Cal. Code Regs. tit. 18 § 17742

Current through Register 2024 Notice Reg. No. 44, November 1, 2024

Section 17742 - Taxability of Estates

(a) In the case of an estate, if the decedent and noncontingent beneficiaries are all nonresidents of this State, and, in the case of a trust, if the fiduciaries and noncontingent beneficiaries are all nonresidents of this State, only income from real or personal property located in this State (see Reg. 17951-3), business carried on within this State (see Reg. 17951-4), and intangible personal property having a business or taxable situs in this State (see Section 17952) is taxable.

In computing the taxable income from these sources, only the gross income from these sources is considered. From such gross income, the deductions allowed by the law are subtracted. See Sections 17301-17303 and Section 17734. The amount remaining is taxable income of the estate or trust to which the rates of tax specified in Section 17041 apply.

EXAMPLE. B is the executor of the estate of A, who was a nonresident of this State at the time of death. All the beneficiaries are likewise nonresidents. During the year 1980, the gross income of the estate from all sources amounted to $100,000, $50,000 of which was derived from real and personal property located, and from business transacted, in this State. The losses, depreciation, and depletion sustained with respect to the property in California, and the taxes, licenses, expenses, bad debts, etc., properly deductible from the California income amounted to $40,000. Thus, the income from California sources, prior to deducting amounts distributed to beneficiaries, amounted to $10,000. Of this amount, $6,000 was distributed to beneficiaries during the year pursuant to a partial distribution of the estate. The remaining $4,000 is the net income of the estate, as defined in Section 18411.

(b) A noncontingent beneficiary is one whose interest is not subject to a condition precedent.

(c) On the death of a married person, the deceased spouse's share of the community property is, in some circumstances, subject to administration in the hands of his or her estate (California Probate Code Sections 201- 206). The estate of the deceased spouse is taxable on the income from that part of his or her one-half of the community property that is properly subject to administration. Income received by the estate, but derived from the surviving spouse's share of the community property (acquired after July 28, 1927) is taxable to the surviving spouse.

Cal. Code Regs. Tit. 18, § 17742

1. New section filed 8-18-82; effective thirtieth day thereafter (Register 82, No. 34).
2. Editorial correction of subsection (a) (Register 83, No. 19).

Note: Authority cited: Section 19253, Revenue and Taxation Code. Reference: Section 17742, Revenue and Taxation Code; and Section 5105, Civil Code.

1. New section filed 8-18-82; effective thirtieth day thereafter (Register 82, No. 34).
2. Editorial correction of subsection (a) (Register 83, No. 19) .