17731. (a) Subchapter J of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to estates, trusts, beneficiaries, and
decedents, shall apply, except as otherwise provided.
(b) Section 692(d)(2) of the Internal Revenue Code, relating to
the ten thousand-dollar ($10,000) minimum benefit, does not apply.
17731.5. (a) Section 641(c)(2)(A) of the Internal Revenue Code is
modified to read: "The amount of the tax imposed by subdivision (e)
of Section 17041 shall be determined by using the highest rate of tax
applicable to an individual under subdivision (a) of Section 17041."
(b) Section 641(c)(2)(B) of the Internal Revenue Code is modified
to read: "The credit allowed under subdivision (b) of Section 17733
shall be zero."
17732. Section 642(b) of the Internal Revenue Code, relating to
deduction for personal exemption, shall not apply.
17733. (a) An estate shall be allowed a credit of ten dollars ($10)
against the tax imposed under Section 17041, less any amounts
imposed under paragraph (1) of subdivision (d) or paragraph (1) of
subdivision (e), or both, of Section 17560.
(b) (1) Except as provided in paragraph (2), a trust shall be
allowed a credit of one dollar ($1) against the tax imposed under
Section 17041, less any amounts imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
(2) (A) A disability trust, as defined in Section 642(b)(2)(C) of
the Internal Revenue Code, shall be allowed a credit in an amount
equal to the personal exemption credit authorized for a single
individual pursuant to subdivision (a) of Section 17054.
(B) The credit authorized by subparagraph (A) shall be subject to
the credit reduction provisions of Section 17054.1. For purposes of
making the adjustments required by Section 17054.1, the adjusted
gross income of the disability trust shall be computed in accordance
with Section 67(e) of the Internal Revenue Code, relating to
determination of adjusted gross income in case of estates and trusts.
(C) This paragraph applies to taxable years beginning on or after
January 1, 2004.
(c) The credits allowed by this section shall be in lieu of the
credits allowed under Section 17054 (relating to credit for personal
exemption).
17734. For purposes of computing "taxable income of a nonresident
or part-year resident" under paragraph (1) of subdivision (i) of
Section 17041, in the case of a nonresident beneficiary, income and
deduction derived through an estate or trust shall be included in
that computation only to the extent that the income or deduction is
derived by the estate or trust from sources within this state.
17734.6. Section 646 of the Internal Revenue Code, relating to tax
treatment of electing Alaska Native Settlement Trusts, shall not
apply.
17735. In the case of an estate, no deductions shall be allowed
under Section 661(a) of the Internal Revenue Code with respect to
amounts attributable and taxable to nonresident beneficiaries if the
fiduciary fails to obtain a certificate as provided by Section 19513.
17736. (a) Section 642(c)(2) of the Internal Revenue Code is
modified for purposes of this part by substituting "December 31, 1970"
for "October 9, 1969" throughout that paragraph.
(b) In lieu of Section 642(c)(4) of the Internal Revenue Code,
relating to adjustments, to the extent that the amount otherwise
allowable as a deduction under Section 642(c) of the Internal Revenue
Code, relating to deduction for amounts paid or permanently set
aside for a charitable purpose, consists of gain described in Section
18152.5, proper adjustment shall be made for any exclusion allowable
to the estate or trust under Section 18152.5. In the case of a
trust, the deduction allowed by Section 642(c) of the Internal
Revenue Code shall be subject to Section 681 of the Internal Revenue
Code, relating to limitation on charitable deduction.
17737. For purposes of computing the taxable income of the estate
or trust and the taxable income of a spouse to whom Section 682(a) of
the Internal Revenue Code (relating to income of an estate or trust
in the case of divorce, etc.) applies, that spouse shall be
considered as the beneficiary for purposes of this chapter.
17742. (a) Except as otherwise provided in this chapter, the income
of an estate or trust is taxable to the estate or trust. The tax
applies to the entire taxable income of an estate, if the decedent
was a resident, regardless of the residence of the fiduciary or
beneficiary, and to the entire taxable income of a trust, if the
fiduciary or beneficiary (other than a beneficiary whose interest in
such trust is contingent) is a resident, regardless of the residence
of the settlor.
(b) For purposes of this article the residence of a corporate
fiduciary of a trust means the place where the corporation transacts
the major portion of its administration of the trust.
17743. Where the taxability of income under this chapter depends on
the residence of the fiduciary and there are two or more fiduciaries
for the trust, the income taxable under Section 17742 shall be
apportioned according to the number of fiduciaries resident in this
state pursuant to rules and regulations prescribed by the Franchise
Tax Board.
