Split-Interest Trust’s Gain Is Subject to NJ Gross Income Tax

A trust that benefits a noncharitable entities during its term then commits the remainder to charity owes New Jersey gross income tax on distributions, the state tax court held Thursday.

Only a charitable trust with exclusively charitable beneficiaries is entitled to an exemption from the tax, New Jersey Tax Court Judge Mala Sundar ruled. As a result, the Jacob & Alice Klein Charitable Remainder Unitrust owes the state about $55,000 in tax and interest for tax year 2015.

• During its 20-year term, the trustee must pay noncharitable beneficiary Klein Group LLP semi-annual installments of 7% of the trust’s initial ...