Trust beneficiary living overseas

[efjeff]

I am preparing a return (US Form 1041, Mass Form 2) for a Massachusetts non-grantor trust with 5 beneficiaries. One of them is a US resident living permanently in Italy, but has a Mass address that she uses for IRS correspondence and that I am using in the return. How do I input her foreign domicile into Turbo Tax? It seems to take the Mass address in the beneficiary information section and use that everywhere, including the Mass return.  I was able to override the legal domicile on the Mass Sch 2K-1 worksheet to Italy but the Mass Schedule B/R still shows MA as the legal domicile and says that this comes from the US K-1 (via the Mass Beneficiary Worksheet). How do I change her legal domicile to Italy while preserving the mailing address?

[Anonymous_]

Is this necessary?

The beneficiary is a U.S. citizen and has MA source income.

[efjeff]

Income from a Massachusetts trust is not necessarily "Massachusetts Source Income".  According to Mass DoR, the definition of Massachusetts Source Income is:

"Massachusetts gross income derived from or effectively connected with (1) any trade or business, including any employment, carried on by a non-resident in Massachusetts, whether or not the non-resident is actively engaged in a trade or business or employment in Massachusetts in the year in which the income is received; (2) the participation in any lottery or wagering transaction in Massachusetts; or (3) the ownership of any interest in real or tangible personal property located in Massachusetts." 

Dividends and interest are not considered Mass Source Income.

[Anonymous_]

You have to read further:

Massachusetts source income derived from pass-through entities, such as partnerships, trusts, estates, limited liability companies (LLCs), or S corporations, generally is also subject to Massachusetts income taxation for non-residents.

See https://www.mass.gov/regulations/830-CMR-625a1-non-resident-income-tax