Adjustments to offset shifting of economic interests or tax benefits
between income beneficiaries and remainder beneficiaries
Sec. 43. (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 that arise
from:
(1) elections and decisions, other than those described in
subsection (b), 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, 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, a
trust, or a 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.
As added by P.L.84-2002, SEC.2.
Last modified: May 27, 2006