Connecticut State Department of Revenue Services

Upcoming CT DRS webinar: Select to register for the upcoming Withholding Forms W-2 and 1099 Annual Filing Webinar on Wednesday, December 4, 2024, at 10:00 a.m.

Trust and Estates Tax Information

What's New

Subtraction Modification for Ordinary and Necessary Business Expenses for Taxpayers Licensed Under Chapter 420f or 420h That Are Not Claimed For Federal Income Tax Purposes

Legislation allows those taxpayers that are licensed under either chapter 420f or 420h of the Connecticut General Statutes to deduct “ordinary and necessary” business expenses allowed under IRC § 162 in determining their Connecticut income tax liability.  The legislation is effective upon passage is applicable to taxable years beginning on or after January 1, 2023.

Definitions

For Connecticut income tax purposes, an estate is either a resident estate or a nonresident estate. A trust is either a resident trust, nonresident trust, or part-year resident trust. The residence of the fiduciary or the beneficiary does not affect the status of a trust or estate as resident or nonresident.

Fiduciary applies to a person who occupies a position of special confidence toward others, such as a trustee, executor, or administrator. A fiduciary is a person who holds in trust property in which another person has a beneficial interest or who receives and controls the income of another.

Any reference to you refers to the fiduciary.

Resident estate is where a decedent was a resident of Connecticut at the time of his or her death. A resident estate also includes a bankruptcy estate of an individual who at the beginning of the bankruptcy case is a Connecticut resident.

Nonresident estate is an estate that is not a resident estate for any part of the year.

Trust means an arrangement ordinarily created either by a will or by an inter vivos declaration where a trustee or trustees take title to property to protect or conserve it for beneficiaries and classified and treated as a trust for federal income tax purposes.

Testamentary trust is a trust or portion of a trust created by the will of a decedent.

Inter vivos trust is a trust created other than by the will of a decedent.

Electing small business trust (ESBT) has the same meaning as for federal income tax purposes.

Resident trust means:

  • A testamentary trust or a portion of the trust if the decedent was a resident individual at the time of death.
  • An inter vivos trust or a portion of the trust consisting of the property of:
  1. A person who was a resident of this state at the time the property was transferred to the trust if the trust was then irrevocable;
  2. A person who, if the trust was revocable at the time the property was transferred to the trust and has not subsequently become irrevocable, was a resident of this state at the time the property was transferred to the trust; or
  3. A person who, if the trust was revocable when the property was transferred to the trust but the trust has subsequently become irrevocable, was a resident of this state at the time the trust became irrevocable.

For this purpose, a trust is revocable if it is subject to a power, exercisable immediately or at any future time, to revest title in the person (the grantor) whose property constitutes the trust. A trust becomes irrevocable when the possibility that the power may be exercised has ended.

An irrevocable inter vivos trust consisting of property of a grantor who is a resident of this state when the property was transferred to the trust remains irrevocable and a resident trust.

The criteria used to determine whether a decedent or grantor is a resident of this state, for Connecticut income tax purposes, are the same criteria used to determine whether an individual is a resident of this state.

Nonresident trust is a trust that is not a resident trust for any part of the year.

Part-year resident trust is a trust that meets the definition of resident trust or nonresident trust for only part of the year.

Grantor trust is a legal trust under applicable state law that is not recognized as a separate taxable entity for income tax purposes because the grantor or other substantial owners have not relinquished complete dominion and control over the trust.

Connecticut alternative minimum tax is a tax imposed on certain individuals, trusts, and estates in addition to their regular income tax. Fiduciaries who have a federal alternative minimum tax liability are subject to the Connecticut alternative minimum tax. The tax rate is the lesser of 19% of adjusted federal tentative minimum tax or 5½% of adjusted federal alternative minimum taxable income. For information on how to calculate the adjusted federal alternative minimum taxable income of an inter vivos trust with one or more nonresident, noncontingent beneficiaries, see Connecticut Taxable Income for Certain Inter Vivos Trusts.

The residency status of each beneficiary is determined as of the last day of the trust or estate’s taxable year.

Distributable net income (DNI) has the same meaning as for federal income tax purposes.

