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Corporate Fiduciaries, Advisors and Other "Co-Trustees" - Perhaps Your Trust Isn't Exempt From New York State Income Tax

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by Paul Comeau and Jack Trachtenberg

The New York State Department of Taxation and Finance (the "Department") recently issued an advisory opinion, Petition of JPMorgan Chase Bank (the "Advisory Opinion"), that raises serious concerns for certain taxpayers who are currently treating their New York resident trusts as exempt from New York State income tax. In particular, the Advisory Opinion indicates that the Department may treat certain out-of-state corporate fiduciaries as New York trustees, and may consider certain advisors, committee members and other non-fiduciaries to be co-trustees.

Both of these potentialities could cause a New York resident trust that was once thought to be exempt from New York income tax to be taxable. Though the reasoning of the Advisory Opinion is questionable in many respects, it raises new issues that must be considered in trust tax planning and administration.

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