23VAC10-115-100. Accounting.

A. An estate or trust's 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:

1. 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 23VAC10-115-50 and 23VAC10-115-60.

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 subdivision 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
Taxable Income			$19,000
Annualized Virginia Taxable Income (19,000 x 10/12)			$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.

Statutory Authority

§§ 58.1-203 and 58.1-380 of the Code of Virginia.

Historical Notes

Derived from VR630-5-380, eff. January 1, 1985.

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