Sec. 139.4. Allocation of distributable net income from New York State sources and modifications (net change)

Tax Law, § 639(a)(3)(A)

(a) General rule.

The distributable net income of a nonresident estate or trust from New York State sources must be allocated among the estate or trust and its beneficiaries (including, solely for the purpose of this allocation, resident beneficiaries) in proportion to their respective shares of Federal distributable net income. The share of the estate or trust in Federal distributable net income is the amount, if any, by which the Federal distributable net income exceeds the aggregate of the shares therein of all its beneficiaries. The net change computed pursuant to section 139.3 of this Part must be allocated among the estate or trust and its beneficiaries in the same manner.

(b) Special rule where an estate or trust has no Federal distributable net income.

[Tax Law, § 639(b)(1)] If an estate or trust has no Federal distributable net income for the taxable year, the share of each beneficiary (including, solely for the purpose of this allocation, resident beneficiaries) in the items derived from or connected with New York State sources which enter into the definition of Federal distributable net income determined under section 139.2 of this Part, and in the net change determined under section 139.3 of this Part, must be in proportion to his share of the estate or trust income for such year, under local law or the governing instrument, which is required to be distributed currently, and any other amounts which are properly paid or credited or required to be distributed during the taxable year. Any balance of such net change must be allocated to the estate or trust.

(c) Alternate method of attributing modifications among an estate or trust and its beneficiaries.

[Tax Law, § 639(b)(2)] A fiduciary may, under the rules provided for under section 119.3 of this Title, use the same alternate method provided for in that section to attribute the modifications relating to the share of a nonresident estate, trust or beneficiary in income derived from or connected with New York State sources among the estate or trust and its beneficiaries. However, those applicable New York modifications, or portions thereof, which are allocated to the nonresident estate or trust under section 138.4 of this Article must be attributed to such estate or trust in determining its New York taxable income regardless of whether the alternate method provided by section 119.3 of this Title is used by the fiduciary.