Supreme Court Blocks North Carolina From Taxing Trust Income (2)

A trust beneficiary’s residence in a state doesn’t establish enough of a connection for the state to tax the trust, the U.S. Supreme Court ruled June 21 in a unanimous opinion.

The case centers on whether a trust can be taxed by a state based on where beneficiaries live. Income not yet distributed can’t be taxed when it is uncertain whether a beneficiary will receive it, the court said in its opinion. Trusts earn about $120 billion in yearly income in the U.S.

A ruling for the state would have meant havoc for trust administration, “forcing trustees to track ...