§ 30-4-3-38 — Grantor trust; reimbursement to deemed owner

Indiana § 30-4-3-38

• Jurisdiction: Indiana
• Art. 4: TRUST CODE
• Ch. 3: Rules Governing the Rights, Powers, Duties, Liabilities,

Text

(a) This section does not apply to a trust if the
application of this section disqualifies the trust for, or reduces the
amount of, a marital or charitable deduction available to any person for
state or federal:
(1) income;
(2) gift; or
(3) estate;
tax purposes.
(b) As used in this section, "deemed owner" means the settlor or
another person who is treated as the owner of the trust for federal
income tax purposes under 26 U.S.C. 671 through 26 U.S.C. 679.
(c) As used in this section, "grantor trust" means a trust in which
part or all of its income is treated as taxable to a deemed owner for
federal tax purposes under 26 U.S.C. 671.
(d) As used in this section, "related or subordinate party" means a
nonadverse party who is:
(1) the deemed owner's spouse, if living with the deemed owner;
or
(2) any of the following:
(A) The deemed owner's:
(i) father;
(ii) mother;
(iii) issue; or
(iv) brother or sister.
(B) A corporation or an employee of a corporation in which the
deemed owner's and the trust's stockholdings are significant
from the viewpoint of voting control.
(C) A subordinate employee of a corporation in which the
deemed owner is the executive.
(e) This subsection applies only to the part of a trust that is taxable
to the deemed owner if only part of the trust is a grantor trust. Unless
the terms of the trust expressly provide otherwise:
(1) the trustee of a grantor trust who is not the deemed owner and
who is not a related or subordinate party; or
(2) any other trustee of a grantor trust acting at the direction of or
with the written consent of a trust director who is not the deemed
owner and not a related or subordinate party with respect to the
trust's deemed owner;
may reimburse the deemed owner for any amount of the deemed
owner's personal federal, state, county, city, local, foreign, or other
income tax liability that is attributable to the inclusion of the trust's
income, capital gains, deductions, and credits in the calculation of the
deemed owner's taxable income.
(f) The trustee may pay the amount under subsection (e) to the
deemed owner directly or to an appropriate taxing authority on behalf
of the deemed owner.
(g) A person who is authorized to reimburse a trust's deemed owner
for income taxes under subsection (e) may not use:
(1) an insurance policy;
(2) the cash value of an insurance policy; or
(3) the proceeds of a loan secured by an interest in an insurance
policy;
that the trust holds on the deemed owner's life to reimburse the deemed
owner or to pay an appropriate taxing authority on behalf of the
deemed owner.
(h) The deemed owner may not be treated as a beneficiary of the
trust for purposes of section 2(b) of this chapter or any other Indiana
law:
(1) because of the trustee's power to make payments to, or on
behalf of, the deemed owner; or
(2) because the trustee decides to exercise power in favor of the
deemed owner.
(i) If a person is the deemed owner of only part of a trust for income
tax purposes, the reimbursement or payment of income taxes under this
section may be made from that part of the trust.

Legislative History

As added by P.L.38-2023, SEC.17.