SCOTUS Grants Cert on whether a State can Tax a Trust Based Solely on the Residence of a Beneficiary

The United States Supreme Court granted certiorari in the case of North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, No. 18-457.  The question at issue is whether North Carolina may tax an out-of-state trust based solely on the North Carolina residency of a trust beneficiary, or whether such taxation is a violation of the federal due process clause.

Here, Kimberly Rice Kaestner, one of the trust beneficiaries, was a resident of North Carolina during the years at issue. The Trustee did not live in North Carolina, nor were the trust’s assets located in North Carolina.

The North Carolina Department of Revenue assessed $1.3 million in taxes for accumulated income of the trust during a three-year period even though no income was distributed to the North Carolina beneficiary during those years.

The North Carolina Supreme Court ruled that an in-state beneficiary does not give the state sufficient minimum contacts to tax an out-of-state trust under federal and state due process provisions.

Tax Notes. Supreme Court Agrees to Hear Trust Taxation Case. Jan. 14, 2018.


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