General rule.

(1) Allocation of the fiduciary adjustment of a resident estate or trust is made in this way regardless of whether any or all of the beneficiaries are residents or nonresidents of New York State. A resident beneficiary, in preparing his own New York State personal income tax return, uses his share of the fiduciary adjustment as a modification of Federal adjusted gross income in computing his New York adjusted gross income as provided in section 112.4 of this Article. A nonresident beneficiary does not do this; instead, in computing his New York adjusted gross income, he must include his share of net change from New York State sources from an estate or trust as provided in section 132.1 of this Title. Nevertheless, a proportionate share of the fiduciary adjustment must be allocated to the nonresident beneficiary in order that the shares allocated to the estate or trust and its resident beneficiaries will be proportionate to their shares of Federal distributable net income.

(2) Allocation of the fiduciary adjustment according to the general rule stated in paragraph (1) of this subdivision is illustrated by the following example: The New York fiduciary adjustment with respect to a resident estate, computed in accordance with section 119.1 of this Part, is a plus figure of $1,000. The estate has Federal distributable net income of $5,000, out of which it distributes $3,000 to A, a resident beneficiary, and $1,500 to B, a nonresident beneficiary. A's share is 60 percent of Federal distributable net income, so that 60 percent of the fiduciary adjustment ($600) is allocated to him, and on his New York State personal income tax return he must add this to his Federal adjusted gross income in determining his New York adjusted gross income. B's share of the distributable net income is 30 percent, so that 30 percent of the New York fiduciary adjustment ($300) is allocated to him even though he will not use this figure in computing his New York taxable income because he is a nonresident. Ten percent of the distributable net income was not distributed by the estate to any beneficiary so that 10 percent of the fiduciary adjustment ($100) is allocated to the estate, and the fiduciary on the estate's New York State fiduciary return must add this amount to the Federal taxable income of the estate in determining its New York taxable income.