17744. Where the taxability of income under this chapter depends on
the residence of the beneficiary and there are two or more
beneficiaries of the trust, the income taxable under Section 17742
shall be apportioned according to the number and interest of
beneficiaries resident in this state pursuant to rules and
regulations prescribed by the Franchise Tax Board.
17745. (a) If, for any reason, the taxes imposed on income of a
trust which is taxable to the trust because the fiduciary or
beneficiary is a resident of this state are not paid when due and
remain unpaid when that income is distributable to the beneficiary,
or in case the income is distributable to the beneficiary before the
taxes are due, if the taxes are not paid when due, such income shall
be taxable to the beneficiary when distributable to him except that
in the case of a nonresident beneficiary such income shall be taxable
only to the extent it is derived from sources within this state.
(b) If no taxes have been paid on the current or accumulated
income of the trust because the resident beneficiary's interest in
the trust was contingent such income shall be taxable to the
beneficiary when distributed or distributable to him or her.
(c) The tax on that income which is taxable to the beneficiary
under subdivisions (a) or (b) is a tax on the receipt of that income
distributed or on the constructive receipt of that distributable
income. For purposes of this section income accumulated by a trust
continues to be income even though the trust provides that the income
(ordinary or capital) shall become a part of the corpus.
(d) The tax attributable to the inclusion of that income in the
gross income of that beneficiary for the year that income is
distributed or distributable under subdivision (b) shall be the
aggregate of the taxes which would have been attributable to that
income had it been included in the gross income of that beneficiary
ratably for the year of distribution and the five preceding taxable
years, or for the period that the trust accumulated or acquired
income for that contingent beneficiary, whichever period is the
shorter.
(e) In the event that a person is a resident beneficiary during
the period of accumulation, and leaves this state within 12 months
prior to the date of distribution of accumulated income and returns
to the state within 12 months after distribution, it shall be
presumed that the beneficiary continued to be a resident of this
state throughout the time of distribution.
(f) The Franchise Tax Board shall prescribe such regulations as it
deems necessary for the application of this section.
17745.1. The amendments of Sections 17742 and 17745 made at the
1963 Regular Session of the Legislature shall be applicable only with
respect to taxable years beginning after December 31, 1962. Whether
or not the income of a trust which is or was accumulated or is or was
accumulated and distributed or accumulated and distributable is
taxable by California for the years prior to 1963 shall be determined
as if Sections 17742 and 17745 had not been amended at the 1963
Regular Session of the Legislature and without inferences drawn from
the fact that such amendments were not made applicable with respect
to taxable years beginning before January 1, 1963.
17750. Section 643(a) of the Internal Revenue Code, relating to
distributable net income, is modified to provide that the exclusion
under Section 18152.5 shall not be taken into account.
17751. Section 645 of the Internal Revenue Code, relating to
certain revocable trusts treated as part of estate, is modified as
follows:
(a) An election under Section 645(a) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor, if any, of the estate and the trustee
of the qualified revocable trust under Section 645(a) of the
Internal Revenue Code for state purposes and a separate election
under paragraph (3) of subdivision (e) of Section 17024.5 shall not
be allowed.
(b) If the executor, if any, of the estate and the trustee of a
qualified revocable trust fail to make an election under Section 645
(a) of the Internal Revenue Code for federal purposes with respect to
that qualified revocable trust, that trust shall be treated and
taxed for purposes of this part as a separate trust, an election
under Section 645(a) of the Internal Revenue Code for state purposes
with respect to that trust shall not be allowed, and a separate
election under paragraph (3) of subdivision (e) of Section 17024.5
shall not be allowed with respect to that trust.
17752. Section 663 of the Internal Revenue Code, relating to
special rules applicable to Sections 661 and 662, is modified as
follows:
(a) Section 663(b) of the Internal Revenue Code, relating to
distributions in the first 65 days of the taxable year, is modified
as follows:
(1) An election under Section 663(b) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(b) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(b) of
the Internal Revenue Code for federal purposes with respect to an
amount properly paid or credited within 65 days of the taxable year,
that amount shall not be considered for purposes of this part as
having been paid or credited on the last day of the preceding taxable
year, an election under Section 663(b) of the Internal Revenue Code
for state purposes with respect to that amount shall not be allowed,
and a separate election under paragraph (3) of subdivision (e) of
Section 17024.5 shall not be allowed with respect to that amount.
