Oregon Administrative Rules › Chapter 150 - DEPARTMENT OF REVENUE › Division 316 - PERSONAL INCOME TAX GENERAL PROVISIONS › Section 150-316-0410 - Fiduciary Adjustment

Current through Register Vol. 63, No. 7, July 1, 2024
The modifications applicable to individuals described in ORS
				Chapter 316 may or may not be applied in computing the income tax liability of
				an estate or trust, depending on the treatment of distributable net income of
				the estate or trust in the Internal Revenue Code. No modification may be added
				or deducted separately. Neither may trust principles of accounting or statutory
				provisions governing allocations of receipts and disbursements by the fiduciary
				be applied in allocating the tax burdens or benefits arising from
				modifications. The net amount of all modifications constitutes the "fiduciary
				adjustment," which must be allocated between the fiduciary and any
				beneficiaries as required in ORS
				316.287(2).
				However, the share of a fiduciary adjustment allowable in reduction of the
				taxable income of a beneficiary shall be limited to the amount of the
				distribution deduction taxable on his individual federal return. The share of a
				fiduciary adjustment increasing taxable income of a beneficiary shall be
				limited to an amount computed by deducting the amount of income of the estate
				or trust taxable on his individual Oregon return from the total amount of money
				and the value of property distributed or required to be distributed to him
				during its current taxable year by the estate or trust. Any amounts not
				allocated to a beneficiary solely by reason of these limitations shall be added
				to the share of the estate or trust. A computation of the federal distributable
				net income must be shown on a copy of the federal Form 1041 attached to the
				Oregon fiduciary Form 41, unless it is clearly evident from the character of
				the estate or trust and the income that either
(1) There is no distributable net income as
			 defined in the Internal Revenue Code;
(2) All distributable net income is taxable
			 to the beneficiary; or
(3) No
			 distributable net income is deductible on the federal fiduciary return as a
			 distribution deduction.
Example:
An estate had ordinary income and capital
				gains. A property worth in excess of the ordinary income was distributed to a
				residuary beneficiary in the taxable year. The total net fiduciary adjustment,
				including federal income tax paid on capital gains, is allocated to the
				distributee, although the personal representative must charge the federal
				income tax against principal. Thus, the tax benefit is granted to the
				beneficiary receiving current distribution while the eventual economic burden
				of payment falls on the residuary beneficiaries ratably. On the other hand, the
				beneficiary receiving a current distribution has been burdened with both
				federal and Oregon tax liability arising from ordinary income. Had he received
				no distribution the liability for tax would have fallen on the estate and the
				eventual economic burden on the residuary beneficiaries ratably. However, if
				the estate has federal taxable income which is not subject to Oregon income
				taxation, such as interest from the United States bonds, to include in the
				fiduciary adjustment to bring the total fiduciary adjustment up to an amount in
				excess of the value of the property distributed, the beneficiary may deduct on
				his individual return only the amount of fiduciary adjustment necessary to
				offset the income of the estate included in his taxable income. Similarly, if a
				U.S. income tax refund was claimed by and allowed to the estate in an amount to
				bring the total fiduciary adjustment up to an addition to income in excess of
				the value of the property distributed, the beneficiary need include only the
				amount of the fiduciary adjustment that, when added to the income of the estate
				included in his taxable income, equals the value of the property
				distributed.
Stat. Auth.: ORS
				  305.100
Stats. Implemented: ORS
				  316.287