Sec. 45a-542cc. Adjustments between principal and income as result of taxes.
Sec. 45a-542cc. Adjustments between principal and income as result 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 which arise from:
(1) Elections and decisions, other than those described in subsection (b) of this
section, that the fiduciary makes from time to time regarding tax matters;
(2) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary
as a result of a transaction involving or a distribution from the estate or trust; or
(3) 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 or
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.
(P.A. 99-164, S. 30, 36.)
History: P.A. 99-164 effective January 1, 2000.