Tax Type
Fiduciary Income Tax
Individual Income Tax
Description
Underpayment of Estimated Tax
Topic
Returns/Payments/Records
Date Issued
06-29-1988
June 29, 1988
Re: Request for Ruling; Fiduciary Income Tax
§58.1-492 Penalty for Underpayment of Estimated Tax
Dear***************
This is in response to your letter of May 5, 1988, in which you requested a ruling relating to the penalty for underpayment of estimated tax by fiduciaries.
Facts
Federal law requires a number of trusts and estates to change to a calendar year. I.R.C. §645. Under Va. Code §58.1-380 the taxable year for Virginia purposes will be similarly changed.
Both federal and Virginia law require trusts and estates to make estimated payments of tax and impose a penalty for underpayment of estimated tax. Several exceptions are provided that apply if the preceding taxable year included 12 months.
The Internal Revenue Service has published Notice 87-32, 1987-17 I.R.B. 15, which permits trusts and estates that were required to change to a calendar year to use the "prior year alternative" if:
-
- 1. The preceding taxable year was a short taxable year in 1987;
2. The short taxable year was preceded by a taxable year of 12 months; and
3. The tax shown on the return for the preceding short taxable year is annualized by dividing it by the number of months in the short taxable year and multiplying the result by 12.
- 1. The preceding taxable year was a short taxable year in 1987;
Determination
If a trust or estate satisfies the conditions set forth in Notice 87-32 to be eligible to use the "prior year alternative" for federal purposes, the trust or estate will be permitted to use the exception in paragraph C.1.a. of Va. Code §58.1-492 to avoid the Virginia penalty for underpayment of estimated tax.
For your information, enclosed is a copy of the emergency regulation recently adopted to implement the estimated tax provisions as they apply to trusts and estates. The issue raised by your request for a ruling is not addressed in this emergency regulation but will be considered in the course of adopting a permanent regulation.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner