Taxable Income of Nonresident Estate or Trust

(1) The determination of the taxable income of a nonresident estate or trust differs from that of a nonresident individual in that there is no provision for proration of items of income, deductions or exemptions. Taxable income must be determined by first recomputing the fiduciary’s net taxable income under the Internal Revenue Code using only those items of income, gain, loss and deductions derived from or connected with sources in Oregon, including the full amount of the personal exemption allowable in determining federal taxable income. This computation may be made on a federal Form 1041 and accompanying schedules if they are clearly marked as state schedules. Regardless of the form of the computation, a copy of the federal Form 1041, and all accompanying schedules, as filed with the Internal Revenue Service must be attached to the Oregon Fiduciary Form 41.

(2) To arrive at the fiduciary’s Oregon taxable income, the recomputed federal net taxable income, limited to items derived from or connected with sources in Oregon, is increased or decreased by the “fiduciary adjustment” provided in ORS 316.287 and the transitional adjustment, if any, provided for in ORS 316.047. The “fiduciary adjustment” is computed in the same manner as that used for resident estates or trusts except that only items of income, gain, loss and deductions that are derived from or connected with sources in Oregon and a portion of any accrued federal income tax liability or refund are included in the computation. The amount of each federal income tax item of the fiduciary adjustment is computed by multiplying the accrued liability or refund by the percentage that the recomputed federal net income from Oregon sources bears to the federal net taxable income from all sources. Both factors in this computation must include only those items taken into account in determining net taxable income of the tax year to which the liability or refund applies.