see date
INTRODUCTION
These regulations for the Virginia Fiduciary Income Tax are published by the authority granted the State Tax Commissioner under Virginia Code § 58-48.6 (§ 58.1-203 effective January 1, 1985) and are subject to amendment, revision and supplemental regulations as required or appropriate.
Amendments, revisions and updates to these regulations will be issued as replacement pages, each replacement page having on it the date of revision.
Each regulation section is numbered to reference the section of Title 58.1 of the Code of Virginia which it interprets. The first three digits, 630, identify these regulations, for purposes of the Virginia Register of Regulations, as regulations of the Department of Taxation. The digits following the first hyphen indicate the tax type, and the digits following the second hyphen indicate the section of Title 58.1 being interpreted. For example, the section number 630-5-360 identifies the agency (630), the fiduciary income tax (5), and the section of Title 58.1, Code of Virginia, which is interpreted (360).
W. H. Forst
State Tax Commissioner
Virginia Department of Taxation
P. O. Box 6-L
Richmond, Virginia 23282
REGULATIONS
EFFECTIVE DATE: January 1, 1985, with retroactive effect according to § 58-48.6 of the Code of Virginia (recodified as § 58.1-203)
EXPIRATION DATE: N/A
SUPERSEDES: All previous documents and any oral directives in conflict herewith.
REFERENCES: Code of Virginia §§ 58.1-302, 58.1-315, 58.1-360 through 58.1-363, through 58.1-37I, and 58.1-380 through 58.1-383 are regulated herein.
AUTHORITY: § 58-48.6, Code of Virginia, and § 58.1-203 on and after January 1, 1985.
SCOPE: Applicable to all trust, estates and beneficiaries subject to the fiduciary income tax.
SUMMARY: These are initial regulations interpreting the Virginia fiduciary income tax, consisting of §§ 630-5-302, 630-5-315, 630-5-360 through 630-5-363, through 630-5-371.1, and 630-5-380 through 630-5-383. These regulations set forth the requirements and procedures for computing and reporting, fiduciary income. They also serve to bring together in one document the applicable statutory provisions and explanation and illustration thereof.
ADOPTION DATE: September 19 , 1984
Regulation
Section Subject Page
630-5-302 DEFINITIONS
Accumulation Distribution
Income and Deductions From
Virginia Sources
Nonresident Estate or Trust
Resident Estate or Trust .
Trust, Estate
Virginia Fiduciary Adjustment
630-5-315 TRANSITIONAL MODIFICATIONS TO
VIRGINIA INCOME
Generally
Subtraction Allowed
Limitation on Credit Allowable
Example
630-5-360 IMPOSITION OF TAX
630-5-361 VIRGINIA TAXABLE INCOME OF A RESIDENT
- ESTATE OR TRUST
630-5-362 VIRGINIA TAXABLE INCOME OF A NONRESIDENT
- ESTATE OR TRUST
630-5-363 SHARE OF A NONRESIDENT ESTATE, TRUST OR
BENEFICIARY IN INCOME FROM VIRGINIA
SOURCES
630-5-370 CREDIT TO TRUST BENEFICIARY RECEIVING
- ACCUMULATION DISTRIBUTION
630-5-371 CREDITS FOR TAXES PAID OTHER STATES
630-5-371.1 OTHER CREDITS
Virginia Neighborhood Assistance
Act Credit
Urban Enterprise Zone Credit
630-5-380 ACCOUNTING
630-5-381 RETURNS OF ESTATES AND TRUSTS
Filing Requirements
- Due Date
Who to File
Report of Change
Amended Return
Final Determination
- Due Date
630-5-382 PLACE OF FILING
630-5-383 EXTENSION OF TIME FOR FILING RETURNS
§ 630-5-302. DEFINITIONS. -- For the purpose of these regulations and unless otherwise required by the context:
"Accumulation distribution" has the meaning set forth in U.S. Treasury Reg. § 1.665 (b)-1A(a).
“Income and deductions from Virginia sources" includes:
- 1. Items of income, gain, loss and deduction attributable to:
- a. The ownership of any interest in real or tangible personal property in Virginia; or
- b. A business, trade, profession or occupation carried on in Virginia.
- 2. Income from intangible personal property, including annuities, dividends, interest, royalties and gains from the disposition of intangible personal property to the extent that such income is from property employed by the taxpayer in a business, trade, profession, or occupation carried on in Virginia.
