Code Section Group

Revenue and Taxation Code - RTC

DIVISION 2. OTHER TAXES [6001 - 60709]

  ( Heading of Division 2 amended by Stats. 1968, Ch. 279. )

PART 10. PERSONAL INCOME TAX [17001 - 18181]

  ( Part 10 added by Stats. 1943, Ch. 659. )

CHAPTER 9. Estates, Trusts, Beneficiaries, and Decedents [17731 - 17779]
  ( Chapter 9 repealed and added by Stats. 1983, Ch. 488, Sec. 59. )

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.

(Amended by Stats. 2005, Ch. 691, Sec. 37. Effective October 7, 2005.)

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.”

(Amended by Stats. 2002, Ch. 35, Sec. 26. Effective May 8, 2002. Applicable as prescribed by Sec. 63 of Ch. 35.)

17732.
  

Section 642(b) of the Internal Revenue Code, relating to deduction for personal exemption, shall not apply.

(Amended by Stats. 1999, Ch. 987, Sec. 46. Effective October 10, 1999.)

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).

(Amended by Stats. 2005, Ch. 691, Sec. 37.5. Effective October 7, 2005.)

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.

(Amended by Stats. 2001, Ch. 920, Sec. 16. Effective January 1, 2002.)

17734.6.
  

Section 646 of the Internal Revenue Code, relating to tax treatment of electing Alaska Native Settlement Trusts, shall not apply.

(Added by Stats. 2005, Ch. 691, Sec. 37.6. Effective October 7, 2005.)

17735.
  

(a) In the case of an estate, for taxable years beginning before January 1, 2014, 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 failed to obtain a certificate as provided by former Section 19513.

(b) This section shall remain in effect only until December 1, 2018, and as of that date is repealed.

(Amended by Stats. 2013, Ch. 239, Sec. 1. Effective January 1, 2014. Repealed as of January 1, 2018, by its own provisions.)

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.

(Amended by Stats. 1993, Ch. 881, Sec. 10. Effective October 6, 1993. Operative January 1, 1994, by Sec. 34 of Ch. 881.)

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.

(Amended by Stats. 1987, Ch. 1138, Sec. 113. Effective September 25, 1987. Applicable to taxable years beginning on or after January 1, 1987, by Sec. 189 of Ch. 1138.)

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.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

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.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

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.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

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.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

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.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

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.

(Amended by Stats. 1997, Ch. 611, Sec. 43. Effective October 3, 1997.)

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.

(Amended by Stats. 2002, Ch. 35, Sec. 27. Effective May 8, 2002. Applicable as prescribed by Sec. 64 of Ch. 35.)

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.

(Added by Stats. 1998, Ch. 322, Sec. 34. Effective August 20, 1998.)

17755.
  

For taxable years beginning on or after January 1, 2014, Section 664(c)(2) of the Internal Revenue Code, relating to excise tax, shall not apply and, in lieu thereof, the unrelated business taxable income, as defined in Section 23732, of every charitable remainder annuity trust or charitable remainder unitrust shall be subject to tax under Section 17651.

(Repealed and added by Stats. 2014, Ch. 478, Sec. 4. Effective January 1, 2015.)

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.

(Added by Stats. 2005, Ch. 691, Sec. 38. Effective October 7, 2005.)

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.

(Amended (as added by Stats. 1998, Ch. 7) by Stats. 1998, Ch. 322, Sec. 35. Effective August 20, 1998.)

17779.
  

Sections 665 to 668, inclusive, of the Internal Revenue Code shall not apply to distributions described in subdivision (b) of Section 17745.

(Repealed and added by Stats. 1983, Ch. 488, Sec. 59. Effective July 28, 1983.)

RTCRevenue and Taxation Code - RTC