Tax Type
Estate Tax
Description
Marital Deduction Trust
Topic
Taxpayers
Date Issued
06-30-1999
June 30, 1999
Re: Request for Ruling: Estate Tax and Individual Income Tax
Dear***
This will reply to your letter requesting a ruling on the taxability of property in a marital deduction trust included in the estate of ***** (the ``Taxpayer'). I apologize for the delay in responding.
FACTS
The marital deduction trust was created by the Taxpayer's spouse in 1972. This trust was set up to transfer property free from estate and gift tax between spouses up to the maximum amount allowed by the Internal Revenue Code. The Taxpayer's spouse passed away in 1976 and his will was probated in a Virginia court.
The Taxpayer, a resident of another state, died in 1997. Her will created a trust which incorporated the principal and interest derived from her late husband's marital deduction trust. The trust contains no real estate or tangible personal property. It is wholly funded with marketable securities and bank deposits which are not located in Virginia. You request a ruling on whether the property is subject to Virginia tax.
RULING
Estate Tax
An individual is a nonresident of Virginia for estate tax purposes if he or she was domiciled outside of Virginia at the time of death. See Code of Virginia Sec. 58.1-901, copy ***** enclosed. Code of Virginia Sec. 58.1-903, copy enclosed, imposes an estate tax on nonresidents for the transfer of real property located in Virginia and tangible personal property having a situs in Virginia. The Taxpayer was domiciled in another state at the time of her death. The property included in the marital deduction trust is considered intangible personal property for Virginia estate tax purposes. Thus, the Taxpayer's estate is not subject to Virginia estate tax.
Income Tax
The Taxpayer's estate/trust is a nonresident estate/trust because the taxpayer: 1) was domiciled in another state at the time of her death; 2) the estate/trust's property is domiciled outside of Virginia; 3) the estate/trust was not created by a Virginia domiciliary; and 4) the estate/trust was not administered in Virginia. See Code of Virginia Sec. 58.1-302, copy enclosed.
Nonresident estates and trusts are taxable only to the extent of income derived from Virginia sources. See Code of Virginia Sec. 58.1-362, copy enclosed. Virginia source income which is derived from intangible property consists of items of income, gain, loss and deduction to the extent such income is derived form property used by the taxpayer in a business, trade, profession or occupation carried on in Virginia. This estate/trust does not generate any Virginia source income because its assets are not employed in any Virginia business. Thus, the taxpayer's estate/trust is not subject to Virginia income tax *****
I trust that the above ruling answers your question. If you have any questions, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13244B
Re: Request for Ruling: Estate Tax and Individual Income Tax
Dear***
This will reply to your letter requesting a ruling on the taxability of property in a marital deduction trust included in the estate of ***** (the ``Taxpayer'). I apologize for the delay in responding.
FACTS
The marital deduction trust was created by the Taxpayer's spouse in 1972. This trust was set up to transfer property free from estate and gift tax between spouses up to the maximum amount allowed by the Internal Revenue Code. The Taxpayer's spouse passed away in 1976 and his will was probated in a Virginia court.
The Taxpayer, a resident of another state, died in 1997. Her will created a trust which incorporated the principal and interest derived from her late husband's marital deduction trust. The trust contains no real estate or tangible personal property. It is wholly funded with marketable securities and bank deposits which are not located in Virginia. You request a ruling on whether the property is subject to Virginia tax.
RULING
Estate Tax
An individual is a nonresident of Virginia for estate tax purposes if he or she was domiciled outside of Virginia at the time of death. See Code of Virginia Sec. 58.1-901, copy ***** enclosed. Code of Virginia Sec. 58.1-903, copy enclosed, imposes an estate tax on nonresidents for the transfer of real property located in Virginia and tangible personal property having a situs in Virginia. The Taxpayer was domiciled in another state at the time of her death. The property included in the marital deduction trust is considered intangible personal property for Virginia estate tax purposes. Thus, the Taxpayer's estate is not subject to Virginia estate tax.
Income Tax
The Taxpayer's estate/trust is a nonresident estate/trust because the taxpayer: 1) was domiciled in another state at the time of her death; 2) the estate/trust's property is domiciled outside of Virginia; 3) the estate/trust was not created by a Virginia domiciliary; and 4) the estate/trust was not administered in Virginia. See Code of Virginia Sec. 58.1-302, copy enclosed.
Nonresident estates and trusts are taxable only to the extent of income derived from Virginia sources. See Code of Virginia Sec. 58.1-362, copy enclosed. Virginia source income which is derived from intangible property consists of items of income, gain, loss and deduction to the extent such income is derived form property used by the taxpayer in a business, trade, profession or occupation carried on in Virginia. This estate/trust does not generate any Virginia source income because its assets are not employed in any Virginia business. Thus, the taxpayer's estate/trust is not subject to Virginia income tax *****
I trust that the above ruling answers your question. If you have any questions, you may contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13244B
Rulings of the Tax Commissioner