BILL REQ. #:  Z-0157.1 

Read first time 01/12/11.   Referred to Committee on Judiciary.

     AN ACT Relating to the income tax required to be paid by a trustee; and amending RCW 11.104A.290.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 11.104A.290 and 2002 c 345 s 505 are each amended to read as follows:
     (((a))) (1) A tax required to be paid by a trustee based on receipts allocated to income must be ((paid from)) charged to income.
     (((b))) (2) A tax required to be paid by a trustee based on receipts allocated to principal must be ((paid from)) charged to principal, even if the tax is called an income tax by the taxing authority.
     (((c))) (3) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be ((paid proportionately)) charged:
     (((1) From)) (a) To income to the extent that receipts from the entity are allocated only to income; ((and
     (2) From)) (b) To principal to the extent that((:
     (i) Receipts from the entity are allocated to principal; and
     (ii) The trust's share of the entity's taxable income exceeds the total receipts described in (1) and (2)(i) of this subsection.
     (d) For purposes of this section, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax)) receipts from the entity are allocated only to principal;
     (c) Proportionately to income and principal to the extent that receipts from the entity are allocated to both income and principal;
     (d) Otherwise to principal.
     (4) Before applying subsections (1) through (3) of this section, the trustee must adjust income or principal receipts by the distributions to a beneficiary for which the trust receives an income tax deduction.