Which state to file irrevocable lving trust income?

[Jam772]

Have a situation w/ an irrevocable living trust (has EIN) that will have undistributed income.  Trying to determine which state (if any) the income needs to be reported.

The trustee is a resident of MA.  The beneficiary and grantor are residents of CO.  The trust will not generate any income directly from either state and looking at the resident trust rules from both states, the trust doesn't seem to fit as a resident trust of either MA or CO.  Is it possible that the trust won't have to file state income in either state?

[Anonymous_]

If the trust does not have CO or MA source income, then it is definitely possible.

CO defines a resident inter vivos trust as any trust which is administered in Colorado (which this one is not).

MA defines a resident inter vivos trust as any trust where the grantor was a MA inhabitant when the trust was created or where the grantor resided in MA during any part of the year for which the income is computed (neither of which appears to be the case here).

Of course, the beneficiary will likely have to report to his/her home state on any taxable income distributed from the trust.

Finally, it is always best to obtain professional guidance on these issues since they can become rather complicated and circumstances (and the law) can change.

[Anonymous]

even what you refer to as an irrevocable living trust can be treated as a grantor trust for federal tax purposes.  state taxation would  follow.  check with the lawyer who drew it up.  make a mistake and the wrong entity would end up paying taxes.

I've created a "irrevocable living trust" but because I retain certain powers, the IRS say it's a grantor trust and I get taxed on all its income.  In fact since I never filed for an EIN for the trust, I don't even need to file a return.   if a grantor trust, because it has an EIN a return will need to be filed but it is treated as a disregarded entity.  

[Anonymous_]

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@Anonymous wrote:

even what you refer to as an irrevocable living trust can be treated as a grantor trust for federal tax purposes.  state taxation would  follow.  

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That is an excellent point and we do not know any details with respect to the document itself, but do know that the grantor is still (apparently) alive.

Therefore, the OP should absolutely check with whoever drafted the trust doc. @Jam772 

[Jam772]

Thanks folks....it was created specifically to be non-grantor trust.  Will require it's own Fed 1041...talked to 2 CPA's and received 2 different answers.  One confident it required MA filing, the other saying neither state owned it as resident.  I read each states rules to net out as neither but.......