"Nonresident estate or trust" means an estate or trust which is not a resident estate or trust.
"Resident estate or trust" means:
- 1. The estate of a decedent who at his death was domiciled in Virginia,
- 2. A trust created by will of a decedent who at his death was domiciled in Virginia,
- 3. A trust created by, or consisting of property of a person domiciled in Virginia, or
- 4. A trust or estate which is being administered in Virginia. A trust or estateis "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.
"Trust" or "estate" means a trust or estate, or a fiduciary thereof, which is required to file a fiduciary income tax return under the laws of the United States.
"Virginia fiduciary adjustment" means the net amount of the applicable modifications described in Va. Code § 58.1-322 and regulations promulgated thereunder (including subsection E thereof if the estate or trust is a beneficiary of another estate or trust) which relate to items of income, gain, loss or deduction of an estate or trust. The fiduciary adjustment shall not include the modification in subsection D of Va. Code § 58.1-322 and regulations promulgated thereunder, except that the amount of state income taxes excluded from federal taxable income shall be included. For example, the Estate of Frederick Jones received $1,750 of interest from obligations of the State of Massachusetts (not subject to federal income tax), $5,400 in interest from U.S. Treasury obligations (not subject to Virginia income tax), $875 in Virginia income tax (permitted as a federal, but not state, itemized deduction) and $3,250 is other itemized deductions deducted on the federal return. The Virginia fiduciary adjustment is a subtraction of $2,775, computed as follows in accordance with Va. Code § 58.1-322 B. and C.:
- Add
- Massachusetts obligations $1,750
- $2,625
U.S. Treasury obligations ( 5,400)- ($2,775)
- Add
§ 630-5-315. 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 Va. Code § 58.1-370 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.
§ 630-5-360. IMPOSITION OF TAX.--
A tax is hereby annually imposed, at the following rates, on the Virginia taxable income for each taxable year of every estate and trust:
- Va. Taxable Income Tax Rate
$ 0 - $ 3,000 2%
- Va. Taxable Income Tax Rate
$5,001 - $12,000 $120 + 5% of excess over $5,000
Over $12,000 $470 + 5.75% of excess over $12,000
(This is statutory language. No further interpretation is required.)
§ 630-5-361.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 Va. Code § 58.1-322B.6. 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.
§ 630-5-362. VIRGINIA TAXABLE INCOME OF A NONRESIDENT ESTATE OR TRUST.--
The Virginia taxable income of a nonresident estate or trust shall be its share of income, gain, loss and deduction attributable to Virginia sources as determined under Va. Regs. § 630-5-363 increased or reduced, as the case may be, by:
1. the amount derived from or connected with Virginia sources of any income, gain, loss and deduction recognized for federal income tax purposes but excluded from the computation of distributable net income of the estate or trust; and
2. the net amount of any modifications as provided for in Va. Code § 58.1-322 and regulations promulgated thereunder (not including subsection D thereof) with respect to the income or gain referred to in paragraph 1 of this section.
Example: Nonresident Trust Z owned rental property in Virginia. It disposed of the property and recognized a short-term capital gain of $10,000. The trust instrument provides that capital gains are allocable to corpus and are not paid, credited or required to be distributed to any beneficiary during the taxable year. Under federal law, the capital gain is excluded from the computation of distributable net income and, accordingly, must be added to the trust's share of income from Virginia sources. If the share of nonresident Trust Z in income, gain, loss and deduction attributable to Virginia sources is $45,000, the Virginia taxable income of Trust Z would be $55,000 ($45,000 + $10,000).
§ 630-5-363. SHARE OF A NONRESIDENT ESTATE, TRUST OR BENEFICIARY IN INCOME FROM VIRGINIA SOURCES.-
-A. The share of a nonresident estate or trust under Va. Regs. § 630-5-362 and the share of a nonresident beneficiary of any estate or trust under provisions other-wise 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 Va. Code § 58.1-322, 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
- 30% depreciation (Va. Code
- Rent $10,000
- 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.
