Section 40. Virginia taxable income of a resident estate or trust

A. The Virginia taxable income of a resident estate or trust means its federal taxable income for the taxable year to which there shall be added or subtracted, as the case may be, the share of the estate or trust in the Virginia fiduciary adjustment determined under subsection B.

B. The respective shares of an estate or trust and its beneficiaries (including, solely for the purpose of this allocation, nonresident beneficiaries) in the Virginia fiduciary adjustment shall be in proportion to their respective shares of distributable net income of the estate or trust. If the estate or trust has no distributable net income for the taxable year, the share of each beneficiary in the Virginia fiduciary adjustment shall be 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 the Virginia fiduciary adjustment shall be allocated to the estate or trust.

Example 1: The Estate of Jane Doe has federal taxable income of $36,000 for calendar year 1983 and its Virginia fiduciary adjustment is a subtraction of $6,000. The Estate has three beneficiaries, two of whom are Virginia residents and the third who is a resident of Maryland. Each beneficiary has a 1/4 share of distributable net income of the Estate. In calendar year 1983 the Estate distributes $27,000 (3/4 times $36,000). Each beneficiary is entitled to subtract $1,500 (1/4 of the $6,000 Virginia fiduciary adjustment) from his federal adjusted gross income. The $1,500 balance of the adjustment is allocated to the Estate, yielding Virginia taxable income of $7,500 ($36,000 minus $27,000 distribution minus $1,500 adjustment).

Example 2: Trust X has no distributable net income and no federal taxable income for calendar year 1982. The Virginia fiduciary adjustment is $15,000, comprised of excess cost recovery under § 58.1-322 B 6 of the Code of Virginia. The trust instrument provides that all income shall be distributed currently, in the following percentages: 50% to A, 30% to B and 20% to C. All of the adjustment ($7,500 to A, $4,500 to B and $3,000 to C) is accordingly allocated to the beneficiaries and the trust's Virginia taxable income is $0.

Historical Notes

Derived from VR630-5-361, eff. January 1, 1985.

Statutory Authority

§§ 58.1-203 and 58.1-361 of the Code of Virginia.