(b) Section 663(c) of the Internal Revenue Code, relating to
separate shares treated as separate estates or trusts, is modified as
follows:
(1) An election under Section 663(c) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(c) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(c) of
the Internal Revenue Code for federal purposes with respect to
separate shares treated as separate estates or trusts, an election
under Section 663(c) of the Internal Revenue Code for state purposes
shall not be allowed, and a separate election under paragraph (3) of
subdivision (e) of Section 17024.5 shall not be allowed.
17755. Section 664(c) of the Internal Revenue Code, relating to the
taxation of trusts, shall not apply and, in lieu thereof, a
charitable remainder annuity trust and a charitable remainder
unitrust shall, for any taxable year, not be subject to any tax
imposed under this part, unless that trust, for the taxable year, has
unrelated business taxable income, within the meaning of Section
23732, determined as if Chapter 4 (commencing with Section 23701) of
Part 11, applied to that trust.
17760. Section 684 of the Internal Revenue Code, relating to
recognition of gain on certain transfers to certain foreign trusts
and estates, shall not apply.
17760.5. Section 685 of the Internal Revenue Code, relating to
treatment of funeral trusts, is modified as follows:
(a) Section 685(a) of the Internal Revenue Code is modified to
read: In the case of a qualified funeral trust--
(1) Subparts B, C, D, and E of Subchapter J of Chapter 1 of
Subtitle A of the Internal Revenue Code shall not apply.
(2) No credit for personal exemption shall be allowed under
Section 17054 or Section 17733.
(b) Section 685(b) of the Internal Revenue Code is modified as
follows:
(1) An election under Section 685(b)(5) of the Internal Revenue
Code for federal purposes shall be treated for purposes of this part
as an election made by the trustee of the qualified funeral trust
under Section 685(b)(5) of the Internal Revenue Code for state
purposes and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed.
(2) If the trustee of a qualified funeral trust fails to make an
election under Section 685(b)(5) of the Internal Revenue Code for
federal purposes with respect to a qualified funeral trust, that
trust shall be treated for purposes of this part as owned under
Subpart E of the Internal Revenue Code by the purchasers of the
contracts described in Section 685(b)(1) of the Internal Revenue
Code, an election under Section 685(b)(5) of the Internal Revenue
Code for state purposes with respect to that trust shall not be
allowed, and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed with respect to that
trust.
(c) Section 685(d) of the Internal Revenue Code is modified to
read: Subdivision (e) of Section 17041 shall be applied to each
qualified funeral trust by treating each beneficiary's interest in
each qualified funeral trust as a separate trust.
(d) The Franchise Tax Board may, by forms and instructions,
provide rules for simplified reporting of all trusts having a single
trustee consistent with the rules prescribed by the Secretary of the
Treasury under Section 685 of the Internal Revenue Code.
(e) This section shall apply to taxable years ending after August
5, 1997.
(f) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
17779. Sections 665 to 668, inclusive, of the Internal Revenue Code
shall not apply to distributions described in subdivision (b) of
Section 17745.
17731. (a) Subchapter J of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to estates, trusts, beneficiaries, and
decedents, shall apply, except as otherwise provided.
(b) Section 692(d)(2) of the Internal Revenue Code, relating to
the ten thousand-dollar ($10,000) minimum benefit, does not apply.
17731.5. (a) Section 641(c)(2)(A) of the Internal Revenue Code is
modified to read: "The amount of the tax imposed by subdivision (e)
of Section 17041 shall be determined by using the highest rate of tax
applicable to an individual under subdivision (a) of Section 17041."
(b) Section 641(c)(2)(B) of the Internal Revenue Code is modified
to read: "The credit allowed under subdivision (b) of Section 17733
shall be zero."
17732. Section 642(b) of the Internal Revenue Code, relating to
deduction for personal exemption, shall not apply.
17733. (a) An estate shall be allowed a credit of ten dollars ($10)
against the tax imposed under Section 17041, less any amounts
imposed under paragraph (1) of subdivision (d) or paragraph (1) of
subdivision (e), or both, of Section 17560.
(b) (1) Except as provided in paragraph (2), a trust shall be
allowed a credit of one dollar ($1) against the tax imposed under
Section 17041, less any amounts imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
(2) (A) A disability trust, as defined in Section 642(b)(2)(C) of
the Internal Revenue Code, shall be allowed a credit in an amount
equal to the personal exemption credit authorized for a single
individual pursuant to subdivision (a) of Section 17054.
(B) The credit authorized by subparagraph (A) shall be subject to
the credit reduction provisions of Section 17054.1. For purposes of
making the adjustments required by Section 17054.1, the adjusted
gross income of the disability trust shall be computed in accordance
with Section 67(e) of the Internal Revenue Code, relating to
determination of adjusted gross income in case of estates and trusts.
