Did a trust or its sole lifetime income beneficiary owe Florida intangible tax when the beneficiary held only a limited appointment power?

Subject

Taxable Situs - Property Subject to Tax -Trusts - Beneficial Interest

Plain-English summary

Neither the trust, trustee, nor taxpayer had to file a Florida intangible personal property tax return for this trust. The taxpayer was the sole lifetime income beneficiary but held only a limited power of appointment, and the trust imposed strict restrictions on Florida residency and business activity.

The Department explained that a taxable beneficial interest required a current income right plus a right to invade corpus, revoke the trust, or appoint successor beneficiaries without limitation. The submitted interest did not meet that test.

What this means for you

Receiving trust income was not enough by itself under the cited historical rule. Additional control over corpus, revocation, or unrestricted successor appointments was required for the defined taxable beneficial interest.

Common questions

Q: Was the lifetime income beneficiary taxable? No, under the stated limited rights.

Q: What extra rights could create a taxable beneficial interest? The ruling listed corpus invasion, revocation, or unlimited power to appoint successor beneficiaries.

Q: Did the trustee have to file? No. The Department concluded the trust itself was not subject to Florida intangible tax.

Citations and references

• Fla. Stat. § 199.023(7) — beneficial interests in trusts
• Fla. Admin. Code r. 12C-2.002(1)(c), (ee) — beneficial interests and trust situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-007

Original ruling text

Mar 02, 1993

Re: Technical Assistance Advisement No. 93(C)2-007
Intangible Tax - Taxable Situs - Property Subject to Tax Trusts - Beneficial Interest
Section 199.023(7), F.S.
Rule 12C-2.002(1)(c) and (ee), F.A.C.
XXX (Taxpayer)
XXX (Trust)
XXX (Trustee)

Dear :

Your request for a technical assistance advisement has been
received in this office.

Requested Advisement

Is the Trust or the Taxpayer subject to the Florida
intangible personal property tax?

Background

The Taxpayer created the Trust by execution of a trust
agreement naming the Trustee as sole Trustee.

The Taxpayer is the sole income beneficiary during his
lifetime and only has limited power of appointment.

Upon the death of the Taxpayer, any remaining trust
principal will be distributed in trust for the benefit of the
Taxpayer's spouse, if then living, or if not, to the Taxpayer's
descendants.

The Trust contains very strict requirements regarding
residency and the conduct of business within Florida.

Discussion and Law

Rule 12C-2.002(1)(ee), F.A.C., provides that a trust having
a taxable situs in Florida is primarily taxable to the trustee.
A beneficiary, having a taxable beneficial interest, where there
is no Florida trustee, is responsible for filing a return for
the taxable trust assets.

A beneficial interest in a trust is defined in s. 199.023,
F.S., and Rule 12C-2.002(1)(c), F.A.C., as one or more valuable
property rights in a trust. A taxable beneficial interest in a
trust is the current right to income coupled with: the right to
invade the corpus of the trust; or the right to revoke the
trust; or the right to appoint successor beneficiaries without
limitation.

Conclusion

Based on the statutory provisions and the information
provided in your letter, the Trust is not subject to the
intangible tax in Florida. Therefore, neither the Trustee nor
the Taxpayer is required to file a Florida intangible personal
property tax return for this Trust.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the

request or the response.

Sincerely,

Nadine C. Posey
Technical Assistant
Technical Assistance

NCP/mh