§ 17744. Taxability of Trust Dependent upon Residence of Beneficiary.

If one or more of the noncontingent beneficiaries of a trust are residents and one or more are nonresidents, and the fiduciaries are nonresidents, the trust is taxable upon (a) all income (less the deduction allowed under Article 1 of Chapter 9 (Section 17731 and following) from real and tangible personal property located in this State, and from business carried on within this State and from intangible personal property having a business or taxable situs in this State (see Reg. 17952); and (b) that proportion of all net income (less the deduction allowed under Article 1 of Chapter 9 (Section 17731 and following)) from all other sources which eventually is to be distributed to the noncontingent beneficiaries who are residents of this State.

EXAMPLE (1). A transferred property located outside this State in trust to pay equal shares of the income to B, a resident, and C, a nonresident of this State. The beneficiaries have noncontingent interests. The fiduciaries of the trust are nonresidents. During the year 1980, the trust realized $50,000 from real and tangible personal property located, and business carried on, within this State, $50,000 from real and tangible personal property located, and business carried on, outside this State, and $50,000 from stocks and bonds, none of which had a business or taxable situs in this State. None of the income was paid or credited to the beneficiaries during the year. The trust is taxable upon the $50,000 realized from real and tangible personal property located, and business carried on, within this State. The trust is also taxable upon one-half of the balance of the income since one-half of such income will eventually be distributed to B, a resident of this State.

EXAMPLE (2). A transferred stocks and bonds and real and personal property located outside this State in trust to B, a nonresident of this State. Under the terms of the trust, the income from the intangible personal property is to be accumulated for a number of years and then distributed to C, a resident of this State with a noncontingent interest. The balance of the income is to be distributed to certain named beneficiaries who are nonresidents of this State. The trust is taxable upon all the income from the intangible personal property, i.e., the stocks and bonds, but is not taxable upon any of the income from the remainder of the trust property.