(C) This paragraph applies to taxable years beginning on or after
January 1, 2004.
(c) The credits allowed by this section shall be in lieu of the
credits allowed under Section 17054 (relating to credit for personal
exemption).
17734. For purposes of computing "taxable income of a nonresident
or part-year resident" under paragraph (1) of subdivision (i) of
Section 17041, in the case of a nonresident beneficiary, income and
deduction derived through an estate or trust shall be included in
that computation only to the extent that the income or deduction is
derived by the estate or trust from sources within this state.
17734.6. Section 646 of the Internal Revenue Code, relating to tax
treatment of electing Alaska Native Settlement Trusts, shall not
apply.
17735. In the case of an estate, no deductions shall be allowed
under Section 661(a) of the Internal Revenue Code with respect to
amounts attributable and taxable to nonresident beneficiaries if the
fiduciary fails to obtain a certificate as provided by Section 19513.
17736. (a) Section 642(c)(2) of the Internal Revenue Code is
modified for purposes of this part by substituting "December 31, 1970"
for "October 9, 1969" throughout that paragraph.
(b) In lieu of Section 642(c)(4) of the Internal Revenue Code,
relating to adjustments, to the extent that the amount otherwise
allowable as a deduction under Section 642(c) of the Internal Revenue
Code, relating to deduction for amounts paid or permanently set
aside for a charitable purpose, consists of gain described in Section
18152.5, proper adjustment shall be made for any exclusion allowable
to the estate or trust under Section 18152.5. In the case of a
trust, the deduction allowed by Section 642(c) of the Internal
Revenue Code shall be subject to Section 681 of the Internal Revenue
Code, relating to limitation on charitable deduction.
17737. For purposes of computing the taxable income of the estate
or trust and the taxable income of a spouse to whom Section 682(a) of
the Internal Revenue Code (relating to income of an estate or trust
in the case of divorce, etc.) applies, that spouse shall be
considered as the beneficiary for purposes of this chapter.
17742. (a) Except as otherwise provided in this chapter, the income
of an estate or trust is taxable to the estate or trust. The tax
applies to the entire taxable income of an estate, if the decedent
was a resident, regardless of the residence of the fiduciary or
beneficiary, and to the entire taxable income of a trust, if the
fiduciary or beneficiary (other than a beneficiary whose interest in
such trust is contingent) is a resident, regardless of the residence
of the settlor.
(b) For purposes of this article the residence of a corporate
fiduciary of a trust means the place where the corporation transacts
the major portion of its administration of the trust.
17743. Where the taxability of income under this chapter depends on
the residence of the fiduciary and there are two or more fiduciaries
for the trust, the income taxable under Section 17742 shall be
apportioned according to the number of fiduciaries resident in this
state pursuant to rules and regulations prescribed by the Franchise
Tax Board.
17744. Where the taxability of income under this chapter depends on
the residence of the beneficiary and there are two or more
beneficiaries of the trust, the income taxable under Section 17742
shall be apportioned according to the number and interest of
beneficiaries resident in this state pursuant to rules and
regulations prescribed by the Franchise Tax Board.
17745. (a) If, for any reason, the taxes imposed on income of a
trust which is taxable to the trust because the fiduciary or
beneficiary is a resident of this state are not paid when due and
remain unpaid when that income is distributable to the beneficiary,
or in case the income is distributable to the beneficiary before the
taxes are due, if the taxes are not paid when due, such income shall
be taxable to the beneficiary when distributable to him except that
in the case of a nonresident beneficiary such income shall be taxable
only to the extent it is derived from sources within this state.
(b) If no taxes have been paid on the current or accumulated
income of the trust because the resident beneficiary's interest in
the trust was contingent such income shall be taxable to the
beneficiary when distributed or distributable to him or her.
(c) The tax on that income which is taxable to the beneficiary
under subdivisions (a) or (b) is a tax on the receipt of that income
distributed or on the constructive receipt of that distributable
income. For purposes of this section income accumulated by a trust
continues to be income even though the trust provides that the income
(ordinary or capital) shall become a part of the corpus.
(d) The tax attributable to the inclusion of that income in the
gross income of that beneficiary for the year that income is
distributed or distributable under subdivision (b) shall be the
aggregate of the taxes which would have been attributable to that
income had it been included in the gross income of that beneficiary
ratably for the year of distribution and the five preceding taxable
years, or for the period that the trust accumulated or acquired
income for that contingent beneficiary, whichever period is the
shorter.
