U.S. Supreme Court Decides Kaestner But Teaches LittleU.S. Supreme Court Decides Kaestner But Teaches Little
State tax on trust income violates due process clause.
The U.S. Supreme Court, in a unanimous decision, held in favor of the taxpayer in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust.1 The Court held that North Carolina can’t tax trust income based solely on the presence of in-state beneficiaries when the beneficiaries had no right to demand the income and weren’t certain to receive it. Although unanimous opinions are often referred to as “sweeping,” Kaestner was clearly designed to be a narrow and limited opinion, fully answering the question before the Court but going no further.
The Trust
The trust involved was established in 1992 when the settlor and the initial trustee were each residents of New York, and the trust instrument provided that New York law ...
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