracted from the federal adjusted gross income of a nonresident individual to determine Maryland adjusted gross income:
(1) Income derived from:
***
(d)That part of a business, occupation, profession, or trade carried on by the individual both within and without this State that is attributable to the business, occupation, profession, or trade carried on outside this State;
(e)A pass-through entity that is equal to the member’s distributive or pro rata share attributable to the business carried on outside this State; (f) Annuities, pensions, state and local income tax refunds, interest, dividends, or other intangible property except if from:
(i) Maryland State lottery prizes or other gambling winnings derived from this State; or
(ii) A business, occupation, profession, or trade carried on by the individual in this State; |
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Comptroller of Maryland website |
Massachusetts (9.00%)Trust residency factors: testator, settlor, fiduciary |
830 CMR 62.10.1 “(a) Testamentary Trusts. Trusts created under the will of a person who died a resident of Massachusetts are subject to the taxing jurisdiction of Massachusetts with respect to all of their taxable income from whatever source derived. Trusts created under the will of a person who died a resident of any other state or foreign country are subject to the taxing jurisdiction of Massachusetts only to the extent of income derived by the trustee (regardless of his residence) from the carrying on of a profession, trade or business within Massachusetts.
(b) Trusts Inter Vivos. Inter vivos or “living trusts” which are created by a grantor during his lifetime are classified in these Regulations as either “Resident Inter Vivos Trusts” or “Non-Resident Inter Vivos Trusts”. The description of these categories and the conditions under which each category is subject to the taxing jurisdiction of Massachusetts are set out in 830 CMR 62.10.1(1)(b)1.
1. Resident Inter Vivos Trusts. To be subject to the taxing jurisdiction of Massachusetts as a “Resident Inter Vivos Trust” at least one trustee must be a resident of Massachusetts and in addition at least one of the following conditions must exist:
a.At the time of the creation of the trust the grantor (or any one of several grantors) was a resident of Massachusetts. The “time of the creation of the trust” will ordinarily be the time when a declaration of trust has been made and property delivered by the grantor to the trustee.
b.During any part of the year for which income is computed the grantor (or any one of several grantors) resided in Massachusetts. c. The grantor (or any one of several grantors) died a resident of Massachusetts.
2. Non-Resident Trusts. A “Non-Resident Inter Vivos Trust” is any inter vivos trust which is not a “Resident Inter Vivos Trust”. Such a trust is subject to the taxing jurisdiction of Massachusetts only to the extent of income derived by the Trustee from the carrying on of a profession, trade or business within Massachusetts. The residence outside of Massachusetts of the grantor, any trustee or any beneficiary, or any or all of such persons, will not remove such a trust from the taxing jurisdiction of Massachusetts. |
Source Income: not a UDITPA or MSP state, see divergent analysis |
830 CMR 62.5A.1(c)(8) outlines source income rules, with a stark difference between the sale of stock v. sale of other entities: “8. Sale of a Business or an Interest in a Business. Income from a trade or business may include income that results from the sale of a business or an interest in a business. This rule generally applies to the sale of an interest in a sole proprietorship, general partnership, limited liability partnership, a general or limited partner’s interest in a limited partnership (subject to the exception in the following sentence), or an interest in a limited liability company. It generally does not apply to the sale of a limited partner’s interest in a publicly traded limited partnership, or to the sale of shares of stock in a C or S corporation, to the extent that the income from such gain is characterized for federal income tax purposes as capital gains. Nevertheless, gain from the disposition of a limited partner’s interest in a publicly traded limited partnership or the disposition of shares of corporate stock will be considered Massachusetts source income if it is treated as compensation for federal income tax purposes. Such gain may also give rise to Massachusetts source income if, for example, the gain is otherwise connected with the taxpayer’s conduct of a trade or business, including employment (as in a case where the stock is related to the taxpayer’s compensation for services) or if the organizational form of a business is changed in anticipation of the disposition of one or more interests therein for the purpose of avoiding Massachusetts tax. Depending on the facts and circumstances of the case, gain from the sale of such corporate stock or limited partner’s interest in a publicly traded limited partnership will be taxable to non-residents if it is determined that the taxpayer has engaged in a transaction or multiple transactions, the purpose of which is the avoidance of tax upon the gain (e.g. sham or step transaction, or prohibited assignment of income). |
