Is the Date of Recognition of a LTCG Sale by a Trust the Date of Recognition for the Beneficiary?

[gam108]

1) CO Resident Jan-Aug 2024, Not a CO resident (resident of a state with no individual income tax) Sep-Dec 2024.

2) Filing as a Part-year CO resident in 2024

3) Expecting a K-1 with LTCG from a trust registered outside of CO that sold real estate outside of CO on Nov 20th, 2024 (while I was not a CO resident).

QUESTION: Is my date of recognition for that LTCG the same as that of the trust, Nov 20th, 2024, and therefore, not taxable by CO (since is it was not CO sourced income, and I was not a CO resident at the time of the recognition)?

Please provide the the CO code section that supports your response.

Thank you.

[KeshaH]

Yes, the date of recognition for you as a beneficiary would be the same as the trust's date of recognition. Since you weren't a Colorado resident at that time and the income wasn't Colorado sourced (both the trust and property were outside Colorado), this long term capital gain wouldn't be taxable by Colorado.

According to Colorado tax code (section 39-22-109), income from trusts is recognized with the trust recognizes it, and for nonresidents only Colorado-sourced income is taxable. Since this capital gain was both recognized when you weren't a resident AND wasn't Colorado sourced income, it will not be included in your Colorado income when determining your Colorado tax.

[gam108]

Thank you, Kesha!