Section 60. Share of a nonresident estate, trust or beneficiary in income from Virginia sources

A. The share of a nonresident estate or trust under 23VAC10-115-50 and the share of a nonresident beneficiary of any estate or trust under provisions otherwise applicable to nonresident individuals in estate or trust income or loss attributable to Virginia sources is determined as follows:

1. Determine the items of income, gain, loss and deduction derived from Virginia sources, which enter into the computation of distributable net income of the estate or trust for the taxable year (including such items from another estate or trust of which the first estate or trust is a beneficiary). In the absence of special provisions, "overhead" items such as interest, taxes, charitable deduction, fiduciary fees, attorney, accountant, and return preparer fees, and other deductions shall be apportioned to income within and without Virginia in the same ratio as gross income from within and without Virginia.

2. Add or subtract (as the case may be) the modifications described in § 58.1-322 of the Code of Virginia, and regulations promulgated thereunder, to the extent relating to items of income, gain, loss and deduction derived from Virginia sources which enter into the computation of distributable net income (including all such items from another estate or trust of which the first estate or trust is a beneficiary). No modification can be made under this subsection which has the effect of duplicating an item already reflected in the computation of distributable net income. For example, no modification would be made for interest which is exempt for federal purposes but taxable in Virginia to the extent the interest is already included in federal distributable net income.

3. The amounts determined under paragraphs 1 and 2 are allocated among the estate or trust and its beneficiaries (including solely for the purposes of this allocation, resident beneficiaries) in proportion to their respective shares of distributable net income. The amounts so allocated have the same character under this article as under the laws of the United States relating to federal income taxes. Where an item entering into the computation of such amounts is not characterized by such laws, it has the same character as if realized directly from the source from which realized by the estate or trust, or incurred in the same manner as incurred by the estate or trust.

Example 1: The Estate of Willie Smith (a nonresident estate) owns rental property in Virginia which produced rent in calendar year 1983 in the amount of $10,000. Such amount is the only Virginia source income for the year. Deductions for repair and maintenance amounted to $2,500, and depreciation expense was $6,000. There is one beneficiary, who received 25% of the distributable net income in calendar 1983. The shares of the Estate and beneficiary in Virginia source income are computed as follows:

Rent	$10,000
Less depreciation	(6,000)
Less repair	(2,500)
	$1,500
Plus
30% depreciation (Va. Code § 58.1-322B.6)	1,800
Net amount of Virginia source income	$3,300
Share of Estate (75% of $3,300)	$2,475
Share of beneficiary (25% of $3,300)	$825

B. If the estate or trust had no distributable net income for the taxable year, the share of each beneficiary (including, solely for the purpose of such allocation, resident beneficiaries) in the net amount determined under paragraphs 1 and 2 of subsection A is in proportion to his share of the estate or trust income for such year, under local law or the governing instrument, which is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of such net amount is allocated to the estate or trust.

Example 2: Assume the same facts as in Example 1 except that the Estate has no distributable net income (for federal income tax purposes) because it suffered losses on property located in other states. All income is required to be distributed currently to the sole beneficiary. Accordingly, the sole beneficiary's share of the Virginia source income is 100% or $3,300.

Historical Notes

Derived from VR630-5-363, eff. January 1, 1985.

Statutory Authority

§§ 58.1-203 and 58.1-363 of the Code of Virginia.