Did a Florida beneficiary or non-Florida trustee owe intangible tax on an irrevocable foreign-situs trust when the beneficiary lacked current income and control rights?

Plain-English summary

Florida found that neither the beneficiary nor the trustee owed intangible personal property tax on the described foreign-situs trust, but the published document says this ruling was later superseded by TAA 96C2-108R.

The Florida-resident grantor and beneficiary transferred intangible assets to an irrevocable trust situated outside Florida. She had no current right to income, no power to revoke the trust or invade its corpus, and no general power to appoint future beneficiaries. Distributions of income and principal were left to the trustee's discretion.

Those limitations meant the beneficiary did not hold the combination of current income rights and control powers required for a taxable beneficial interest. Her limited power of appointment did not change that result.

The individual trustee lived outside Florida, maintained no Florida office, and administered assets without Florida situs. The Department therefore found no Florida tax situs for the trustee either. Neither party was liable, and no trust returns were required.

What this means for you

Grantors and beneficiaries

Florida residence alone did not create a taxable beneficial interest. The Department examined current income rights and the powers to revoke, invade corpus, or appoint beneficiaries.

Trustees

The trustee's residence, office location, and the situs of the trust assets were central to the separate trustee-level analysis.

Accountants and tax professionals

Review beneficiary rights separately from trustee situs. Because the source expressly says this ruling was superseded, consult TAA 96C2-108R before treating the original analysis as current guidance.

Common questions

Q: Did the Florida beneficiary have a taxable beneficial interest? A: No. She lacked a current income right and the specified revocation, corpus-invasion, and general appointment powers.

Q: Did the beneficiary's limited power of appointment make the trust taxable? A: No under the ruling's stated analysis.

Q: Did the nonresident trustee have Florida situs? A: No. The trustee was not a Florida resident, had no Florida office, and the trust assets lacked Florida situs.

Q: Were trust returns required?
A: No.

Q: Is this the final version of the Department's advice? A: No. The document is marked as superseded by revised TAA 96C2-108R, issued December 20, 1996.

Q: Can another trust rely on this TAA? A: Not automatically. Apart from being superseded, the advisement states that it binds the Department only for the specific beneficiary-rights, trustee, office, and situs facts described.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interests in foreign-situs trusts
• Fla. Stat. § 199.052(5) — primary filing responsibility of a Florida trustee
• Fla. Stat. § 199.175(1) — Florida taxable situs
• Fla. Admin. Code r. 12C-2.002(1)(c) — foreign-trust beneficial interests
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-108

Original ruling text

Status: Superseded by TAA 96C2-108R (Revised), issued December 20, 1996

Oct 10, 1996

Re: Technical Assistance Advisement No. 96(C)2-108 Intangible Tax; Taxable Situs-Foreign Trust Sections 199.023(7), 199.052(6), 199.052(7), 199.175(1), F.S. XXX (hereinafter referred to as "Grantor") XXX (hereinafter referred to as the "Trust") XXX (hereinafter referred to as the "Trustee")

Dear :

This office has received your request for a Technical Assistance Advisement for the trust listed above.

Discussion of Trust Provisions

Under the provisions of the Trust, the Grantor, a Florida resident and beneficiary of the Trust, will assign all of her rights, title and interest in and to certain intangibles to the Trust. The Trustee is a resident of the State of XXX, and the situs for the Trust is in the State of XXX. The Trustee does not have an office in Florida. The beneficiary of the Trust does not have a current right to income; and the Trustee has been granted full discretion for distributions of income and principal. The beneficiary does not have the right to revoke her Trust nor does she have a general power of appointment. If the beneficiary dies prior to the end of the Term of the Trust, the assets shall be payable to the beneficiary's revocable trust, if any, and if none, to the beneficiary's estate.

Provisions of Law

Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C., provide that a taxable beneficial interest in a foreign-situs trust is the current right to income coupled with either a right

to revoke the trust, or the right to invade the corpus of the trust, or an unlimited power of appointment of future beneficiaries.

Section 199.052(5), F.S., places primary responsibility for payment of the intangible tax on the Florida trustee. To have a taxable situs in Florida the provisions of s. 199.175(1), F.S., must be met. The trustee must be a Florida resident or legally or commercially domiciled in Florida to have a taxable situs in Florida.

Discussion of Law

Based upon the provisions of the Trust, the beneficiary has a limited power of appointment over the assets of the Trust, does not have a power to invade the corpus of the Trust, nor the power to revoke the Trust. Therefore, the beneficiary of the Trust does not have a taxable beneficial interest in the Trust.

The individual Trustee is not a resident of Florida and the Trust assets do not have a Florida situs. Therefore, the Trustee does not have a taxable situs in Florida.

In summary, neither the beneficiary nor the Trustee is liable for the intangible tax in Florida and no returns are required to be filed for the 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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

JE/mh