Part I. Fiduciary Income Tax
23VAC10-115-10. (Repealed.)
Historical Notes
Derived from VR630-5-302, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.
23VAC10-115-20. Transitional modifications to Virginia income.
A. Generally. For taxable years beginning on or after January 1, 1972, Virginia is in conformity with federal income tax laws. For taxable years beginning before January 1, 1972, a trust beneficiary was taxed on his distributive share, whether distributed or not, of the net income of a trust for the taxable year. To avoid double taxation of income because of the difference in treatment of accumulation distribution between the old and new law, a trust beneficiary may subtract from his Virginia taxable income that portion of an accumulation distribution allocable to the undistributed net income accumulated by the trust under the old law.
B. Subtraction allowed. That portion of any accumulation distribution which is allocable, under the laws of the United States relating to federal income taxes, to undistributed net income of a trust for any taxable year beginning on or before December 31, 1971, shall be subtracted from Virginia taxable income. The rules prescribed by such laws of the United States with reference to any such accumulation distribution shall be applied, mutatis mutandis.
C. Limitation on credit allowable. The credit provided by § 58.1-370 of the Code of Virginia in the case of accumulation distributions shall in no instance encompass any part of any tax paid for a taxable year beginning on or before December 31, 1971.
D. Example. A trust which reports on a calendar-year basis had undistributed net income of $7,460 at the end of calendar year 1971. In calendar year 1972 the trust makes an accumulation distribution to the beneficiary of $5,000 which, for federal income tax purposes, would be thrown back and allocated to the 1971 undistributed net income of $7,460. The modification permits the beneficiary to subtract $5,000 (the 1972 accumulation distribution allocable to the 1971 undistributed net income) from his 1972 Virginia taxable income.
Statutory Authority
§§ 58.1-203 and 58.1-315 of the Code of Virginia.
Historical Notes
Derived from VR630-5-315, eff. January 1, 1985.
23VAC10-115-30. (Repealed.)
Historical Notes
Derived from VR630-5-360, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.
23VAC10-115-40. (Repealed.)
Historical Notes
Derived from VR630-5-361, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.
23VAC10-115-50. (Repealed.)
Historical Notes
Derived from VR630-5-362, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.
23VAC10-115-60. Share of a nonresident estate, trust or beneficiary in income from Virginia sources.
A. The share of a nonresident estate or trust under 23VAC10-115-50 and the share of a nonresident beneficiary of any estate or trust under provisions otherwise applicable to nonresident individuals in estate or trust income or loss attributable to Virginia sources is determined as follows:
1. Determine the items of income, gain, loss and deduction derived from Virginia sources, which enter into the computation of distributable net income of the estate or trust for the taxable year (including such items from another estate or trust of which the first estate or trust is a beneficiary). In the absence of special provisions, "overhead" items such as interest, taxes, charitable deduction, fiduciary fees, attorney, accountant, and return preparer fees, and other deductions shall be apportioned to income within and without Virginia in the same ratio as gross income from within and without Virginia.
2. Add or subtract (as the case may be) the modifications described in § 58.1-322 of the Code of Virginia, and regulations promulgated thereunder, to the extent relating to items of income, gain, loss and deduction derived from Virginia sources which enter into the computation of distributable net income (including all such items from another estate or trust of which the first estate or trust is a beneficiary). No modification can be made under this subsection which has the effect of duplicating an item already reflected in the computation of distributable net income. For example, no modification would be made for interest which is exempt for federal purposes but taxable in Virginia to the extent the interest is already included in federal distributable net income.
3. The amounts determined under paragraphs 1 and 2 are allocated among the estate or trust and its beneficiaries (including solely for the purposes of this allocation, resident beneficiaries) in proportion to their respective shares of distributable net income. The amounts so allocated have the same character under this article as under the laws of the United States relating to federal income taxes. Where an item entering into the computation of such amounts is not characterized by such laws, it has the same character as if realized directly from the source from which realized by the estate or trust, or incurred in the same manner as incurred by the estate or trust.
