Virginia Law

A. All payments of estimated tax shall be applied toward the income tax liability of the estate or trust for the taxable year. Payments of estimated tax may not be applied toward any other tax or taxable year unless and until an income tax return is filed claiming a refund. In extraordinary circumstances where the fiduciary is not required to file a Virginia income tax return the fiduciary may request a refund of estimated tax.

B. Payments of estimated tax may not be applied toward the income or estimated tax liability of a beneficiary of an estate or trust even if the fiduciary distributes all or a portion of the distributable net income to the beneficiary after making installment payments of estimated tax.

C. Example: For the calendar year 1988 the trustee anticipates earning $50,000 income after expenses. The terms of the trust require the trustee to pay $10,000 annually to the beneficiary and accumulate the balance of the income; however, the trustee is permitted to pay additional sums to the beneficiary if required for the beneficiary's support. Initially, the trustee anticipates that 1988 taxable income will be $40,000 after the distribution deduction and makes installment payments of estimated tax in the amount of $407 on May 1, 1988, June 15, 1988, and September 15, 1988. In December the trustee finds it necessary to distribute an additional $25,000 for the beneficiary's support. The trustee makes no installment payment on January 15, 1989.

1. The trust will have taxable income of $15,000 after the distribution deduction on which a tax of $620 will be due. Since the estimated tax payments total $1,221, the trust will be entitled to a refund of $601.

2. No part of the trust's estimated tax payments may be transferred to the account of the beneficiary even though $25,000 of income was distributed to the beneficiary after the trustee had paid estimated tax on it.