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Bank of America, N.A., trustee vs. Commissioner of Revenue, 474 Mass. 702 – Bank of America, N.A. (bank), in its capacity as a corporate trustee of several inter vivos trusts, qualifies as an “inhabitant” and accordingly is subject to the fiduciary income tax under G. L. c. 62, § 10 |
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Massachusetts Department of Revenue Technical Information Release (TIR) 22-14: VAS Holdings & Investments LLC v. Commissioner of Revenue:
Apportionment of Gain from the Sale of a Pass-through Entity (PTE) Interest Based Entirely Upon the Attributes of the PTE |
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Craig H. and Natalia I. Welch v. Commissioner of Revenue, ATB 2023-391 – Taxpayer was resident of New Hampshire and sold stock in business based in Massachusetts. Appellate tax board found that the gain was due to his work and value he added to the business through his employment there, essentially overriding the general maxim of mobilia sequunter personam and finding MA could still tax the capital gains on sale ($336,000). This case is on appeal to Massachusetts Appeals Court as of January 2025. |
Michigan
(4.25%) Trust residency factors: testator, settlor. By case law and administrative ruling, trustee, assets, administration, beneficiary |
MI Comp L § 206.18 Resident and domicile; definitions.
(1) “Resident” means:
(a)An individual domiciled in the state. “Domicile” means a place where a person has his true, fixed and permanent home and principal establishment to which, whenever absent therefrom he intends to return, and domicile continues until another permanent establishment is established. If an individual during the taxable year being a resident becomes a nonresident or vice versa, taxable income shall be determined separately for income in each status. If an individual lives in this state at least 183 days during the tax year or more than 1/2 the days during a taxable year of less than 12 months he shall be deemed a resident individual domiciled in this state.
(b)The estate of a decedent who at his death was domiciled in this state.
(c)Any trust created by will of a decedent who at his death was domiciled in this state and any trust created by, or consisting of property of, a person domiciled in this state, at the time the trust becomes irrevocable.” [see below for case/ruling modifications of this] |
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Blue v Michigan Department of Treasury, 185 Mich App 406; 462 NW2d 762 (1990), discussed in material. |
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Twenty-Five Years Later: Michigan Department of Treasury Revenue Administrative Bulletin 2015-15 clarifies that it will follow Blue case and that: “In addition, a trust that meets the definition of a resident trust may nonetheless become a nonresident trust if all the following are true: the trustee is not a Michigan resident; the trust assets are not held, located or administered in Michigan, and; all of the beneficiaries are nonresidents.” |
Source income:
UDITPA, MSP |
MI Comp L § 206.112 Capital gains and losses.
“(1) Capital gains and losses from sales or exchanges of real property located in this state are allocable to this state.
(2) Capital gains and losses from sales or exchanges of tangible personal property are allocable to this state if:
(a)The property had a situs in this state at the time of the sale; or
(b)The taxpayer is a resident partnership, estate or trust or individual of this state or has a commercial domicile in this state and the taxpayer is not taxable in the state in which the property had a situs.
(3) Capital gains and losses from sales or exchanges of intangible personal property are allocable to this state if the taxpayer is a resident partnership, estate or trust or individual of this state or has a commercial domicile in this state.“ |
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Michigan Department of Treasury website |
Minnesota(9.85%)Trust residency factors: testator, settlor, administration, other, but see Fielding case and articles cited below |
MN Stat § 290.01
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Subd. 3a. Trust.
The term “trust” has the meaning provided under the Internal Revenue Code, and also means designated settlement fund as defined in and taxed federally under section 468B of the Internal Revenue Code.*** Subd. 7b. Resident trust.
