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New York Tax Obligations of a Resident Trust – Under Tax Law §605(b)(3)(D), a resident trust is not subject to tax if all of the following conditions are satisfied



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New York Tax Obligations of a Resident Trust – Under Tax Law §605(b)(3)(D), a resident trust is not subject to tax if all of the following conditions are satisfied:

  1. All trustees are domiciled in a state other than New York;

  2. The entire corpus of the trust is located outside of New York; and

  3. All income and gains of the trust are derived from or connected with sources outside New York, determined as if the trust were a nonresident trust.

    1. What about Corporate Trustees?

  1. In a 2003 New York County Surrogate’s Court case involving a trust created by William Rockefeller (773 N.Y.S.2d 529, 2003 N.Y. Slip Op.), the Court refused the trustee’s request to change the situs of the trust from New York to Delaware, despite the fact that the Court had previously granted a request for a change of the corporate trustee from a New York to a Delaware corporation. The Surrogate’s Court held that unless there were benefits to the trust from a change of situs other than tax benefits, such applications would be denied.

  2. And a 2004 advisory opinion (TSB-A-04(7)I) issued to JP Morgan Chase Bank, the successor trustee for five irrevocable trusts created by John D. Rockefeller Jr., states that the domicile for purposes of determining whether the trust is subject to New York tax under Tax Law §605(b)(3)(D) is not the state of incorporation of the corporate trustee but the domicile of the individuals who direct the corporate trustee. In this case, the individuals serving on the Committee that had decision-making power over the assets of the trusts would be treated as co-trustees and thus it was the domicile of these individuals that determined the New York tax obligations of the trusts. The advisory opinion also left open the question of whether other individuals providing investment advice or management services to the trusts could be considered co-trustees as well.




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