Noncontingent beneficiary is a beneficiary whose interest is not subject to a condition precedent and includes every individual to whom a trustee of an inter vivos trust during the taxable year: 1) is required to currently distribute income or corpus, or both; or 2) properly pays or credits income or corpus, or both; or 3) may, in the trustee’s discretion, distribute income or corpus, or both. Noncontingent beneficiary includes every beneficiary to whom or to whose estate any of the trust’s income for the taxable year must be distributed at a specified future date or event and every beneficiary who has the unrestricted lifetime or testamentary power, exercisable currently or at some future specified date or event, to withdraw any of the trust’s income for the taxable year or to appoint the income to any person including the estate of the beneficiary. This also applies to a noncontingent beneficiary which is a trust or an estate. Wherever reference is made to an individual who is a noncontingent beneficiary, that reference includes a trust or estate that is a noncontingent beneficiary but does not include a corporation that is a noncontingent beneficiary.

Contingent beneficiary is an individual (or trust or estate) who is a beneficiary, but not a noncontingent beneficiary of a resident inter vivos trust.

Who Must File the Income Tax Return for Trusts and Estates

The fiduciary of a Connecticut resident trust or estate or part‑year resident trust must file Form CT‑1041 if the trust or estate:

  • Is required to file a federal Form 1041 for the taxable year; or
  • Had any Connecticut taxable income for the taxable year.

The fiduciary of a nonresident trust or estate must file Form CT‑1041 if the trust or estate:

  • Had income derived from or connected with sources within Connecticut;
  • Incurred a net operating loss for Connecticut income tax purposes, but not for federal income tax purposes; or
  • Incurred a net passive activity loss or net capital loss for Connecticut income tax purposes, but did not incur a net passive activity loss or net capital loss, respectively, for federal income tax purposes.

Nonresident trusts or estates that are members of a partnership or S corporation that receive Connecticut‑sourced income from pass-through entities, are required to file Form CT‑1041.

Income derived from or connected with sources within Connecticut includes income:

  • Attributable to ownership or disposition of real or tangible personal property within Connecticut including but not limited to the income from the rental or sale of the property;
  • Gains and losses from the sale or disposition of an interest in an entity that owns, directly or indirectly, real property in Connecticut. See Sale or Disposition of an Interest in an Entity that Owns Property in Connecticut;
  • Attributable to compensation for services performed in Connecticut or income from a business, trade, profession, or occupation carried on in Connecticut;
  • From a partnership doing business in Connecticut;
  • From an S corporation doing business in Connecticut;
  • From a trust or estate with income derived from or connected with sources within Connecticut; or
  • From reportable Connecticut Lottery winnings. Winnings from the Connecticut Lottery, including Powerball, are reportable if the winner was issued a federal Form W-2G by the Connecticut Lottery Corporation. In general, the Connecticut Lottery Corporation is required to issue a federal Form W-2G to a winner if the Connecticut Lottery winnings, including Powerball, are $600 or more and at least 300 times the amount of the wager. See Informational Publication 2015(23), Connecticut Income Tax Treatment of State Lottery Winnings Received by Residents and Nonresidents of Connecticut.

A trust or estate carries on a business, trade, profession, or occupation within Connecticut if:

  • It maintains or operates desk space, an office, shop, store, warehouse, factory, agency, or other place in Connecticut where its affairs are systematically and regularly carried on; or
  • Business activities are conducted in Connecticut with a fair measure of permanency and continuity for livelihood or profit as distinguished from isolated or incidental transactions.

Grantor Trust

A grantor trust not required to file federal Form 1041 should not file Form CT‑1041. A grantor trust required to file federal Form 1041 must file Form CT‑1041 in the same manner. Check Grantor type trust filing federal Form 1041, in the Type of Entity section on Form CT‑1041 and create a separate statement with the Connecticut‑sourced income for all nonresident grantors. Attach both the federal and Connecticut statements to the Form CT‑1041 for nonresident grantors. The Connecticut statement is not necessary for resident grantors.

If Form CT‑1041 is filed electronically, retain these statements for three years from the date of filing the return. The statements must be provided to DRS upon request.

Federal Form 1041‑A and 5227 Filers

A fiduciary required to file federal Form 1041‑A or federal Form 5227, or both, is not required to file Form CT‑1041. However, the fiduciary must give appropriate information to the beneficiaries to enable them to complete their individual Connecticut income tax returns. The fiduciary must disclose to the nonresident beneficiaries the amount of income derived from or connected with Connecticut sources.

