State Trust and Estate Income Tax Return Checklist

Introduction by: Gregory A. Bergmann, CPA, J.D.
Editor: Sarah McGahan, J.D., LL.M.

State income tax compliance for trusts and estates has become increasingly challenging for trustees and their tax advisers. Trust portfolios have moved from traditional stocks and bonds to investments in real estate, private equity, venture capital, and hedge funds. This migration toward more sophisticated investments has increased the complexity of state income taxation and related tax return preparation.

In addition, trusts have inherent technical challenges. First, for income tax purposes, trusts operate as flowthrough entities to the extent that current distributions are made to beneficiaries, and as separate taxpayers for undistributed amounts retained at the trust level. Second, there is a lack of integration between the two principal conventions governing the operations of trusts: fiduciary accounting and income taxation. States have developed varying approaches to layering state income tax concepts, such as allocation and apportionment, on top of these trust concepts and federal income tax rules. Practitioners could use help navigating the rules and analyzing the relevant issues for preparing state income tax returns for trusts and estates.

The AICPA State & Local Tax Technical Resource Panel has developed the State Trust and Estate Income Tax Return Checklist to assist practitioners with state income tax compliance for trusts and estates. (The checklist is available for free download by AICPA Tax Section members. Login is required.) The State Trust and Estate Income Tax Return Checklist follows the format of other AICPA checklists. The six sections of the checklist are: General Information, Income, Deductions, Tax Computation and Credits, Multistate Issues, and Other. This checklist should be considered in connection with the practice guides contained in the AICPA’s 2013 Tax Practice Guides and Checklists publication package.



Greg Bergmann is a tax partner with Deloitte Tax LLP in Chicago. Sarah McGahan is a senior manager, state and local tax, with KPMG LLP in Washington. Ms. McGahan is the chair and Mr. Bergmann is a former member of the AICPA State & Local Tax Technical Resource Panel. For more information about this column, contact Ms. McGahan at

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