Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
05-13-1999
May 13, 1999
Re: § 58.1-1821 Application: Fiduciary Income Tax
Dear******************
This will reply to your letters and amended returns requesting a refund of fiduciary income tax paid by ****************** (the "Taxpayer') for the 1994 through 1997 taxable years. I apologize for the delay in response.
FACTS
A Virginia resident's will created a trust upon the death of the resident. The Virginia resident died in 1982. The Trustee is a New York bank. The beneficiaries have been domiciled in North Carolina since 1992. The trust property is not located in Virginia.
Virginia fiduciary income tax returns were filed for the 1994 through 1997 taxable years and fiduciary income tax was paid for those years. The Taxpayer has filed amended returns requesting a refund. The Taxpayer contends that Public Document (P.D.) 93-189 (8/26/93) precludes the taxation of fiduciary income in situations where the only connection to Virginia is the creation of a trust by a Virginia resident who subsequently dies.
DETERMINATION
Pursuant to Code of Virginia § 58.1-381, every resident trust required to file a federal income tax return for the taxable year must also file a Virginia fiduciary income tax return. Code of Virginia § 58.1-302 includes trusts which are created by the will of a decedent who dies as a Virginia resident.
However, P.D. 93-189 interprets the Code of Virginia so as to create a limited exception to the statutory rule. In that ruling, the department held that the current domicile of the trustees and beneficiaries as well as the location of the trust property will be considered when a trust's only connection to Virginia is that the trust was created in Virginia by a decedent grantor who was a Virginia resident. If none of these persons received the benefit and protection of Virginia law, then the Commonwealth lacks sufficient nexus to tax the trust's income.
n the instant case, the trustee is domiciled in New York, the beneficiaries have been domiciled in North Carolina since 1992 and the trust property is not located in Virginia. Based on the interpretation contained in P.D. 93-189, the resident trust did not have nexus with Virginia and was not subject to fiduciary income tax in the 1994 through 1997 taxable years.
Accordingly, the requested relief is granted. A review of the department's records indicates that a refund has been issued for the 1996 and 1997 taxable years. Refunds of tax with the appropriate interest will be issued for the 1994 and 1995 taxable years pursuant to the enclosed schedule. If you have any questions about this determination, you may contact *************************** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/18105B
Rulings of the Tax Commissioner