22-3-506 - Adjustments between principal and income because of taxes. - Utah Statutes

22-3-506. Adjustments between principal and income because of taxes.
(1) A fiduciary may make adjustments between principal and income to offset theshifting of economic interests or tax benefits between income beneficiaries and remainderbeneficiaries which arise from:
(a) elections and decisions, other than those described in Subsection (2), that thefiduciary makes from time to time regarding tax matters;
(b) an income tax or any other tax that is imposed upon the fiduciary or a beneficiary as aresult of a transaction involving or a distribution from the estate or trust; or
(c) the ownership by an estate or trust of an interest in an entity whose taxable income,whether or not distributed, is includable in the taxable income of the estate, trust, or abeneficiary.
(2) If the amount of an estate tax marital deduction or charitable contribution deductionis reduced because a fiduciary deducts an amount paid from principal for income tax purposesinstead of deducting it for estate tax purposes, and as a result estate taxes paid from principal areincreased 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 principalfrom which the increase in estate tax is paid. The total reimbursement must equal the increase inthe estate tax to the extent that the principal used to pay the increase would have qualified for amarital deduction or charitable contribution deduction but for the payment. The proportionateshare of the reimbursement for each estate, trust, or beneficiary whose income taxes are reducedmust be the same as its proportionate share of the total decrease in income tax. An estate or trustshall reimburse principal from income.

Enacted by Chapter 285, 2004 General Session