CT-1041 booklet, Connecticut Income Tax Return for Trusts and ...

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and income from property acquired by the debtor after thecommencement of the case (but before, in each instance,the case is closed, dismissed, or converted to a case underChapter 7, 12, or 13 of the Bankruptcy Code, whicheveroccurs first) are, in general, includible in the estate’s grossincome rather than in the debtor’s gross income for federaland Connecticut income tax purposes. See IRS Notice2006-83, Individual Chapter 11 Debtors, I.R.B. 2006-40(October 2, 2006), for more details. This provision does notapply to a case under Chapter 7 of the Bankruptcy Code wherethe debtor is an individual.Cases under Chapter 12 or Chapter 13 of the BankruptcyCode: No Form CT-1041 must be filed where a case underChapter 12 or Chapter 13 of the Bankruptcy Code has beencommenced.Connecticut Income Taxation of Debtors WhoAre IndividualsTaxation of a debtor who is an individual in a case underChapter 7 or Chapter 11 of the Bankruptcy Code: Theincome, gain, loss, and deduction taxed to and claimedby the estate for federal income tax purposes will not betaxed to and claimed by the debtor for federal income taxpurposes. The Connecticut income tax liability of a debtorwho is an individual is computed on his or her Connecticutadjusted gross income, but the starting point in computingthe debtor’s Connecticut adjusted gross income is his or herfederal adjusted gross income. In computing the debtor’sConnecticut adjusted gross income, not all items of incomeor gain taxable to the debtor for federal income tax purposesare taxable for Connecticut income tax purposes and not allitems of loss and deduction allowable to the debtor for federalincome tax purposes are allowable for Connecticut incometax purposes. To determine whether the debtor is requiredto file a Connecticut income tax return (Form CT-1040 if aresident individual or Form CT-1040NR/PY if a nonresidentor part-year resident individual), see the filing instructions inthe booklets for those returns.Debtors in a case under Chapter 11 of the Bankruptcy Codeshould review the preceding Note.Taxation of a debtor who is an individual in a case underChapter 12 or Chapter 13 of the Bankruptcy Code: Wherethe debtor is an individual, the commencement of a case underChapter 12 or Chapter 13 of the Bankruptcy Code does notcreate a bankruptcy estate for federal or Connecticut incometax purposes. The Connecticut income tax liability of a debtorwho is an individual is computed on his or her Connecticutadjusted gross income, but the starting point in computingthe debtor’s Connecticut income tax liability is the amountof his or her federal adjusted gross income. In computingthe debtor’s Connecticut adjusted gross income, not all itemsof income, gain, loss, or deduction taxed to and claimed bythe debtor for federal income tax purposes are taxed to andclaimed by the debtor for Connecticut income tax purposes. Todetermine whether the debtor is required to file a Connecticutincome tax return (Form CT-1040 if a resident individual, orForm CT-1040NR/PY if a nonresident or part-year residentindividual), see the filing instructions in the booklets forthose returns.Qualified Funeral Trusts (QFT)A trustee that makes the election to be taxed as a QFTfor federal income tax purposes and files federal Form1041-QFT, U.S. Income Tax Return for Qualified FuneralTrusts, will file Form CT-1041 in the same manner as any otherinter vivos trust. See Form CT-1041 Quick-File Requirementson Page 13. If you do not meet the Quick-File Requirements,see Form CT-1041 Line Instructions on Page 14. Thetrustee should write “QFT election” at the top of the front ofForm CT-1041.In the case of a QFT, wherever reference is made in thisbooklet and on Form CT-1041 to federal Form 1041, Line 22,substitute federal Form 1041-QFT, Line 12.Composite ReturnA trustee that files one aggregate federal Form 1041-QFTfor all QFTs of which he or she is the trustee must providean attachment with Form CT-1041 to provide the followinginformation:• The number of QFTs included in the aggregate return;• The name, address, and Social Security Number (SSN) ofthe grantor(s) for each QFT; and• All corresponding beneficiaries for each QFT.A trustee may file one aggregate Form CT-1041 for allConnecticut resident QFTs. The trustee must be able toprovide to DRS, upon request, detailed information for eachseparate QFT that would have been reported on ScheduleCT-1041B, Part 1, and if applicable, Schedule CT-1041B,Part 2, Schedule CT-1041C, and Schedule CT-1041FA.A trustee may file one aggregate Form CT-1041 for allnonresident QFTs that have Connecticut-sourced income.The trustee must be able to provide to DRS, upon request,detailed information for each separate QFT that would havebeen reported on Schedule CT-1041B, Part 1, and ScheduleCT-1041FA, Parts 3, 2, and 1.Reporting for a Portion of a Resident TrustIf a QFT has both resident and nonresident grantors, thetrustee will show how the resident percentage is arrived at forthe QFT. This percentage should be multiplied by the federaltaxable income to arrive at the amount to report on ScheduleCT-1041C, Line 4.Special AccrualsA part-year resident trust must recognize and report items ofincome, gain, loss, or deduction on the accrual basis regardlessof the method of accounting normally used. In general, an itemof income is subject to special accrual if the right to receiveit is fixed and the amount to be paid is determinable withreasonable accuracy at the time the trust changes residencystatus.Page 8
