How do I determine if a trust is resident or non-resident for Mass fiduciary return?

[Ted6]

My Mom was trustee for a grantor, inter-vivos trust when she passed away in 2018. The trust was created in California (in 2003) and she lived in Arizona for the last 10 years. I'm the successor trustee and I live in Massachusetts. I have the TurboTax Massachusetts Fiduciary return package. All the trust income is from investments in mutual funds and stocks. Is this trust a Massachusetts resident or non-resident trust? (It's the "Residency" question asked in TurboTax.)

[tagteam · Accepted solution]

"How do I determine if a trust is resident or non-resident for Mass fiduciary return?"

If you look at page 4 of the instructions (link below), it appears as if the trust satisfied one of the requirements for MA residency (you are an MA resident trustee), but none of the other requirements appear to be applicable.

See page 4: https://www.mass.gov/files/documents/2019/01/25/dor-2018-fido-form-2-inst.pdf

[Ted6]

Thanks. That seems to indicate it would be a non-resident trust. However, the first condition for that seems to be that there be Mass source income. If all the income is from stocks and bonds, it's not clear to me how Mass jurisdiction is established. By my being a beneficiary?

[tagteam]

MA source income would be something on the order of rental property located in MA, a MA-based partnership, et al.

Income, in the form of dividends, interest, and capital gains, from the likes of stocks and bonds would not be considered MA source income. If you have nothing more than that, I can't see where the trust is anything other than a non-resident trust.

[Ted6]

I'm sorry if I don't seem to be getting this but it looks like the first condition for a non-resident trust is "A trust that earns Massachusetts source income and ..." Am I reading/interpreting that incorrectly?

[tagteam]

MA source income is not a condition for residency; it only controls whether or not MA can tax the income of a non-resident. If an MA non-resident (any MA non-resident) has MA source income, MA can impose a tax on that income.

I should add that it appears the only connection the trust at issue here has with MA is that you, as trustee, are an MA resident and, according to the instructions (link in the answer), that is not sufficient to confer MA residency on the trust.

[Ted6]

Ok -- I think I've got it -- thanks.