How to File

File Electronically

Form CT‑1041, Connecticut Income Tax Return for Trusts and Estates, Form CT‑1041 EXT, Application for Extension of Time to File Connecticut Income Tax Return for Trusts and Estates, and Form CT‑1041ES, Estimated Connecticut Income Tax Payment Coupon for Trusts and Estates, can be filed electronically through myconneCT. If you file electronically, you are expected to pay electronically at the time of filing.

Click here to File, Pay, or Register Now on myconneCT!

Modernized e-file

DRS accepts Form CT‑1041, Connecticut Income Tax Return for Trusts and Estates, Form CT‑1041 EXT, Application for Extension of Time to File Connecticut Income Tax Return for Trusts and Estates, and Form CT‑1041ES, Estimated Connecticut Income Tax Payment Coupon for Trusts and Estates, through the Connecticut Federal/State Electronic Filing Modernized e-file (MeF) Program.

When to File (Tax Due Date and Extensions)

Form CT‑1041 is normally due on or before April 15. If the due date falls on a Saturday, Sunday, or legal holiday, the return will be considered timely filed if filed by the next business day.

If the trust or estate is not a calendar year filer, the return is due no later than the fifteenth day of the fourth month following the close of the taxable year.

The return will meet the timely filed and timely payment rules if it is electronically submitted by midnight on the due date or if the U.S. Postal Service cancellation date or the date recorded or marked by a designated private delivery service (PDS) using a designated type of service is on or before the due date.

Not all services provided by these designated PDSs qualify. This list is subject to change. See Policy Statement 2016(4), Designated Private Delivery Services and Designated Types of Service, for a current list of qualified PDSs.

To request additional time to file, use Form CT-1041 EXT, Application for Extension of Time to File Connecticut Income Tax Return for Trusts and Estates. For detailed information, see the Form CT-1041 EXT instructions.

To request additional time to pay, use Form CT‑1127, Application for Extension of Time for Payment of Income Tax. For detailed information, see the Form CT-1127 instructions.

Electronic Payment Options

Visit myconneCT at portal.ct.gov/DRS-myconneCT to make an electronic payment. After logging in to myconneCT, find your tax account on the Summary screen, select the Make a Payment link and choose your payment method.

  • Pay by Direct Payment: Using this option authorizes DRS to electronically withdraw a payment from your bank account (checking or savings) on a date you select up to the due date.
  • Pay by Credit Card or Debit Card: You may elect to pay your tax liability using a credit card (American Express®, Discover®, MasterCard®, VISA®) or comparable debit card. A convenience fee will be charged by the credit card service provider.  You will be informed of the amount of the fee and may elect to cancel the transaction. Your payment will be effective on the date you make the charge. 

At the end of the transaction, you will be given a confirmation number for your records. As a reminder, even if you pay electronically, you must still file your return by the due date. Tax not paid on or before the due date will be subject to penalty and interest.

Estimated Tax Payments

In most cases, the fiduciary must make estimated income tax payments if:

  1. The fiduciary's Connecticut income tax, after taking into account its Connecticut tax withheld, and any Pass‑Through Entity Tax Credit (PE Tax Credit) the fiduciary is allowed to claim, is $1,000 or more; and
  2. The fiduciary expects its Connecticut income tax withheld (including any PE Tax Credit) to be less than its required annual payment.

Use Form CT‑1041ES, Estimated Connecticut Income Tax Payment Coupon for Trusts and Estates, to make estimated Connecticut income tax payments. For detailed information about estimates, see the Form CT-1041ES instructions.

Interest and Penalties

In general, interest applies to any portion of the tax not paid on or before the original due date of the return. If you do not pay the tax when due, the trust or estate will owe interest at the rate of 1% per month or fraction of a month until the tax is paid in full. Interest on underpayment or late payment of tax cannot be waived.

Penalty for Late Payment or Late Filing

The penalty for underpayment of tax is 10% of the tax not paid on or before the original due date of the return. If a request for an extension of time has been granted, the trust or estate can avoid a penalty for failure to pay the full amount due by the original due date if the fiduciary:

  • Pays at least 90% of the income tax shown to be due on the return on or before the original due date of the return; and
  • Pays the balance due with the return on or before the extended due date.

The Commissioner of Revenue Services may impose a $50 penalty for the late filing of any return or report required by law to be filed even if no tax is due.