Example: A part-year resident trust sold property on aninstallment basis prior to changing from a resident trust toa nonresident trust and accrued the entire gain on the sale ofthat property to the residency portion of the year.If the trust became a Connecticut resident trust during thetaxable year, it must accrue to the nonresidency portion ofthe year any item of income, gain, loss, or deduction whichunder an accrual method of accounting would be reportableat the time it changed its residence. No accrual is required orallowed for items of income, gain, loss, or deduction derivedfrom or connected with sources within Connecticut.If the trust ceases to be a Connecticut resident trust, it mustaccrue any item of income, gain, loss, or deduction whichunder an accrual method of accounting would be reportableat the time the residence was changed. This includes incomeor gain it elected to report on the installment basis.Surety Bond in Lieu of Special AccrualsThe fiduciary may elect to defer payment of Connecticutincome tax on items of special accrual by filing a suretybond with DRS for an amount not less than the additionalConnecticut income tax that would be payable if no suretybond or other security were filed. If you choose this option,you must file Form CT-1041 for the taxable year when thetrust changed its residence and include a separate statementshowing the nature and amount of each item of accrual as ofthe date of change of residence, together with a computationof the additional Connecticut income tax that would be due ifthe election to file a surety bond had not been made.For more information on the requirements for a suretybond, contact DRS and request a copy of Conn. AgenciesRegs.§12-717(c)(4)-1; Form CT-12-717A, Change ofResident Status - Special Accruals Connecticut Surety BondForm; and Form CT-12-717B, Change of Resident Status -Special Accruals Other Acceptable Security Form.Taxable Year and Method of AccountingThe fiduciary of a trust or estate must use the same taxableyear and method of accounting for Connecticut income taxpurposes used for federal income tax purposes.If the taxable year or method of accounting is changed forfederal income tax purposes, the same changes must be madefor Connecticut income tax purposes. If a return for a periodof less than 12 months is filed for federal income tax purposes,the fiduciary must also file a short period return for Connecticutincome tax purposes.When to File Form CT-1041Form CT-1041 is due on or before April 15, 2010. If the trustor estate is not a calendar year filer, the return is due no laterthan the fifteenth day of the fourth month following the closeof the taxable year. If the due date falls on a Saturday, Sunday,or legal holiday, the next business day is the due date.The return will meet the timely filed and timely payment rulesif it is electronically submitted by midnight on the due date orif the U.S. Postal Service cancellation date or the date recordedor marked by a designated private delivery service (PDS) usinga designated type of service is on or before the due date. Notall services provided by these designated PDSs qualify.The following are the designated PDSs and designated typesof service at the time of publication:Federal Express(FedEx)• FedEx Priority Overnight• FedEx Standard Overnight• FedEx 2Day• FedEx International Priority• FedEx International FirstUnited Parcel Service (UPS)• UPS Next Day Air• UPS Next Day Air Saver• UPS 2nd Day Air• UPS 2nd Day Air A.M.• UPS Worldwide Express Plus• UPS Worldwide ExpressThis list is subject to change. To verify the names of designatedPDSs and designated types of service, visit the DRS websiteto see Policy Statement 2008(3), Designated Private DeliveryServices and Designated Types of Service.Using the 2009 Form CT-1041 for a TaxableYear Beginning in 2010The 2009 Form CT-1041 may be used for a taxable yearbeginning in 2010 if:1. The trust or estate has a taxable year of less than12 months that begins and ends in 2010; and2. The 2010 Form CT-1041 is not available by the time thetrust or estate is required to file its tax return. However,the trust or estate must enter the beginning and endingdates of the taxable year on the 2009 Form CT-1041 andincorporate any tax law changes effective for taxable yearsbeginning on or after January 1, 2010.The fiduciary must attach an explanatory note to the frontof the return if the return is for a short year beginning andending in 2010.If you file your return late or do not pay all the tax due withyour return, see Interest and Penalties on Page 11 to determineif you must report interest and penalty with this return.Extension RequestsExtension of Time to FileIf the trust or estate cannot meet the filing deadline, thefiduciary must file Form CT-1041 EXT and pay all of the taxthe trust or estate expects to owe on or before the due date.Form CT-1041 EXT is included in this booklet. Filing thisform will automatically extend the due date for five monthsif a federal Form 7004, Application for Automatic Extensionof Time to File Certain Business Income, Information, andOther Returns, has been filed. If federal Form 7004 was notfiled, the fiduciary can apply for a five-month extension tofile Form CT-1041 provided there is reasonable cause for therequest. You are not required to attach a copy of the federalextension request to Form CT-1041 EXT.Page 9
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