Section 20. Transitional modifications to Virginia income

A. Generally. For taxable years beginning on or after January 1, 1972, Virginia is in conformity with federal income tax laws. For taxable years beginning before January 1, 1972, a trust beneficiary was taxed on his distributive share, whether distributed or not, of the net income of a trust for the taxable year. To avoid double taxation of income because of the difference in treatment of accumulation distribution between the old and new law, a trust beneficiary may subtract from his Virginia taxable income that portion of an accumulation distribution allocable to the undistributed net income accumulated by the trust under the old law.

B. Subtraction allowed. That portion of any accumulation distribution which is allocable, under the laws of the United States relating to federal income taxes, to undistributed net income of a trust for any taxable year beginning on or before December 31, 1971, shall be subtracted from Virginia taxable income. The rules prescribed by such laws of the United States with reference to any such accumulation distribution shall be applied, mutatis mutandis.

C. Limitation on credit allowable. The credit provided by § 58.1-370 of the Code of Virginia in the case of accumulation distributions shall in no instance encompass any part of any tax paid for a taxable year beginning on or before December 31, 1971.

D. Example. A trust which reports on a calendar-year basis had undistributed net income of $7,460 at the end of calendar year 1971. In calendar year 1972 the trust makes an accumulation distribution to the beneficiary of $5,000 which, for federal income tax purposes, would be thrown back and allocated to the 1971 undistributed net income of $7,460. The modification permits the beneficiary to subtract $5,000 (the 1972 accumulation distribution allocable to the 1971 undistributed net income) from his 1972 Virginia taxable income.

Historical Notes

Derived from VR630-5-315, eff. January 1, 1985.

Statutory Authority

§§ 58.1-203 and 58.1-315 of the Code of Virginia.