(e) In the event that a person is a resident beneficiary during
the period of accumulation, and leaves this state within 12 months
prior to the date of distribution of accumulated income and returns
to the state within 12 months after distribution, it shall be
presumed that the beneficiary continued to be a resident of this
state throughout the time of distribution.
(f) The Franchise Tax Board shall prescribe such regulations as it
deems necessary for the application of this section.
17745.1. The amendments of Sections 17742 and 17745 made at the
1963 Regular Session of the Legislature shall be applicable only with
respect to taxable years beginning after December 31, 1962. Whether
or not the income of a trust which is or was accumulated or is or was
accumulated and distributed or accumulated and distributable is
taxable by California for the years prior to 1963 shall be determined
as if Sections 17742 and 17745 had not been amended at the 1963
Regular Session of the Legislature and without inferences drawn from
the fact that such amendments were not made applicable with respect
to taxable years beginning before January 1, 1963.
17750. Section 643(a) of the Internal Revenue Code, relating to
distributable net income, is modified to provide that the exclusion
under Section 18152.5 shall not be taken into account.
17751. Section 645 of the Internal Revenue Code, relating to
certain revocable trusts treated as part of estate, is modified as
follows:
(a) An election under Section 645(a) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor, if any, of the estate and the trustee
of the qualified revocable trust under Section 645(a) of the
Internal Revenue Code for state purposes and a separate election
under paragraph (3) of subdivision (e) of Section 17024.5 shall not
be allowed.
(b) If the executor, if any, of the estate and the trustee of a
qualified revocable trust fail to make an election under Section 645
(a) of the Internal Revenue Code for federal purposes with respect to
that qualified revocable trust, that trust shall be treated and
taxed for purposes of this part as a separate trust, an election
under Section 645(a) of the Internal Revenue Code for state purposes
with respect to that trust shall not be allowed, and a separate
election under paragraph (3) of subdivision (e) of Section 17024.5
shall not be allowed with respect to that trust.
17752. Section 663 of the Internal Revenue Code, relating to
special rules applicable to Sections 661 and 662, is modified as
follows:
(a) Section 663(b) of the Internal Revenue Code, relating to
distributions in the first 65 days of the taxable year, is modified
as follows:
(1) An election under Section 663(b) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(b) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(b) of
the Internal Revenue Code for federal purposes with respect to an
amount properly paid or credited within 65 days of the taxable year,
that amount shall not be considered for purposes of this part as
having been paid or credited on the last day of the preceding taxable
year, an election under Section 663(b) of the Internal Revenue Code
for state purposes with respect to that amount shall not be allowed,
and a separate election under paragraph (3) of subdivision (e) of
Section 17024.5 shall not be allowed with respect to that amount.
(b) Section 663(c) of the Internal Revenue Code, relating to
separate shares treated as separate estates or trusts, is modified as
follows:
(1) An election under Section 663(c) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(c) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(c) of
the Internal Revenue Code for federal purposes with respect to
separate shares treated as separate estates or trusts, an election
under Section 663(c) of the Internal Revenue Code for state purposes
shall not be allowed, and a separate election under paragraph (3) of
subdivision (e) of Section 17024.5 shall not be allowed.
17755. Section 664(c) of the Internal Revenue Code, relating to the
taxation of trusts, shall not apply and, in lieu thereof, a
charitable remainder annuity trust and a charitable remainder
unitrust shall, for any taxable year, not be subject to any tax
imposed under this part, unless that trust, for the taxable year, has
unrelated business taxable income, within the meaning of Section
23732, determined as if Chapter 4 (commencing with Section 23701) of
Part 11, applied to that trust.
17760. Section 684 of the Internal Revenue Code, relating to
recognition of gain on certain transfers to certain foreign trusts
and estates, shall not apply.
17760.5. Section 685 of the Internal Revenue Code, relating to
treatment of funeral trusts, is modified as follows:
(a) Section 685(a) of the Internal Revenue Code is modified to
read: In the case of a qualified funeral trust--
(1) Subparts B, C, D, and E of Subchapter J of Chapter 1 of
Subtitle A of the Internal Revenue Code shall not apply.
(2) No credit for personal exemption shall be allowed under
Section 17054 or Section 17733.
(b) Section 685(b) of the Internal Revenue Code is modified as
follows:
(1) An election under Section 685(b)(5) of the Internal Revenue
Code for federal purposes shall be treated for purposes of this part
as an election made by the trustee of the qualified funeral trust
under Section 685(b)(5) of the Internal Revenue Code for state
purposes and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed.
