Trusts and Estates

Ca. Trs. & Estates Quarterly 2014, Volume 20, Issue 2

CALIFORNIA INCOME TAX ISSUES FOR NON-CALIFORNIA TRUSTS – PART 2

By Matthew G. Brown, Esq., David L. Keligian, Esq., and Gregory E. Lambourne, Esq.*

I. INTRODUCTION

The blessing by the Internal Revenue Service (IRS) of irrevocable incomplete-gift nongrantor (ING Trusts) in Private Letter Rulings ("PLRs") 201310002-201310006 and others1 potentially revives such trusts as a viable state income tax planning tool. However, planners making use of this strategy must pay careful attention to California’s unparalleled statutory reach specifically designed to trap and/or claw back tax revenue on trust income.

In Part 1 of this two-part article (published in Volume 19, Issue 4), we reviewed California’s broad power to tax trusts with California-source income or resident fiduciaries, including trustees, advisors, protectors, and others with power to direct the trustee or control trust property.

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