Example 1: The Estate of Willie Smith (a nonresident estate) owns rental property in Virginia which produced rent in calendar year 1983 in the amount of $10,000. Such amount is the only Virginia source income for the year. Deductions for repair and maintenance amounted to $2,500, and depreciation expense was $6,000. There is one beneficiary, who received 25% of the distributable net income in calendar 1983. The shares of the Estate and beneficiary in Virginia source income are computed as follows:
| Rent | $10,000 |
| Less depreciation | (6,000) |
| Less repair | (2,500) |
|
| $1,500 |
| Plus |
|
| 30% depreciation (Va. Code § 58.1-322B.6) | 1,800 |
| Net amount of Virginia source income | $3,300 |
| Share of Estate (75% of $3,300) | $2,475 |
| Share of beneficiary (25% of $3,300) | $825 |
B. If the estate or trust had no distributable net income for the taxable year, the share of each beneficiary (including, solely for the purpose of such allocation, resident beneficiaries) in the net amount determined under paragraphs 1 and 2 of subsection A is in proportion to his share of the estate or trust income for such year, under local law or the governing instrument, which is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of such net amount is allocated to the estate or trust.
Example 2: Assume the same facts as in Example 1 except that the Estate has no distributable net income (for federal income tax purposes) because it suffered losses on property located in other states. All income is required to be distributed currently to the sole beneficiary. Accordingly, the sole beneficiary's share of the Virginia source income is 100% or $3,300.
Statutory Authority
§§ 58.1-203 and 58.1-363 of the Code of Virginia.
Historical Notes
Derived from VR630-5-363, eff. January 1, 1985.
23VAC10-115-70. Credit to trust beneficiary receiving accumulation distribution.
A. A beneficiary of a trust whose Virginia taxable income includes all or part of an accumulation distributed by such trust is allowed a credit against the tax otherwise due under these regulations for all or a proportionate part of any tax paid by the trust under these regulations which would not have been payable if the trust had in fact made distributions to its beneficiaries at the times and in the amounts specified in the laws of the United States relating to federal income taxes. The proportion of Virginia income tax paid by the trust which is attributable to the accumulation distribution is deemed to be the same as the proportion of federal income tax paid which is attributable to the accumulation distribution.
B. The credit under this section shall not reduce the tax otherwise due from the beneficiary to an amount less than would have been due if the accumulation distribution or his part thereof were excluded from his Virginia taxable income.
Example: Trust T accumulates income in the amount of $10,000 for each of the years 1978 through 1981 for which it pays an aggregate Virginia income tax of $1,480 ($370 for each of 1978 through 1981). In 1982 it distributes the accumulated income of $38,520 ($40,000 less $1,480) to the sole beneficiary who has no other income. The sole beneficiary owes a tax of $1,845, but receives a credit of $1,480, for a net tax liability of $365. If the amount of the credit had exceeded the sole beneficiary's tax liability, he would not have been entitled to a refund.
Statutory Authority
§§ 58.1-203 and 58.1-370 of the Code of Virginia.
Historical Notes
Derived from VR630-5-370, eff. January 1, 1985.
23VAC10-115-80. Credits for taxes paid other states.
The provisions of § 58.1-332 of Code of Virginia will apply mutatis mutandis to trusts and estates. See Individual Income Tax Regulations, 23VAC10-110-220 through 23VAC10-110-222. The credit is available only to the entity which paid the tax, that is, a credit to a beneficiary for a tax paid by the beneficiary to another state, or a credit to the trust for tax paid by the trust to another state.
Statutory Authority
§§ 58.1-203 and 58.1-371 of the Code of Virginia.
Historical Notes
Derived from VR630-5-371, eff. January 1, 1985.
23VAC10-115-90. (Repealed.)
Historical Notes
Derived from VR630-5-371.1, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.
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.
23VAC10-115-110. Returns of estates and trusts.
A. Every resident estate or trust that either is required to file a federal income tax return for the taxable year or that has any Virginia taxable income for the taxable year must file an income tax return. If the return is for a fractional part of a year, the due date shall be determined as if the return were for a full 12-month period, that is, it shall be due by the 15th day of the fourth month after the close of the taxable year.
B. Every nonresident estate or trust having Virginia taxable income for the taxable year determined under 23VAC10-115-50 must file an income tax return.
C. The return must be accompanied by a copy of any federal fiduciary tax return filed for such taxable year.
Statutory Authority
§ 58.1-203 of the Code of Virginia.
Historical Notes
Derived from VR630-5-381, eff. January 1, 1985; amended, Virginia Register Volume 33, Issue 6, eff. February 1, 2017.
23VAC10-115-120. (Repealed.)
Historical Notes
Derived from VR630-5-382 and VR630-5-383, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.