(2) If the trustee of a qualified funeral trust fails to make an
election under Section 685(b)(5) of the Internal Revenue Code for
federal purposes with respect to a qualified funeral trust, that
trust shall be treated for purposes of this part as owned under
Subpart E of the Internal Revenue Code by the purchasers of the
contracts described in Section 685(b)(1) of the Internal Revenue
Code, an election under Section 685(b)(5) of the Internal Revenue
Code for state purposes with respect to that trust shall not be
allowed, and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed with respect to that
trust.
(c) Section 685(d) of the Internal Revenue Code is modified to
read: Subdivision (e) of Section 17041 shall be applied to each
qualified funeral trust by treating each beneficiary's interest in
each qualified funeral trust as a separate trust.
(d) The Franchise Tax Board may, by forms and instructions,
provide rules for simplified reporting of all trusts having a single
trustee consistent with the rules prescribed by the Secretary of the
Treasury under Section 685 of the Internal Revenue Code.
(e) This section shall apply to taxable years ending after August
5, 1997.
(f) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
17779. Sections 665 to 668, inclusive, of the Internal Revenue Code
shall not apply to distributions described in subdivision (b) of
Section 17745.
17731. (a) Subchapter J of Chapter 1 of Subtitle A of the Internal
Revenue Code, relating to estates, trusts, beneficiaries, and
decedents, shall apply, except as otherwise provided.
(b) Section 692(d)(2) of the Internal Revenue Code, relating to
the ten thousand-dollar ($10,000) minimum benefit, does not apply.
17731.5. (a) Section 641(c)(2)(A) of the Internal Revenue Code is
modified to read: "The amount of the tax imposed by subdivision (e)
of Section 17041 shall be determined by using the highest rate of tax
applicable to an individual under subdivision (a) of Section 17041."
(b) Section 641(c)(2)(B) of the Internal Revenue Code is modified
to read: "The credit allowed under subdivision (b) of Section 17733
shall be zero."
17732. Section 642(b) of the Internal Revenue Code, relating to
deduction for personal exemption, shall not apply.
17733. (a) An estate shall be allowed a credit of ten dollars ($10)
against the tax imposed under Section 17041, less any amounts
imposed under paragraph (1) of subdivision (d) or paragraph (1) of
subdivision (e), or both, of Section 17560.
(b) (1) Except as provided in paragraph (2), a trust shall be
allowed a credit of one dollar ($1) against the tax imposed under
Section 17041, less any amounts imposed under paragraph (1) of
subdivision (d) or paragraph (1) of subdivision (e), or both, of
Section 17560.
(2) (A) A disability trust, as defined in Section 642(b)(2)(C) of
the Internal Revenue Code, shall be allowed a credit in an amount
equal to the personal exemption credit authorized for a single
individual pursuant to subdivision (a) of Section 17054.
(B) The credit authorized by subparagraph (A) shall be subject to
the credit reduction provisions of Section 17054.1. For purposes of
making the adjustments required by Section 17054.1, the adjusted
gross income of the disability trust shall be computed in accordance
with Section 67(e) of the Internal Revenue Code, relating to
determination of adjusted gross income in case of estates and trusts.
(C) This paragraph applies to taxable years beginning on or after
January 1, 2004.
(c) The credits allowed by this section shall be in lieu of the
credits allowed under Section 17054 (relating to credit for personal
exemption).
17734. For purposes of computing "taxable income of a nonresident
or part-year resident" under paragraph (1) of subdivision (i) of
Section 17041, in the case of a nonresident beneficiary, income and
deduction derived through an estate or trust shall be included in
that computation only to the extent that the income or deduction is
derived by the estate or trust from sources within this state.
17734.6. Section 646 of the Internal Revenue Code, relating to tax
treatment of electing Alaska Native Settlement Trusts, shall not
apply.
17735. In the case of an estate, no deductions shall be allowed
under Section 661(a) of the Internal Revenue Code with respect to
amounts attributable and taxable to nonresident beneficiaries if the
fiduciary fails to obtain a certificate as provided by Section 19513.
17736. (a) Section 642(c)(2) of the Internal Revenue Code is
modified for purposes of this part by substituting "December 31, 1970"
for "October 9, 1969" throughout that paragraph.
(b) In lieu of Section 642(c)(4) of the Internal Revenue Code,
relating to adjustments, to the extent that the amount otherwise
allowable as a deduction under Section 642(c) of the Internal Revenue
Code, relating to deduction for amounts paid or permanently set
aside for a charitable purpose, consists of gain described in Section
18152.5, proper adjustment shall be made for any exclusion allowable
to the estate or trust under Section 18152.5. In the case of a
trust, the deduction allowed by Section 642(c) of the Internal
Revenue Code shall be subject to Section 681 of the Internal Revenue
Code, relating to limitation on charitable deduction.
