DRS: 12-701(a)(09)-1, Connecticut taxable income of a resident trust or estate

DRS has reproduced this regulation. This is an unofficial copy. Official copies of regulations ONLY are available from the Commission on Official Legal Publications, 111 Phoenix Avenue, Enfield, CT 06082,  colp@jud.state.ct.us. Copies of DRS forms and publications are available at http://www.ct.gov/drs.

 

Conn. Agencies Regs. § 12-701(a)(9)-1. Connecticut taxable income of a resident trust or estate.

(a) The Connecticut taxable income of a resident trust (other than a nontestamentary trust with one or more nonresident noncontingent beneficiaries) or resident estate (other than a bankruptcy estate in a case under chapter 7 or chapter 11 of title 11 of the United States Code in which the debtor is an individual) is the federal taxable income of the fiduciary of such trust or estate to which shall be added or subtracted, as the case may be, such trust or estate’s share of the Connecticut fiduciary adjustment, as defined in this Part. Additionally, with respect to a trust which sells appreciated property within two years of the receipt of such property, there shall be added to federal taxable income the amount of any includible gain, as that term is defined in section 644 of the Internal Revenue Code.

(b)(1) The Connecticut taxable income of a resident nontestamentary trust with one or more nonresident noncontingent beneficiaries shall be the sum of:

(A) all of the Connecticut taxable income of the trust that is derived from or connected with sources within this state, and

(B) the Connecticut taxable income of the trust that is derived from or connected with all other sources multiplied by a fraction, the numerator of which is the number of resident noncontingent beneficiaries, if any, and the denominator of which is the total number of noncontingent beneficiaries, whether resident or nonresident.

(2) "Derived from or connected with sources within this state" is to be so construed so as to accord with the definition of the term "derived from or connected with sources within this state" set forth in Part II in relation to the adjusted gross income of a nonresident individual.

(3) For purposes of this subsection, "noncontingent beneficiary" means every beneficiary whose interest is not subject to a condition precedent and includes every individual to whom a trustee of a nontestamentary trust during the taxable year (i) is required to distribute currently income or corpus (or both) or (ii) properly pays or credits income or corpus (or both) or (iii) may, in the trustee’s discretion, distribute income or corpus (or both). "Noncontingent beneficiary" includes every beneficiary to whom or to whose estate any of the trust’s income for the taxable year is required to be distributed at a specified future date or event and every beneficiary who has the unrestricted lifetime or testamentary power, exercisable currently or at some future specified date or event, to withdraw any of the trust’s income for the taxable year or to appoint such income to any person, including the estate of such beneficiary. The provisions of this subsection also apply to a noncontingent beneficiary which is a trust or an estate, and wherever reference is made in this subsection to an individual who is a noncontingent beneficiary, such reference shall be construed to include a trust or estate which is a noncontingent beneficiary, but shall not be construed to include a corporation which is a noncontingent beneficiary.

(c) Where the grantor of a trust or another person is treated for federal income tax purposes as the owner of any portion of the trust, and, in computing, for federal income tax purposes, the taxable income of such grantor or other person, those items of income or deduction that are attributable to that portion of the trust are taken into account, the same items of income or deduction are not taken into account in determining the federal taxable income of the fiduciary of the trust or, accordingly, the Connecticut taxable income of the trust.

(d)(1) Where there is more than one grantor of a trust, at least one of whom is a resident individual and at least one of whom is a nonresident individual, the Connecticut taxable income of the resident portion of the trust is the sum of:

(A) that portion of the federal taxable income of the fiduciary of such trust that is derived from property that was contributed by the resident individual or individuals and that has not been commingled with, and has maintained its separate identity from, property that was contributed by a nonresident individual or individuals.

(B) that portion of the amount of any includible gain, as that term is defined in section 644 of the Internal Revenue Code, that is derived from the sale or other disposition of property that was contributed by the resident individual or individuals and that has not been commingled with, and has maintained its separate identity from, property that was contributed by a nonresident individual or individuals.

(C) that portion of the trust’s share of the Connecticut fiduciary adjustment that is derived from property that was contributed by the resident individual or individuals and that has not been commingled with, and has maintained its separate identity from, property that was contributed by a nonresident individual or individuals.

