General Information The federal taxable income of the fiduciary is the starting point for preparing a North Carolina Income Tax Return for Estates and Trusts, Form D-407, and requires the same additions and deductions. An addition is also required for the amount of state, local, or foreign income tax deducted on the federal return. The fiduciary responsible for administering the estate or trust is responsible for filing the return and paying the tax. The fiduciary must file an income tax return for the estate or trust for which he acts if he is required to file a federal return for estates and trusts and (1) the estate or trust derives income from North Carolina sources or (2) the estate or trust derives any income which is for the benefit of a resident of North Carolina. Fiduciaries should be consistent in the use of the name and address of an estate or trust on a return. If a different name for an estate or trust is used in any year from that used in a prior year, that fact should be noted on the first page of the return and the name used in the prior year indicated. The use of numbers assigned by banks to trusts is also helpful in the processing of trust returns after they are filed. Due Date for Estates and Trusts Tax Returns The return is required to be filed on or before April 15 if on a calendar year basis and on or before the 15th day of the fourth month following the end of the fiscal year if on a fiscal year basis. If the return cannot be filed by the due date, the fiduciary may apply for an automatic six-month extension of time to file the return. An estate or trust that is granted an automatic extension to file a federal income tax return will be granted an automatic extension to file the corresponding North Carolina income tax return. To receive an automatic State extension, the estate or trust must certify on the North Carolina tax return that it was granted an automatic federal extension. If the estate or trust is not granted an automatic federal extension, the estate or trust must file Form D-410P, Application for Extension for Filing Partnership, Estate, or Trust Tax Return, by the original due date of the return to receive an extension for North Carolina purposes. Amended Returns If you need to amend your North Carolina Income Tax Return for Estates and Trusts, complete and file (1) Form D-407 (fill in the applicable Amended Return circle), and (2) any applicable schedules (e.g. D-407TC, etc.). North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust On June 21, 2019, the United States Supreme Court held that the presence of “in-state beneficiaries alone does not empower a state to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain ever to receive it.” 139 S. Ct. 2213, 2221 (2019). By contrast, the United States Supreme Court stated that taxation of trust income based on distributions of trust income to an in-state resident, a trustee’s in-state residence, or in-state trust administration does not violate the Constitution. Id. at 2220. Trusts with these or other connections to the State should carefully analyze those connections to determine if the connections are sufficient for the State to tax the entity’s undistributed taxable income under the Due Process Clause. Income that is exempt from North Carolina tax under the United States Supreme Court’s holding in North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust is excluded from North Carolina taxable income using line 6 of Form D-407.
General Information The federal taxable income of the fiduciary is the starting point for preparing a North Carolina Income Tax Return for Estates and Trusts, Form D-407, and requires the same additions and deductions. An addition is also required for the amount of state, local, or foreign income tax deducted on the federal return. The fiduciary responsible for administering the estate or trust is responsible for filing the return and paying the tax. The fiduciary must file an income tax return for the estate or trust for which he acts if he is required to file a federal return for estates and trusts and (1) the estate or trust derives income from North Carolina sources or (2) the estate or trust derives any income which is for the benefit of a resident of North Carolina. Fiduciaries should be consistent in the use of the name and address of an estate or trust on a return. If a different name for an estate or trust is used in any year from that used in a prior year, that fact should be noted on the first page of the return and the name used in the prior year indicated. The use of numbers assigned by banks to trusts is also helpful in the processing of trust returns after they are filed. Due Date for Estates and Trusts Tax Returns The return is required to be filed on or before April 15 if on a calendar year basis and on or before the 15th day of the fourth month following the end of the fiscal year if on a fiscal year basis. If the return cannot be filed by the due date, the fiduciary may apply for an automatic six-month extension of time to file the return. An estate or trust that is granted an automatic extension to file a federal income tax return will be granted an automatic extension to file the corresponding North Carolina income tax return. To receive an automatic State extension, the estate or trust must certify on the North Carolina tax return that it was granted an automatic federal extension. If the estate or trust is not granted an automatic federal extension, the estate or trust must file Form D-410P, Application for Extension for Filing Partnership, Estate, or Trust Tax Return, by the original due date of the return to receive an extension for North Carolina purposes. Amended Returns If you need to amend your North Carolina Income Tax Return for Estates and Trusts, complete and file (1) Form D-407 (fill in the applicable Amended Return circle), and (2) any applicable schedules (e.g. D-407TC, etc.). North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust On June 21, 2019, the United States Supreme Court held that the presence of “in-state beneficiaries alone does not empower a state to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain ever to receive it.” 139 S. Ct. 2213, 2221 (2019). By contrast, the United States Supreme Court stated that taxation of trust income based on distributions of trust income to an in-state resident, a trustee’s in-state residence, or in-state trust administration does not violate the Constitution. Id. at 2220. Trusts with these or other connections to the State should carefully analyze those connections to determine if the connections are sufficient for the State to tax the entity’s undistributed taxable income under the Due Process Clause. Income that is exempt from North Carolina tax under the United States Supreme Court’s holding in North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust is excluded from North Carolina taxable income using line 6 of Form D-407.
