Daily Tax Report ®

Justices Take Up Dispute Over Trusts and State Taxes

Jan. 11, 2019, 7:38 PM

The U.S. Supreme Court agreed today to review a dispute over the taxation of trust income based on where beneficiaries live.

Nearly every state taxes trust income in some way, but only 11 currently tax undistributed income based on the residency of beneficiaries, the North Carolina revenue department said.

In this case, the primary beneficiary of a family trust created and governed by New York State laws was taxed roughly $1.3 million on income, whether it was distributed or not, by North Carolina for several years after she moved there.

State courts are split on whether that scheme violates federal...

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