Tax Type
Fiduciary Income Tax
Description
Allocation of estimated tax payments to beneficiaries; Refund
Topic
Returns/Payments/Records
Date Issued
09-10-1992
September 10, 1992
Re: Request for Ruling; Fiduciary Income Tax
Dear****************
This will reply to your letter of May 13, 1992, in which you request a ruling on behalf of the **************(the "estate") regarding the allocation of estimated fiduciary income taxes paid for 1991.
FACTS
During its final year (1991), the estate had Virginia taxable income for the first time. The income resulted from a §1231 gain derived from a partnership. The estate received its share of the proceeds from the partnership in 1991 and distributed them to its beneficiaries (three testamentary trusts). Because the beneficiaries were allocated the proceeds of this portion of the estate's principal, the estate also allocated to the three beneficiaries its share of the recognized gain. Therefore, for federal (and Virginia) income tax purposes, the estate had no liability for income tax on its final return. Instead, this income (and liability for the income tax) was allocable to the estate's three beneficiaries.
Federal and Virginia estimated tax payments for 1991 were made by the estate. The federal estimated payments for 1991 may be allocated to the estate's three beneficiaries on their federal Schedule K-1's from the estate's Form 1041-T (Allocation of Estimated Tax Payments to Beneficiaries). You point out that Virginia does not have a similar mechanism on its Virginia Fiduciary Income Tax Return (Form 770) and request that the estate be allowed to allocate the Virginia estimated taxes paid for 1991 to the three beneficiaries.
RULING
The information provided indicates that the 1991 Virginia estimated payments were actually paid on behalf of the estate with checks drawn on the bank accounts of the three beneficiaries, as the estate had no funds to pay the tax. Because the estimated tax payments for the estate were made by the three beneficiaries, permission is granted for the estate to allocate these estimated tax payments to the three beneficiaries in the amounts paid by each, provided the estate does not claim a credit or refund on its Form 770.
The applicable credit amount should be reported by each beneficiary on its Form 770 on the line designated for Virginia estimated tax payments. The fiduciary should include an attachment to each return explaining that the estimated payments were allocated from the estate. A copy of federal Form 1041-T should also be included.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6155F
Rulings of the Tax Commissioner