§ 630-5-370. CREDIT TO TRUST BENEFICIARY RECEIVING ACCUMULATION DISTRIBUTION.--
A. A beneficiary of a trust whose Virginia taxable income includes all or part of an accumulation distribution by such trust is allowed a credit against the tax otherwise due under these regulations for all or a proportionate part of any tax paid by the trust under these regulations which would not have been payable if the trust had in fact made distributions to its beneficiaries at the times and in the amounts specified in the laws of the United States relating to federal income taxes. The proportion of Virginia income tax paid by the trust which is attributable to the accumulation distribution is deemed to be the same as the proportion of federal income tax paid which is attributable to the accumulation distribution.
B. The credit under this section shall not reduce the tax otherwise due from the beneficiary to an amount less than would have been due if the accumulation distribution or his part thereof were excluded from his Virginia taxable income.
Example: Trust T accumulates income in the amount of $10,000 for each of the years 1978 through 1981 for which it pays an aggregate Virginia income tax of $1,480 ($370 for each of 1978 through 1981). In 1982 it distributes the accumulated income of $38,520 ($40,000 less $1,480) to the sole beneficiary who has no other income. The sole beneficiary owes a tax of $1,845, but receives a credit of $1,480, for a net tax liability of $365. If the amount of the credit had exceeded the sole beneficiary's tax liability, he would not have been entitled to a refund.
§ 630-5-371. CREDITS FOR TAXES PAID OTHER STATES.--
The provisions of Va. Code § 58.1-332 will apply mutatis mutandis to trusts and estates. See Individual Income Tax Regulations, § 630-2-332. The credit is available only to the entity which paid the tax, that is, a credit to a beneficiary for a tax paid by the beneficiary to another state, or a credit to the trust for tax paid by the trust to another state.
§ 630-5-371.1. OTHER CREDITS.--
A. Virginia Neighborhood Assistance Act Credit. A tax credit is provided under the Virginia Neighborhood Assistance Act for businesses which invest in approved neighborhood assistance projects designed to benefit low income individuals. The Act is administered by the Virginia Department of Social Services, which should be contacted for additional information. To claim the credit, fiduciaries or beneficiaries must attach to their respective income tax returns a copy of a statement from the Department of Social Services certifying the credit. A statement from the fiduciary should also be attached specifying the amount of the business credit applicable to each beneficiary.
B. Urban Enterprise Zone Credit. A tax credit is provided under the Virginia Urban Enterprise Zone Act to qualified business firms which derive income from conducting business in an urban enterprise zone. The Act is administered by the Virginia Department of Housing and Community Development, which should be contacted for additional information.
To claim the credit, fiduciaries or beneficiaries must attach to their respective income tax returns a copy of a certificate of qualification to receive state tax incentives issued by the Department of Housing and Community Development. A statement from the fiduciary should also be attached specifying the amount of credit applicable to each beneficiary. Form 301, Urban Enterprise Zone Credit, must be attached to the fiduciary income tax return.
§ 630-5-380. ACCOUNTING.--A. An estate or trust taxable year under these regulations shall be the same as its taxable year for federal income tax purposes.
B. If a taxpayer's taxable year is changed for federal income tax purposes, its taxable year for purposes of these regulations shall be similarly changed. If a taxpayer's first or last taxable year is less than 12 months, there shall be no proration. If a taxable year of less than twelve months results from a change of taxable year, the Virginia taxable income shall be prorated as follows:
- (a) For a resident estate or trust, federal taxable income for the short taxable year(as computed before annualizing income for federal purposes) shall be adjusted by the Virginia fiduciary adjustment attributable to the short taxable year. The result will be Virginia taxable income calculated as for a normal taxable year.
- (b) For a nonresident estate or trust, Virginia taxable income for the short taxable year shall be computed in accordance with Va. Regs. §§ 630-5-362 and -363.
(2) A tentative tax shall then be calculated based upon the annualized Virginia taxable income.
(3) The actual tax shall be the tentative tax calculated pursuant to subsection (2) above multiplied by the ratio of months in the short taxable year to 12 months.
