Babic: Income Taxation of Trusts in California

Filip Babic has published an article, Income Taxation of Trusts in California, in the AICPA Tax Insider.  The article begins as follows:

For years, the California Franchise Tax Board (FTB) has taken the position that trusts are subject to California state income tax on all of their California-source income, and that non-California-source income is apportioned pro rata according to the number of California fiduciaries and noncontingent beneficiaries (see Cal. Code Regs. tit. 18, §17743).

Recently, in a closely watched case, the California Superior Court in San Francisco rejected the FTB’s approach to the taxation of trusts and determined that all income, including California-source income, is subject to the apportionment formula set forth in California Revenue & Taxation Code Section 17743, et seq. (Paula Trust v. California Franchise Tax Bd., No. CGC-16-556126 (Cal. Super. Ct. 3/7/18)). Should this decision be upheld, tax on California-source income could be deferred for years (i.e., until the income is distributed to the beneficiaries).

See full article at Income Taxation of Trusts in California.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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