55-277.30 - Adjustments between principal and income because of taxes. - Virginia Statutes

§ 55-277.30. Adjustments between principal and income because of taxes.

A. A fiduciary may make adjustments between principal and income to offsetthe shifting of economic interests or tax benefits between incomebeneficiaries and remainder beneficiaries which arise from:

1. Elections and decisions, other than those described in subsection B, thatthe fiduciary makes from time to time regarding tax matters;

2. An income tax or any other tax that is imposed upon the fiduciary or abeneficiary as a result of a transaction involving or a distribution from theestate or trust; or

3. The ownership by an estate or trust of an interest in an entity whosetaxable income, whether or not distributed, is includable in the taxableincome of the estate, trust, or a beneficiary.

B. If the amount of an estate tax marital deduction or charitablecontribution deduction is reduced because a fiduciary deducts an amount paidfrom principal for income tax purposes instead of deducting it for estate taxpurposes, and as a result estate taxes paid from principal are increased andincome taxes paid by an estate, trust, or beneficiary are decreased, eachestate, trust, or beneficiary that benefits from the decrease in income taxshall reimburse the principal from which the increase in estate tax is paid.The total reimbursement must equal the increase in the estate tax to theextent that the principal used to pay the increase would have qualified for amarital deduction or charitable contribution deduction but for the payment.The proportionate share of the reimbursement for each estate, trust, orbeneficiary whose income taxes are reduced must be the same as itsproportionate share of the total decrease in income tax. An estate or trustshall reimburse principal from income.

(1999, c. 975.)