Penalty for Failure to File

If the fiduciary does not file the return and DRS files a return for the trust or estate, the penalty for failure to file is 10% of the balance due or $50, whichever is greater. If the fiduciary was required to file an amended Form CT-1041 and failed to do so, a penalty may be imposed. See Amended Returns.

Interest on Underpayment of Estimated Tax

For information on interest on underpayment of estimated tax, see Form CT‑2210, Underpayment of Estimated Income Tax by Individuals, Trusts, and Estates. Use Form CT-2210 to calculate interest on the underpayment of estimated tax. Form CT‑2210 and detailed instructions are available from DRS. However, this is a complex form and you may prefer to have DRS calculate the interest and send you a bill.

Order in Which to Complete Form CT‑1041 and Schedules

For trusts or estates that do not meet the Quick-File Requirements, see Form CT‑1041 Quick‑File Requirements, in the Form CT-1041 instructions for verification.

Complete Form CT‑1041 and the schedules for resident and nonresident estates, full-year resident and nonresident trusts, and part-year resident trusts in the following order:

1. Resident trust or estate with resident beneficiaries:

  • Part 1, Schedule A;
  • Schedule CT‑1041B, Part 1;
  • CT‑1041FA, Part 2, Column 4, as necessary;
  • Schedule CT‑1041C and Schedule CT-1041 ESBT;
  • The front of Form CT‑1041;
  • Part 1, Schedule B, as necessary; and
  • Form CT‑1041 Schedule I, Parts 1 and 2, as necessary.

2. Resident estate or full‑year resident testamentary trust with any nonresident beneficiaries or a full‑year resident inter vivos trust with nonresident, contingent beneficiaries but without nonresident, noncontingent beneficiaries:

  • Part 1, Schedule A;
  • Schedule CT‑1041B, Part 1;
  • Schedule CT‑1041FA, Parts 3 and 2;
  • Schedule CT‑1041C and Schedule CT-1041 ESBT;
  • The front of Form CT‑1041;
  • Part 1, Schedule B, as necessary; and
  • Form CT‑1041 Schedule I, Parts 1 and 2, as necessary.

3. Full‑year resident inter vivos trust with nonresident, noncontingent beneficiaries:

  • Part 1, Schedule A;
  • Schedule CT‑1041B, Parts 1 and 2;
  • Schedule CT‑1041FA, Parts 3 and 2;
  • Schedule CT‑1041C and Schedule CT-1041 ESBT;
  • The front of Form CT‑1041;
  • Part 1, Schedule B, as necessary; and
  • Form CT‑1041 Schedule I, Parts 1 and 2, as necessary.

4. Nonresident estate, full‑year nonresident trust, or part‑year resident inter vivos trust without nonresident, noncontingent beneficiaries:

  • Part 1, Schedule A;
  • Schedule CT‑1041B, Part 1;
  • Schedule CT‑1041FA‚ Parts 3, 2, and 1, and Schedule CT-1041 ESBT;
  • The front of Form CT‑1041;
  • Part 1, Schedule B, as necessary; and
  • Form CT‑1041 Schedule I, Parts 1 and 2, as necessary.

5. Part‑year resident inter vivos trust with nonresident, noncontingent beneficiaries:

  • Part 1, Schedule A;
  • Schedule CT‑1041B, Parts 1 and 2;
  • Schedule CT‑1041FA‚ Parts 3, 2, and 1, and Schedule CT-1041 ESBT;
  • The front of Form CT‑1041;
  • Part 1, Schedule B, as necessary; and
  • Form CT‑1041 Schedule I, Parts 1 and 2, as necessary.

Form CT‑8801, Credit for Prior Year Connecticut Minimum Tax for Individuals, Trusts, and Estates, Schedule CT‑IT Credit, Income Tax Credit Summary, and Schedule CT‑PE, Pass‑Through Entity Tax Credit, must be completed as necessary for all types of trusts and estates that expect a credit or credit carryforward of alternative minimum tax paid in a prior year.

Connecticut Minimum Tax Credit

A fiduciary claiming a 2023 Connecticut minimum tax credit on Form CT‑8801, Credit for Prior Year Connecticut Minimum Tax for Individuals, Trusts, and Estates, must also complete Schedule CT‑IT Credit in order to calculate any carryforward amount.

Connecticut Tax Returns for Individuals

Every fiduciary who acts for an individual whose entire income is in his or her control (for example, a guardian or conservator for an incompetent person) must file a return for a resident individual on Form CT‑1040, Connecticut Resident Income Tax Return, or for a nonresident or part‑year resident on Form CT‑1040NR/PY, Connecticut Nonresident and Part‑Year Resident Income Tax Return. In these cases, the fiduciary must pay the tax due.

