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Irrevocable Non-Grantor Simple Trust domiciled in New York with Arizona rental property and investment dividends, distributing all net rent income and dividends, filing Federal, New York, Arizona tax returns.
Are dividends considered NY state income?
If all distributions go to out-of-state (CA) beneficiary, does said beneficiary have to file NY state return?
If distributions are shared between out-of-state (CA) beneficiary and NY beneficiary, does CA beneficiary have to file NY state return due to dividend income?
Best Answer Click here
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You seem to have asked twice, once for Lacerte and once for ProSeries. It helps to ask for the program you are using.
Don't yell at us; we're volunteers
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Are you sure you don't have to file a California return also?
Trusts
The trustee may have to file a return if the trust meets any of these:
- The trustee or beneficiary (non-contingent) is a California resident
- Gross income is over $10,000
- Net income is over $100
- The trust has income from a California source
- Income is distributed to a beneficiary
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Returns were previously prepared by EA who filed only for AZ and NY and included dividends on Federal returns but did not associate them with any state specific income.
Question then is do dividends constitute NY income by virtue of the trust being domiciled in NY?
Does trust have to file CA return and MA returns annually because Trustees domiciled in each of those states?
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Probably. When all else fails read the instructions and look for Who must file
MA https://www.mass.gov/doc/2019-form-2-instructions/download
BobKamman already gave you a good answer for CA.
Generally investment income is not state specific and is taxable to the resident state of the beneficiary. The beneficiaries may have to file AZ income because of the rental being sourced there.
Answers are easy. Questions are hard!
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Thanks for the feedback and useful resource link.
Agreed regarding beneficiary filing requirement in AZ.
Agreed regarding dividend income being taxable to beneficiary in state of residence. Question is about the specific mechanics:
Is the dividend income taxable to beneficiary ONLY in state of residence or ALSO in state in which trust is domiciled (with adjustments in beneficiary home state for taxes paid in other state)?
