Tax Type
Fiduciary Income Tax
Description
Resident Estate and Trust
Topic
Estates and Trusts
Date Issued
06-24-2002
June 24, 2002
Re: Ruling Request: Fiduciary Income Tax
Dear *****:
This will reply to your letter of April 19, 2002, in which you request a ruling as to whether the ***** (the "Trust") would be treated as a "resident trust" for Virginia income tax purposes.
FACTS
The Trust was established by an individual who was not a resident of Virginia. A bank located outside Virginia has been appointed as trustee. The books and records of the Trust are maintained outside Virginia. None of the beneficiaries of the Trust reside in Virginia.
The Trust employs a five member committee (the "Committee") to oversee and direct the trustee. The oversight authority, based on a majority vote of all members, includes directions concerning the payment of trust income and principal and the power to direct Trust investments. In addition, by unanimous vote, the Committee may remove the trustee and appoint a successor trustee.
The Committee has not conducted meetings in Virginia. Currently, none of the members of the Committee are residents of Virginia. The Trust is considering appointing a Virginia resident to the Committee. You request a ruling as to whether this appointment would cause the Trust to be deemed a "resident trust" for Virginia income tax purposes.
RULING
Code of Virginia § 58.1-381 provides that every resident estate or trust required to file a federal income tax return for the taxable year or having Virginia taxable income is required to file a Virginia fiduciary income tax return. Code of Virginia § 58.1-302 defines a "resident estate or trust" as:
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- 1. The estate of a decedent who at his death was domiciled in the Commonwealth;
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- 2. A trust created by will of a decedent who at his death was domiciled in the Commonwealth;
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- 3. A trust created by or consisting of property of a person domiciled in the Commonwealth; or
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- 4. A trust or estate which is being administered in the Commonwealth.
Title 23 of the Virginia Administrative Code ("VAC") 10-115-10 provides that "a trust or estate is ‘being administered in Virginia’ if, for example, its assets are located in Virginia, its fiduciary is a resident of Virginia, or it is under the supervision of a Virginia court."
A fiduciary is defined as a person or institution who manages money or property for another and who must exercise a standard of care in such management activity imposed by law or contract. See Black's Law Dictionary 625 (6th Ed. 1990). The oversight and distribution approval activities of the Committee attest to its fiduciary responsibilities to the Trust. As a fiduciary, the Committee would be considered to be administering the Trust.
Because the Trust has no other connection with Virginia, the relevant issue is whether the Trust would be considered to be administered in Virginia if a Virginia resident becomes a member of the Committee. Based on information provided, members of the Committee cannot exercise control over the trust individually. Instead, the Committee makes decisions by a majority or consensus of the members. Accordingly, it is the Committee that administers the Trust and not individual members. As such, so long as the Committee does not operate in Virginia or is not controlled in Virginia, membership in the Committee by a Virginia resident or residents would not make the Trust a "resident trust" for Virginia income tax purposes.
I hope the foregoing answers your question. If you have any further questions, you may contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/40207B
Rulings of the Tax Commissioner