Tax Type
Fiduciary Income Tax
Description
Resident and nonresident estates and trusts are liable for Virginia income tax
Topic
Estates and Trusts
Fiduciary
Persons Subject to Tax
Property Subject to Tax
Date Issued
08-29-2008
August 29, 2008
Re: Request for Ruling: Fiduciary Income Tax
Dear *****:
This will reply to your letter in which you request a ruling regarding the filing requirements for your client, an irrevocable trust.
FACTS
In 1972, a Virginia resident (the "Grantor") funded an irrevocable trust (the "Trust") for the benefit of his daughter (the "Beneficiary"). At the time the trust was established, the Beneficiary was also a Virginia resident. The Grantor and the Beneficiary are no longer Virginia residents. The trustee is a trust company located in Pennsylvania (State A) and the trust instrument states that the Trust is governed by State A law. None of the Trust's property is located in Virginia. The Taxpayer requests a ruling as to whether the Trust is required to file a Virginia fiduciary income tax return.
DETERMINATION
Virginia Code § 58.1-360 provides that both resident and nonresident estates and trusts are liable for Virginia income tax on Virginia taxable income. Pursuant to Va. Code § 58.1-302, a resident estate or trust is one of the following:
- 1)The estate of a decedent who at his death was domiciled in the Commonwealth;
2)A trust created by will of a decedent who at his death was domiciled in the Commonwealth;
3)A trust created by or consisting of property of a person domiciled in the Commonwealth; or
Based on the information provided, the Trust does not meet any of the four criteria set out in Va. Code § 58.1-302. As such, the Trust would not be considered to be a resident trust for Virginia income tax purposes.
Virginia taxes a nonresident trust on its gross, income from sources within Virginia less expenses attributable to the income from Virginia sources reduced by the amount of income from Virginia sources distributed to beneficiaries. See Va. Code §§ 58.1-362 and 58.1-363. As long as the Trust has no property in Virginia, it would have no Virginia source income and would not be required to file a fiduciary income tax return under Va. Code § 58.1-381 A 2.
This ruling is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
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AR/1-2294292185.B
Rulings of the Tax Commissioner