§ 15-1.2-507 — Adjustment between income and principal because of taxes

Colorado § 15-1.2-507

• Jurisdiction: Colorado
• Title 15: Probate,
• Art.: Uniform Fiduciary Income and Principal Act

Text

(1)
A fiduciary may make an adjustment between income and principal to offset the
shifting of economic interests or tax benefits between current income beneficiaries
and successor beneficiaries which arises from:

(a) An election or decision the fiduciary makes regarding a tax matter, other
than a decision to claim an income tax deduction to which subsection (2) of this
section applies;

(b) An income tax or other tax imposed on the fiduciary or a beneficiary as a
result of a transaction involving the fiduciary or a distribution by the fiduciary; or

(c) Ownership by the fiduciary of an interest in an entity a part of whose
taxable income, whether or not distributed, is includable in the taxable income of
the fiduciary or a beneficiary.

(2) If the amount of an estate tax marital or charitable 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 the fiduciary or a beneficiary
are decreased, the fiduciary shall charge each beneficiary that benefits from the
decrease in income tax to 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 the principal used to pay the increase would have qualified for a marital
or charitable deduction but for the payment. The share of the reimbursement for
each fiduciary or beneficiary whose income taxes are reduced must be the same as
its share of the total decrease in income tax.

(3) A fiduciary that charges a beneficiary under subsection (2) of this section
may offset the charge by obtaining payment from the beneficiary, withholding an
amount from future distributions to the beneficiary, or adopting another method or
combination of methods.

Legislative History

Source: L. 2021: Entire article added, (SB 21-171), ch. 143, p. 835, � 1, effective January 1, 2022.