But are they also taxed to California, because that's where the beneficiary now resides?  I thought I solved this puzzle a year ago, but now I'm having doubts.  And I have another trust return with the same situation.  I did both an AZ return and  CA return.  CA allowed a Schedule S credit (which I prepared manually) but there was still tax owed to CA.   The amounts involved aren't much -- less than $100 in one case, less than $500 in another -- but they could be higher in a better year.