17 NCAC 06B .3723. ALLOCATION OF ADJUSTMENTS

(a)  The additions and deductions to federal taxable income of an estate or trust must be apportioned between the estate or trust and the beneficiaries based on the distributions of income made during the taxable year.  Unless the trust instrument or will that created the estate or trust specifically provides for the distribution of certain classes of income to different beneficiaries, the apportionment of additions and deductions to the beneficiaries is determined on the basis that each beneficiary's share of the "income for regular tax purposes" from Schedule K‑1, Federal Form 1041 relates to "adjusted total income" from Federal Form 1041.  If the trust instrument or will specifically provides for the distribution of certain classes of income to different beneficiaries, any addition or deduction directly attributable to a particular class of income must be apportioned to the beneficiary to which that class of income is distributed.  After apportioning the additions and deductions to the beneficiaries, the balance is apportioned to the fiduciary.

(b)  In allocating the adjustments, for State purposes the amount of "income for regular tax purposes" on Federal Schedule K‑1 must be adjusted for distributions to the beneficiary which are not reflected in "income for regular tax purposes."  The "adjusted total income" on Federal Form 1041 must be adjusted:

(1)           to exclude classes of income that are not part of the distribution to the beneficiary;

(2)           to include classes of income that are a part of the distribution to the beneficiary but are not included in adjusted total income; and

(3)           by any deduction treated differently for State and federal tax purposes that adjust federal taxable income pursuant to G.S. 105‑134.6 and G.S. 105‑134.7.

 

History Note:        Authority G.S. 105‑134.5; 105‑134.6; 105‑134.7; 105‑160.2; 105‑160.5; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993.