17737. For purposes of computing the taxable income of the estate
or trust and the taxable income of a spouse to whom Section 682(a) of
the Internal Revenue Code (relating to income of an estate or trust
in the case of divorce, etc.) applies, that spouse shall be
considered as the beneficiary for purposes of this chapter.
17742. (a) Except as otherwise provided in this chapter, the income
of an estate or trust is taxable to the estate or trust. The tax
applies to the entire taxable income of an estate, if the decedent
was a resident, regardless of the residence of the fiduciary or
beneficiary, and to the entire taxable income of a trust, if the
fiduciary or beneficiary (other than a beneficiary whose interest in
such trust is contingent) is a resident, regardless of the residence
of the settlor.
(b) For purposes of this article the residence of a corporate
fiduciary of a trust means the place where the corporation transacts
the major portion of its administration of the trust.
17743. Where the taxability of income under this chapter depends on
the residence of the fiduciary and there are two or more fiduciaries
for the trust, the income taxable under Section 17742 shall be
apportioned according to the number of fiduciaries resident in this
state pursuant to rules and regulations prescribed by the Franchise
Tax Board.
17744. Where the taxability of income under this chapter depends on
the residence of the beneficiary and there are two or more
beneficiaries of the trust, the income taxable under Section 17742
shall be apportioned according to the number and interest of
beneficiaries resident in this state pursuant to rules and
regulations prescribed by the Franchise Tax Board.
17745. (a) If, for any reason, the taxes imposed on income of a
trust which is taxable to the trust because the fiduciary or
beneficiary is a resident of this state are not paid when due and
remain unpaid when that income is distributable to the beneficiary,
or in case the income is distributable to the beneficiary before the
taxes are due, if the taxes are not paid when due, such income shall
be taxable to the beneficiary when distributable to him except that
in the case of a nonresident beneficiary such income shall be taxable
only to the extent it is derived from sources within this state.
(b) If no taxes have been paid on the current or accumulated
income of the trust because the resident beneficiary's interest in
the trust was contingent such income shall be taxable to the
beneficiary when distributed or distributable to him or her.
(c) The tax on that income which is taxable to the beneficiary
under subdivisions (a) or (b) is a tax on the receipt of that income
distributed or on the constructive receipt of that distributable
income. For purposes of this section income accumulated by a trust
continues to be income even though the trust provides that the income
(ordinary or capital) shall become a part of the corpus.
(d) The tax attributable to the inclusion of that income in the
gross income of that beneficiary for the year that income is
distributed or distributable under subdivision (b) shall be the
aggregate of the taxes which would have been attributable to that
income had it been included in the gross income of that beneficiary
ratably for the year of distribution and the five preceding taxable
years, or for the period that the trust accumulated or acquired
income for that contingent beneficiary, whichever period is the
shorter.
(e) In the event that a person is a resident beneficiary during
the period of accumulation, and leaves this state within 12 months
prior to the date of distribution of accumulated income and returns
to the state within 12 months after distribution, it shall be
presumed that the beneficiary continued to be a resident of this
state throughout the time of distribution.
(f) The Franchise Tax Board shall prescribe such regulations as it
deems necessary for the application of this section.
17745.1. The amendments of Sections 17742 and 17745 made at the
1963 Regular Session of the Legislature shall be applicable only with
respect to taxable years beginning after December 31, 1962. Whether
or not the income of a trust which is or was accumulated or is or was
accumulated and distributed or accumulated and distributable is
taxable by California for the years prior to 1963 shall be determined
as if Sections 17742 and 17745 had not been amended at the 1963
Regular Session of the Legislature and without inferences drawn from
the fact that such amendments were not made applicable with respect
to taxable years beginning before January 1, 1963.
17750. Section 643(a) of the Internal Revenue Code, relating to
distributable net income, is modified to provide that the exclusion
under Section 18152.5 shall not be taken into account.
17751. Section 645 of the Internal Revenue Code, relating to
certain revocable trusts treated as part of estate, is modified as
follows:
(a) An election under Section 645(a) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor, if any, of the estate and the trustee
of the qualified revocable trust under Section 645(a) of the
Internal Revenue Code for state purposes and a separate election
under paragraph (3) of subdivision (e) of Section 17024.5 shall not
be allowed.
(b) If the executor, if any, of the estate and the trustee of a
qualified revocable trust fail to make an election under Section 645
(a) of the Internal Revenue Code for federal purposes with respect to
that qualified revocable trust, that trust shall be treated and
taxed for purposes of this part as a separate trust, an election
under Section 645(a) of the Internal Revenue Code for state purposes
with respect to that trust shall not be allowed, and a separate
election under paragraph (3) of subdivision (e) of Section 17024.5
shall not be allowed with respect to that trust.
