Accumulation Distribution Credit for Oregon Taxes Paid by Trust During Income Accumulation Years

(1) The accumulation distribution credit is determined by calculating the amount of tax that would have been paid by the trust if the distribution had been made in the year the income was earned, and then subtracting that amount from the tax that the trust actually paid in that year. The total available credit is distributed to the beneficiaries pro rata.

(2) Trusts, whose Oregon taxable income in the year of income accumulation included capital gains that were not part of its distributable net income (DNI), must determine the amount of Oregon tax paid on ordinary income to arrive at the maximum Oregon tax credit available to the beneficiary. For purposes of this computation, the percentage of Oregon taxable income representing capital gains not included in DNI must be determined. Example 1: This example is a continuation of the first example in OAR 150-316-0575. A review of the facts in that example would be helpful. Based on the facts in the example in OAR 150-316-0575, the maximum credit available to the beneficiary for the Oregon tax paid by the trust is calculated as follows: [Example not included. See ED. NOTE.]

(3) The credit allowable to the beneficiary cannot reduce the beneficiary’s tax below that which would have otherwise been due, without regard to the addition of the accumulation distribution. Example 2: The beneficiary’s total 1993 tax is $150. The total tax calculated without inclusion of the accumulation distribution in taxable income is $100. Although the maximum calculated credit is $71, the beneficiary can only claim a credit of $50 (the difference between $150 and $100).

[ED. NOTE: To view attachments referenced in rule text, click here to view rule.]