Q: I am the trustee of a Washington state trust and live in California. Will the CA FTB try to tax the sale.
WA state has a tax on home sales, cant pay tax two times. Seems like the only tax I should have to pay is when I take a distribution.
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A:
When serving as a trustee of a Washington state trust while living in California, you could face potential tax complications from both states. California's Franchise Tax Board (FTB) may attempt to tax the income if it considers the trust a "resident trust," which depends on factors like where the trustee resides or where the trust's assets are located. However, the taxation of the sale of property, particularly in Washington, might primarily be subject to Washington's rules, including its real estate excise tax.
To avoid double taxation, you may be able to receive a credit for taxes paid to Washington, but this varies depending on the nature of the income and whether California deems it taxable. This could influence how you report the sale to both states.
Tax liability may not arise when you take a distribution, depending on the specific rules of both Washington and California and how the trust’s income is classified. Consulting with a professional can help clarify your obligations.
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