The following examples illustrate computation of the tax:
Example 1: Trust A, a resident trust, has federal taxable income for short taxable year 1983 of $20,000. Trust A also has $1,000 in interest income from obligations of the State of New Jersey which are exempt from federal but not Virginia tax, and $2,000 in interest on U.S. Treasury obligations. The Trust changed its taxable year to a 10-month period ending October 31, 1983. Its Virginia tax for the short taxable year is computed as follows:
- Federal taxable income $20,000
- Plus: Taxable Interest (N.J.) $1,000 --------------
21,000
Less: Exempt Interest (U.S.) 2,000 --------------
- Plus: Taxable Interest (N.J.) $1,000 --------------
- Federal taxable income $20,000
Taxable Income $19,000
Annualized VirginiaTaxable Income
- (19,000 X 12/10) $22,800
Tentative Tax (on $22,800) $ 1,091
Actual Tax ($1,091 X 10/12) $ 909.17
Example 2: Trust B, a nonresident trust, has Virginia taxable income for short taxable year 1982 (a 7-month period) of $14,000. Its Virginia tax for the short taxable year is computed as follows:
- Virginia taxable income $14,000
Annualized Virginia taxable income
- ($14,000 X 12/7) $24,000
Tentative tax (on $24,000) $ 1,160
- Actual tax ($1,160 X 7/12) $ 676.67
C. A taxpayer's method of accounting under these regulations shall be the same as its method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, Virginia taxable income shall be computed under such method as in the opinion of the Tax Commissioner clearly reflects income.
D. If a taxpayer's method of accounting is changed for federal income tax purposes, its method of accounting for Virginia tax purposes must be similarly changed.
E. Any accounting adjustments for federal purposes for any taxable year shall also apply to the computation of Virginia taxable income.
§ 630-5-381. RETURNS OF ESTATES AND TRUSTS.--
A. Filing Requirements.
1. Every resident estate or trust which either is required to file a federal income tax return for the taxable year or which has any Virginia taxable income for the taxable year must file an income tax return. If the return is for a fractional part of a year, the due date shall be determined as if the return were for a full 12-month period, that is, it shall be due by the 15th day of the fourth month after the close of the taxable year.
2. Every nonresident estate or trust having Virginia taxable income for the taxable year determined under Va. Regs. § 630-5-362 must file an income tax return.
3. The return must be accompanied by a copy of any federal fiduciary tax return filed for such taxable year.
B. Due Date.
1. The return is due on or before May 1 of each year for fiduciaries filing on a calendar-year basis.
2. If the return is for a fiscal or fractional year, it is due on or before the 15th day of the fourth month after the close of the taxable year.
C. Who to File.
1. Deceased Individual. The return for any deceased individual shall be made and filed by his executor, administrator, or other person charged with his property.
2. Fiduciary. The return for an estate or trust shall be made and filed by the fiduciary.
3. Two or more fiduciaries. If two or more fiduciaries are acting jointly, the return may be made by any one of them.
D. Report of Change. If the amount of any fiduciary's federal taxable income is changed or corrected by the Internal Revenue Service or other competent authority or as the result of a renegotiation of a contract or subcontract with the United States, such fiduciary must report the change or correction to the department within 90 days from the date of the final determination of such change, correction, or renegotiation. In reporting a change, correction or renegotiation, the fiduciary shall either concede its accuracy or state why such is erroneous.
E. Amended Return. When any fiduciary files an amended federal income tax return for any taxable year, it must also file an amended Virginia return for such taxable year. The amended return must be filed within 90 days of the filing of the complementary federal amended return, except that any amended return claiming a refund for overpayment of tax must be filed within 60 days of the final determination of any changes in its federal tax liability. (See Va. Regs. § 630-1-1823.)
F. Final Determination. For purposes of this section a "final determination" of a change in federal tax liability shall have the same meaning as set forth in Va. Regs. § 630-1-1823(B).
§ 630-5-382. PLACE OF FILING.--
Every fiduciary required to file a return on behalf of an estate or trust must file such return with the commissioner of the revenue having jurisdiction in the county or city in which the fiduciary qualified or, if there has been no qualification in Virginia, in the county or city in which such fiduciary resides, does business or has an office or wherein the beneficiary or any of them may reside.
(This is statutory language. No further interpretation is required.)
§ 630-5-383. EXTENSION OF TIME FOR FILING RETURNS.--
The provisions of Va. Code § 58.1-344 will apply to the extension of time for filing returns by a fiduciary on behalf of an estate or trust. See also Individual Income Tax Regulations, § 630-2-344.
(This is statutory language. No further interpretation is required.)[[{"fid":"517","view_mode":"default","fields":{"format":"default","field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""},"type":"media","attributes":{"height":26,"width":2383,"class":"media-element file-default"}}]]