The Taxation of Trusts : Part III

Trusts fit uneasily into any tax system. The beneficiary should be taxed on any trust income received; yet the trustee also receives income that is amenable to taxation. It would not be fair for the income to be taxed to both the beneficiary and the trustee, yet neither should the trustee escape tax on income that is not paid immediately to the beneficiary. This article is the third of three that examine the taxation of trusts in New Zealand under the Income Tax Act 1976. See also “The Taxation of Trusts: Part I” [1980] 25 New Zealand Current Taxation 109 and “The Taxation of Trusts: Part II” [1981] 25 New Zealand Current Taxation 134.Part III concludes the series by examining more miscellaneous aspects of the taxation of trusts. The article examines: whether the provisions of the Income Tax Act 1976 that relate to trusts constitute a code; taxation of foreign-source beneficiaries income and trustees' income; the character of trust income derived by beneficiaries; what happens where income for trust purposes differs from income for tax purposes; deductions; losses; and the taxation of business and unit trusts and other trusts that do not fall within sections the trust-specific provisions of the Act