(2) Where property that was contributed by a resident individual or individuals has been commingled with, and has not maintained its separate identity from, property that was contributed by a nonresident individual or individuals, the Connecticut taxable income of the resident portion of the trust is the product of (A) the sum of (i) the federal taxable income of the trust, (ii) the amount of any includible gain, as that term is defined in section 644 of the Internal Revenue Code, and (iii) the trust’s share of the Connecticut fiduciary adjustment, multiplied by (B) the percentage that is determined under §12-701(a)(4)-1(d)(2).

(3) If the trust consists of both commingled and noncommingled property, the Connecticut taxable income of the resident portion of the trust is the sum of (A) the amount that is determined under subdivision (1) of this subsection and (B) the amount that is determined under subdivision (2) of this subsection.

(e)(1) Where there is more than one grantor of a trust, at least one of whom is a resident individual and at least one of whom is a nonresident individual, the Connecticut taxable income derived from or connected with sources within Connecticut of the nonresident portion of the trust is the sum of:

(A) that portion of the federal taxable income of the fiduciary of such trust (i) that is derived from property that was contributed by the nonresident individual or individuals and that has not been commingled with, and has maintained its separate identity from, property that was contributed by a resident individual or individuals and (ii) that is derived from or connected with Connecticut sources, in accordance with §12-713(a)-4.

(B) that portion of the amount of any includible gain, as that term is defined in section 644 of the Internal Revenue Code, (i) that is derived from the sale or other disposition of property that was contributed by the nonresident individual or individuals and that has not been commingled with, and has maintained its separate identity from, property that was contributed by a resident individual or individuals and (ii) that is derived from or connected with Connecticut sources, in accordance with §12-713(a)-4.

(C) that portion of the trust’s share of the Connecticut fiduciary adjustment (i) that is derived from property that was contributed by the nonresident individual or individuals has not been commingled with, and has maintained its separate identity from, property that was contributed by a resident individual or individuals and (ii) that is derived from or connected with Connecticut sources, in accordance with §12-713(a)-4.

(2) Where property that was contributed by a nonresident individual or individuals has been commingled with, and has not maintained its separate identity from, property that was contributed by a resident individual or individuals, the Connecticut taxable income derived from or connected with sources within Connecticut of the nonresident portion of the trust is the product of (A) the sum of (i) the federal taxable income of the trust, (ii) the amount of any includible gain, as that term is defined in section 644 of the Internal Revenue Code, and (iii) the trust’s share of the Connecticut fiduciary adjustment, multiplied by (B) the difference after subtracting (i) the percentage that is determined under §12-701(a)(4)-1(d)(2) from (ii) one, multiplied by (C) the percentage of Connecticut taxable income that is derived from or connected with Connecticut sources, determined in accordance with §12-713(a)-4.

(3) If the trust consists of both commingled and noncommingled property, the Connecticut taxable income derived from or connected with sources within Connecticut of the nonresident portion of the trust is the sum of (A) the amount that is determined under subdivision (1) of this subsection and (B) the amount that is determined under subdivision (2) of this subsection.

(f) The provisions of subsections (d) and (e) of this section also apply to grantors that are trusts or estates, and wherever reference is made in such subsections to a resident individual or to a nonresident individual, such reference shall be construed to include a resident trust or estate or a nonresident trust or estate, respectively.

(g)(1) The Connecticut taxable income of a bankruptcy estate in a case under chapter 7 or chapter 11 of title 11 of the United States Code in which the debtor is a resident individual is, as required by 11 U.S.C. §346(b)(2), computed in the same manner as the Connecticut taxable income of any other estate. Therefore, the estate is not entitled to an exemption under Section 12-702 of the general statutes or to a credit under Section 12-703 of the general statutes.

(2) In the computation of Connecticut adjusted gross income of a resident individual who is a debtor in a case under chapter 7 or chapter 11 of title 11 of the United States Code, the provisions of section 1398 of the Internal Revenue Code affecting the computation of such individual’s federal adjusted gross income shall apply, to the extent they are not superseded by the provisions of 11 U.S.C. §§346 and 728. In general, such individual shall compute his or her Connecticut adjusted gross income in the same manner as other individuals (using his or her federal adjusted gross income as the starting point), and may or may not, as the case may be, be entitled to an exemption under Section 12-702 of the general statutes or to a credit under Section 12-703 of the general statutes.

(h) While this section pertains to Section 12-701(a)(9) of the general statutes, for purposes of supplementary interpretation, as the phrase is used in Section 12-2 of the general statutes, the adoption of this section is authorized by Section 12-740(a) of the general statutes.

(Effective November 18, 1994.)