TurboTax automatically moves the trust federal income (specifically just its capital gains, not div or int) and puts that number in Line B of the NY IT-205 form. TurboTax uses this number to then create the trust NY tax liability. The trust ought not to have a NY tax liability as it meets the following conditions • All the trustees are domiciled in a state other than New York. • The entire corpus of the trust, including real and tangible personal property, is located outside of New York State. • All income and gains of the trust are derived from or connected with sources outside of New York State, determined as if the trust were a nonresident trust.
This is noted in turbotax software by checking a box that states Trust meets conditions of section 605(b)(3)(D). TurboTax further confirms this by generating IT-205C, a statement certifying the trust is nontaxable by NYS. Despite all this, TurboTax tells me I owe taxes in NYS because I/TurboTax can't put a correct figue in IT-205 Line B.
