Personal Finance

Arthur Rubin · Guest

I'm not planning to go into trust practice, but I'm trustee
of the "B" trust funded on my mother's death, and I have a
few questions. I took the Spidell seminar on trust
taxation, but there a few things not covered in as much
detail as I would like.

The trust and estate made the section 645 election, which
expired in mid-2004. I haven't filed the 2004 tax returns
yet, because there's no taxable income (the trust was
invested in tax-exempt municipal) bonds with respect to all
states which might have taxation. However, I don't know
whether I'm supposed to report only that income the trust
earned after the 645 expired, or the income for the full
year; and whether I'm supposed to file at all....

Specifics: The decedent was a resident of Indiana; the two
trustees of the trust are residents of California and
Florida, and the three income beneficiaries of the trust are
residents of California, Indiana, and Florida. As far as I
can tell the estate was taxable only in Indiana except for
state-sourced income, and the trust is 2/3 taxable in
California, again except for state-sourced income.

2004 specifics, for the full year:
Total income, all Federally tax exempt: $2,976.71
Federal AMT taxable income: $1,305.90
State (California) taxable income: $0.68
The trust made no payments or distributions in 2004

Questions:

Do I need to file returns for 2004? If so, what numbers do
I use?

Sourcing questions:

Are California-tax-exempt bonds considered
California-sourced for the purpose of allocating CA-AMT
income on the CA 541 Schedule K-1?

Is the fact the trust account is being managed by a
California trustee (me) sufficient to make the income from
the trust account California-sourced for the purpose of the
CA 541 Schedule K-1 and CA form 592-series withholding.

Specifically, does, assuming there's no specific
California-source income in the trust, does the trust need
to withhold on payments or distributions, or file form 541
Schedule K-1?

Can the trust take an NOL (for 2005) if payments exceed
income? If so, how is it calculated if much of the income
is tax exempt? (The trust made the final payment to the
estate's lawyer, as specified in the trust agreement, as
there were no funds left in the estate.)

Also, unfortunately, the trust seminar I took didn't cover
schedule J at all. As I expect income to be accumulated
until my father's death, when the trust dissolves, I should
have some idea how that works, and whether it applies to the
2003 income which was taxed as part of the estate.

--
Arthur L. Rubin

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