(a)Resident trust means a trust, except a grantor type trust, which either (1) was created by a will of a decedent who at death was domiciled in this state or (2) is an irrevocable trust, the grantor of which was domiciled in this state at the time the trust became irrevocable. For the purpose of this subdivision, a trust is considered irrevocable to the extent the grantor is not treated as the owner thereof under sections 671 to 678 of the Internal Revenue Code. The term “grantor type trust” means a trust where the income or gains of the trust are taxable to the grantor or others treated as substantial owners under sections 671 to 678 of the Internal Revenue Code. This paragraph applies to trusts, except grantor type trusts, that became irrevocable after December 31, 1995, or are first administered in Minnesota after December 31, 1995.
(b)This paragraph applies to trusts, except grantor type trusts, that are not governed under paragraph (a). A trust, except a grantor type trust, is a resident trust only if two or more of the following conditions are satisfied:
(i)a majority of the discretionary decisions of the trustees relative to the investment of trust assets are made in Minnesota;
(ii)a majority of the discretionary decisions of the trustees relative to the distributions of trust income and principal are made in Minnesota;
(iii) the official books and records of the trust, consisting of the original minutes of trustee meetings and the original trust instruments, are located in Minnesota.
(c) For purposes of paragraph (b), if the trustees delegate decisions and actions to an agent or custodian, the actions and decisions of the agent or custodian must not be taken into account in determining whether the trust is administered in Minnesota, if:
(i) the delegation was permitted under the trust agreement;
(ii) the trustees retain the power to revoke the delegation on reasonable notice; and
(iii) the trustees monitor and evaluate the performance of the agent or custodian on a regular basis as is reasonably determined by the trustees.
Subd. 8. Fiduciary.
The term “fiduciary” means a guardian, trustee, receiver, conservator, personal representative, or any person acting in any fiduciary capacity for any person or corporation. |
Source Income: MN is a UDITPA
state, though see variation in bold, also see discussion in Fielding case and article |
MN Stat § 290.17 GROSS INCOME, ALLOCATION TO STATE Subdivision 1.Scope of allocation rules. (a) The income of resident individuals is not subject to allocation outside this state. The allocation rules apply to nonresident individuals, estates, trusts, nonresident partners of partnerships, nonresident shareholders of corporations treated as “S” corporations under section 290.9725, and all corporations not having such an election in effect.
********(c) Income or gains from intangible personal property not employed in the business of the recipient of the income or gains must be assigned to this state if the recipient of the income or gains is a resident of this state or is a resident trust or estate. Gain on the sale of a partnership interest is allocable to this state in the ratio of the original cost of partnership tangible property in this state to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than 50 percent of the value of the partnership’s assets consists of intangibles, gain or loss from the sale of the partnership interest is allocated to this state in accordance with the sales factor of the partnership for its first full tax period immediately preceding the tax period of the partnership during which the partnership interest was sold. Gain on the sale of an interest in a single member limited liability company that is disregarded for federal income tax purposes is allocable to this state as if the single member limited liability company did not exist and the assets of the limited liability company are personally owned by the sole member.Gain on the sale of goodwill or income from a covenant not to compete that is connected with a business operating all or partially in Minnesota is allocated to this state to the extent that the income from the business in the year preceding the year of sale was assignable to Minnesota under subdivision 3. When an employer pays an employee for a covenant not to compete, the income allocated to this state is in the ratio of the employee’s service in Minnesota in the calendar year preceding leaving the employment of the employer over the total services performed by the employee for the employer in that year. |
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William Fielding, Trustee of the Reid and Ann MacDonald Irrevocable GST Trust for Maria V. MacDonald v. Commissioner of Revenue – Minnesota Supreme Court case. The Minnesota Department of Revenue has appealed this decision to the U.S. Supreme Court, but as of June 21, 2019, the U.S. Supreme Court has not yet granted cert. |
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Ed Morrow, David Berek, and Raj Malviya on the Minnesota Supreme Court’s Affirmation of Fielding and Its Impact on Minnesota’s and Other States’ Abilities to Tax Trust Income. LISI Income Tax Planning Newsletter #156 (Oct 4, 2018) |