Instructions For Utah Fiduciary Return (Tc-41) - 2013 Page 5
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33Page 4
2013 Utah Fiduciary Income Tax
Portfolio Income
Pass-through Entity Withholding Re-
quirements
For purposes of pass-through entities, generally, portfolio
income includes all gross income, other than income
Estates and trusts are considered pass-through entities
derived in the ordinary course of a trade or business and
(see UC §59-10-1402(10)) and, for tax years beginning
Utah nonbusiness income taxable on the Utah return of
on or after Jan. 1, 2013, are required to withhold Utah
a pass-through entity taxpayer.
income tax on all nonresident individual benefi ciaries,
and on all resident business and nonresident busi-
Portfolio income may include:
ness benefi ciaries. These benefi ciaries are collectively
• interest;
referred to as pass-through entity taxpayers (see UC
• dividends;
§59-10-1402(11)). A pass-through entity is not required
• royalties;
to withhold on a benefi ciary that is exempt from tax
• income from the disposition of property that
under UC §59-7-102(1)(a) or §59-10-104.1, or if the
produces income of a type defi ned as portfolio
pass-through entity is a plan under IRC Sections 401,
income;
408 or 457 and is not required to fi le a return under UC
• income from the disposition of property held for
Chapter 7, or is a publicly traded partnership as defi ned
investment; and
under UC §59-10-1403.2(1)(b)(iii).
• income from a real estate investment trust, a
regulated investment company, a real estate mort-
Utah imposes a 5 percent withholding tax on all Utah
gage investment conduit, a common trust fund, a
business and nonbusiness income derived from or
controlled foreign corporation, a qualifi ed electing
connected with Utah sources and attributable to pass-
fund, or a cooperative.
through entity taxpayers. The estate or trust may reduce
this withholding by any mineral production withholding
Interest, dividends, royalties, etc., earned in the ordinary
tax and previous pass-through entity withholding tax
course of the trade or business of a pass-through entity
allocated to the benefi ciary. This withholding tax must
are not portfolio income.
be paid to the Tax Commission by the original due date
Example: Interest and dividends may be considered
of the return, without regard to extensions.
portfolio income if the pass-through entity had funds that
The calculation of the required Utah withholding tax is
were not used to further the trade or business and were
done on Schedule N. See the instructions for Schedule
invested and generated interest or dividends. Interest
N on page 26 for more details.
and dividends are not considered portfolio income if the
entity’s primary business activity is investing funds, such
The estate or trust must provide a Utah Schedule K-1
as with a brokerage fi rm.
to each partner showing the amount of Utah withhold-
ing paid on behalf of the benefi ciary. This withholding
Portfolio income is attributable to the benefi ciary‘s
tax is then claimed as a credit by the benefi ciary on the
resident state.
benefi ciary’s personal return.
Pass-through Entity
If this estate or trust has an interest in another pass-
A pass-through entity is an entity whose income, gains,
through entity, that other entity is required to withhold
losses, deductions and/or credits fl ow through to its part-
Utah income tax on Utah income allocated to this estate
ners (partnerships), members (limited liability compa-
or trust. The other pass-through entity must provide a
nies), and shareholders (S corporations) or benefi ciaries
Utah Schedule K-1 showing the amount of Utah with-
(estates and trusts) for federal tax purposes.
holding tax paid on behalf of this estate or trust. This
An estate or trust is also considered a pass-through
withholding tax must be reported on TC-250 and then
entity if it is required to divide among and pass through
allocated to the benefi ciaries of this estate or trust to be
to one or more benefi ciaries its income, gains, losses,
claimed on their personal returns. Enter this previous
deductions, and/or credits. A pass-through entity is
pass-through entity withholding tax for each benefi ciary
required to withhold Utah income tax on the income
on Schedules K and K-1.
from Utah sources passed through to its benefi ciaries.
The estate or trust may request a waiver of withhold-
The calculation of the withholding tax requirement for
ing tax and any associated penalty and interest for all
an estate or trust is made on the TC-41N. (See TC-41N
or selected benefi ciaries who fi led and paid tax on the
instructions on page 26.)
Utah income from this estate or trust. The tax must be
Pass-through Entity Taxpayer
paid on or before the estate or trust’s return due date,
A pass-through entity taxpayer is any entity which has
including extensions (see UC §59-10-1403.2(6)).
income, gains, losses, deductions and/or credits passed
to it from a pass-through entity (e.g., an individual who
is a benefi ciary in a trust is a pass-through entity tax-
payer). Utah withholding tax paid for or on behalf of the
benefi ciary by the pass-through entity is reported on the
TC-41, Schedule K-1, and is claimed as a refundable
credit on the income tax return fi led by the benefi ciary.
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