17752. Section 663 of the Internal Revenue Code, relating to
special rules applicable to Sections 661 and 662, is modified as
follows:
(a) Section 663(b) of the Internal Revenue Code, relating to
distributions in the first 65 days of the taxable year, is modified
as follows:
(1) An election under Section 663(b) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(b) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(b) of
the Internal Revenue Code for federal purposes with respect to an
amount properly paid or credited within 65 days of the taxable year,
that amount shall not be considered for purposes of this part as
having been paid or credited on the last day of the preceding taxable
year, an election under Section 663(b) of the Internal Revenue Code
for state purposes with respect to that amount shall not be allowed,
and a separate election under paragraph (3) of subdivision (e) of
Section 17024.5 shall not be allowed with respect to that amount.
(b) Section 663(c) of the Internal Revenue Code, relating to
separate shares treated as separate estates or trusts, is modified as
follows:
(1) An election under Section 663(c) of the Internal Revenue Code
for federal purposes shall be treated for purposes of this part as an
election made by the executor of the estate or the fiduciary of the
trust, as the case may be, under Section 663(c) of the Internal
Revenue Code for state purposes and a separate election under
paragraph (3) of subdivision (e) of Section 17024.5 shall not be
allowed.
(2) If the executor of the estate or the fiduciary of the trust,
as the case may be, fails to make an election under Section 663(c) of
the Internal Revenue Code for federal purposes with respect to
separate shares treated as separate estates or trusts, an election
under Section 663(c) of the Internal Revenue Code for state purposes
shall not be allowed, and a separate election under paragraph (3) of
subdivision (e) of Section 17024.5 shall not be allowed.
17755. Section 664(c) of the Internal Revenue Code, relating to the
taxation of trusts, shall not apply and, in lieu thereof, a
charitable remainder annuity trust and a charitable remainder
unitrust shall, for any taxable year, not be subject to any tax
imposed under this part, unless that trust, for the taxable year, has
unrelated business taxable income, within the meaning of Section
23732, determined as if Chapter 4 (commencing with Section 23701) of
Part 11, applied to that trust.
17760. Section 684 of the Internal Revenue Code, relating to
recognition of gain on certain transfers to certain foreign trusts
and estates, shall not apply.
17760.5. Section 685 of the Internal Revenue Code, relating to
treatment of funeral trusts, is modified as follows:
(a) Section 685(a) of the Internal Revenue Code is modified to
read: In the case of a qualified funeral trust--
(1) Subparts B, C, D, and E of Subchapter J of Chapter 1 of
Subtitle A of the Internal Revenue Code shall not apply.
(2) No credit for personal exemption shall be allowed under
Section 17054 or Section 17733.
(b) Section 685(b) of the Internal Revenue Code is modified as
follows:
(1) An election under Section 685(b)(5) of the Internal Revenue
Code for federal purposes shall be treated for purposes of this part
as an election made by the trustee of the qualified funeral trust
under Section 685(b)(5) of the Internal Revenue Code for state
purposes and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed.
(2) If the trustee of a qualified funeral trust fails to make an
election under Section 685(b)(5) of the Internal Revenue Code for
federal purposes with respect to a qualified funeral trust, that
trust shall be treated for purposes of this part as owned under
Subpart E of the Internal Revenue Code by the purchasers of the
contracts described in Section 685(b)(1) of the Internal Revenue
Code, an election under Section 685(b)(5) of the Internal Revenue
Code for state purposes with respect to that trust shall not be
allowed, and a separate election under paragraph (3) of subdivision
(e) of Section 17024.5 shall not be allowed with respect to that
trust.
(c) Section 685(d) of the Internal Revenue Code is modified to
read: Subdivision (e) of Section 17041 shall be applied to each
qualified funeral trust by treating each beneficiary's interest in
each qualified funeral trust as a separate trust.
(d) The Franchise Tax Board may, by forms and instructions,
provide rules for simplified reporting of all trusts having a single
trustee consistent with the rules prescribed by the Secretary of the
Treasury under Section 685 of the Internal Revenue Code.
(e) This section shall apply to taxable years ending after August
5, 1997.
(f) The amendments made to this section by the act adding this
subdivision shall apply to taxable years beginning on or after
January 1, 1998.
17779. Sections 665 to 668, inclusive, of the Internal Revenue Code
shall not apply to distributions described in subdivision (b) of
Section 17745.
