Tax Type
Individual Income Tax
Description
Grantor Trust
Topic
Estates and Trusts
Date Issued
03-31-1986
March 31, 1986
Re: Ruling Request: Individual
Dear ****************
This will reply to your letter of February 27, 1986 concerning applicability of Virginia individual income tax to income received from grantor trusts.
Facts
You write that, under federal-law, a grantor trust is treated as a "conduit" in that the income taxed to the grantor has the same character in the grantor's hands as it had in the trustee's hands. You define & grantor trust, for the purpose of your inquiry, as a trust in which the grantor retain control over the income or corpus, or both, to such an extent that such grantor will be treated as the owner of the property and its income for federal income tax purposes. You ask whether the. income received by the trust retains its character after it is distributed to the grantors as beneficiaries.
Determination
There is no express provision in the Virginia fiduciary income tax concerning the character of such income after distribution. However in that the starting point for an individual's Virginia taxable income for a taxable year is his federal adjusted gross income, with the modifications of Virginia Code §58.1-322, Virginia would also take the position that income received by a grantor trust retains its character after it is distributed to grantors as beneficiaries. This position would be unaffected by whether the trustee was a corporation or an individual or by whether the trust was a resident or nonresident trust.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner