Trustees of nongrantor trusts and, to a lesser extent, executors of estates often desire to treat distributions to beneficiaries as including realized capital gains, so that these gains are passed, along with any associated tax liability, to the beneficiaries of the trust or estate.
This is in reply to your request for a ruling as to the interpretation of General Laws, Chapter 62, Section 17(e), on behalf of your client, **********, successor by merger to **********, as trustee of the ********** Common Trust Fund A ("CTF").
All outstanding units of participation have been redeemed.
Likewise, any taxable distribution to beneficiaries is deductible by the trust.
If the trust retains income beyond the end of the calendar year, then it must pay taxes on it.
If money is distributed to the beneficiaries, then whether it is taxable or not to the beneficiaries will depend on whether principal or income was distributed, and if it was income, then whether it was tax-free income or retained income from previous years that the trust has already paid tax on.
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