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By Ted Friedman and Madison Barnett
The North Carolina Court of Appeals held that it would violate Due Process to impose income tax on an out-of-state inter vivos trust because the trust lacked a sufficient connection with North Carolina. The trust was created and governed by laws outside of North Carolina, the Trustee resided outside of North Carolina, and the trust did not own property in North Carolina. Although a beneficiary of the trust resided in North Carolina, she had no control over the trust. Accordingly, the Court upheld an order directing the Department of Revenue to refund income taxes and penalties paid by the trust to the State. Kimberly Rice Kaestner 1992 Family Trust v. N.C. Dep’t of Revenue, No. COA15-896 (N.C. Ct. App. July 2, 2016).