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    Using Decanting and BDOT Provisions to Avoid a Peppercorn of Income Potentially Triggering State Income Tax on a Trust’s Entire Income

    This article was originally posted on Steve Leimberg’s Estate Planning Email Newsletter as Archive Message #205.

    Generally, states can only tax the income of non-residents that is sourced to that state, but no more. States can tax all the income of their residents without regard to the source. However, a handful of states look to whether there is source income, or assets located in state, as a crucial factor to determine whether they may levy a tax over a trust’s entire income. For these states, avoiding such income or assets in state can be extremely important in order to avoid state income tax on income not sourced to that state.

    To read the full article, click here.

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