Peyton, CO asked in Tax Law for Colorado

Q: State tax obligation for K-1 form 1041

We have to amend our 2018 taxes because we received a schedule K1 form 1041 after we had already filed our tax returns and received our refund. ( my husband’s mother passed away and she had a trust out of New York) The question I have is since we are Colorado residents do we have to pay Colorado state taxes on the trust inheritance or NY state taxes? What forms would I have to include with my amended Colorado return. Thank you

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1 Lawyer Answer
D. Mathew Blackburn
D. Mathew Blackburn
Answered
  • Tax Law Lawyer
  • Englewood, CO
  • Licensed in Colorado

A: A distribution from a trust is not an inheritance. The K-1 should only include your allocable trust income, not a distribution of trust corpus. The amounts originally placed in trust are not taxable on distribution; only the income of the trust distributed to you is taxable to you. Most accountants can't do a F1041 (Trust & Estate Return) properly so you may want to have the return reviewed.

No NY tax because you're not residents. The trust will pay any allocable taxes to NY. This would be for undistributed income of the trust.

You'll need a 104X to amend the CO return.

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