Income Taxes

1. Law
2. Tennessee Code
3. Fiduciaries and Trust Estates
4. Uniform Principal and Income Act
5. Allocation of Disbursements During Administration of Trust
6. Income Taxes

1. A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.
2. A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.
3. A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid:
   1. From income to the extent that receipts from the entity are allocated only to income;
   2. From principal to the extent that receipts from the entity are allocated only to principal;
   3. Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and
   4. From principal to the extent that the tax exceeds the total receipts from the entity.
4. After applying subsections (a)-(c), the trustee shall adjust income or principal receipts to the extent that the trust's taxes are reduced because the trust receives a deduction for payments made to a beneficiary.

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