Arizona Laws 14-7430. Adjustments between principal and income because of taxes
A. A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries that arise from:
Terms Used In Arizona Laws 14-7430
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: includes , in the case of a decedent's estate, an heir, legatee and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary. See Arizona Laws 14-7401
- Estate: includes the property of the decedent, trust or other person whose affairs are subject to this title as originally constituted and as it exists from time to time during administration. See Arizona Laws 14-1201
- Fiduciary: A trustee, executor, or administrator.
- Fiduciary: means a personal representative or a trustee and includes an executor, an administrator, a successor personal representative, a special administrator and a person performing substantially the same function. See Arizona Laws 14-7401
- Income: means money or property that a fiduciary receives as current return from a principal asset and includes a portion of receipts from a sale, exchange or liquidation of a principal asset, to the extent provided in sections 14-7410 through 14-7424. See Arizona Laws 14-7401
- Marital deduction: The deduction(s) that can be taken in the determination of gift and estate tax liabilities because of the existence of a marriage or marital relationship.
- Principal: means property held in trust for distribution to a remainder beneficiary when the trust terminates. See Arizona Laws 14-7401
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
- Trust: includes an express trust, private or charitable, with any additions, wherever and however created. See Arizona Laws 14-1201
1. Elections and decisions, other than those described in subsection B, that the fiduciary makes from time to time regarding tax matters.
2. An income tax or any other tax that is imposed on the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust.
3. The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includible in the taxable income of the estate, the trust or a beneficiary.
B. If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust or beneficiary are decreased, each estate, trust or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.