Tax Returns for Decedents

The executor, administrator, or other representative of a taxpayer who died during the taxable year must file Form CT‑1040 or Form CT‑1040NR/PY depending upon the decedent’s resident status.

Supplemental Schedule CT-1041WH

Supplemental Schedule CT‑1041WH, Connecticut Income Tax Withholding, is required to be completed only if you have more than five Forms W-2G or 1099.

Schedule CT‑PE

Schedule CT‑PE, Pass‑Through Entity Tax Credit, is required to be completed to take credit for any PE Tax Credit allocated to the trust or estate.

Change of Residence of the Grantor of a Revocable Trust

If the grantor of a revocable trust changes his or her domicile from or to Connecticut between the time of transfer of the property to the trust and the time it becomes irrevocable, the residence of the trust is considered changed at the date it ceases to be revocable. In this case the fiduciary must, for the taxable year in which the change of status of the trust occurs, file Schedule CT‑1041FA, Fiduciary Allocation. The change of residency of a beneficiary does not affect the status of the trust.

Connecticut Taxable Income for Certain Inter Vivos Trusts

If any resident trust or portion of a resident trust other than a testamentary trust has one or more nonresident, noncontingent beneficiaries, the Connecticut taxable income of the trust is the sum of all income derived from or connected with sources within this state and that portion of all other income derived by applying a fraction to all other income. The numerator of the fraction is the number of resident, noncontingent beneficiaries and the denominator is the total number of noncontingent beneficiaries.

Fiduciary Adjustment for Lump Sum Distributions

In determining the fiduciary adjustment, the fiduciary is required to include as an addition modification the total amount of a lump‑sum distribution for the taxable year, if such distribution is not already included in the federal taxable income prior to distributions to beneficiaries.

Sale or Disposition of an Interest in an Entity that Owns Property in Connecticut

In determining the income, gain, loss and deduction derived from or connected with Connecticut sources, a nonresident trust must include certain gains and losses from the sale or disposition of an interest in an entity that owns, directly or indirectly, real property in Connecticut.

Entity means a partnership, limited liability company, or S corporation.

All or a portion of the gain or loss from a nonresident trust’s sale or disposition of an interest in an entity is considered to be derived from Connecticut sources if the entity owns, directly or indirectly, real property in Connecticut that has a fair market value that equals or exceeds 50% of all the assets of the entity on the date of sale or disposition of the nonresident’s interest.

In determining the fair market value of the entity’s assets on the date of sale, only the assets that the entity owned for at least two years prior to the date of sale or disposition of the person’s interest in the entity are used.

Determine the gain or loss derived from Connecticut sources from the sale or disposition of an interest by using the apportionment formula. The gain or loss factor of the apportionment formula is computed by dividing the fair market value of all real property located in Connecticut owned by the entity on the date of sale or disposition of the individual’s interest and the fair market value of all assets of the entity on the date of the sale or disposition.

This also applies to nonresident trusts that are partners or shareholders in an entity and to tiered entities. If an individual sells or disposes of an interest in an entity that is part of a tiered structure of entities, it applies to the sale or disposition if any entity in the tiered structure owns, directly or indirectly, real property located in Connecticut.

This does not affect the existing tax treatment of gain and loss passed through to partners and shareholders where the entity itself sells real property located in Connecticut.

How Part‑Year Resident Trusts Are Taxed

The income of a part‑year resident trust derived from or connected with sources within Connecticut is the sum of the following:

  1. The trust’s share of Connecticut taxable income for the period of residence computed as if the taxable year for federal income tax purposes was limited to the period of residence;
  2. The trust’s share of Connecticut taxable income derived from or connected with sources within Connecticut for the period of nonresidence determined as if the taxable year for federal income tax purposes was limited to the period of nonresidence; and
  3. The amount of special accruals. See Special Accruals.

Connecticut Income Taxation of Bankruptcy Estates

Cases under Chapter 7 or Chapter 11 of the Bankruptcy Code

The passage by Congress of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) has harmonized the state income tax treatment of bankruptcy estates with the federal income tax treatment of bankruptcy estates. Where the debtor is an individual, the commencement of a case under Chapter 7 or Chapter 11 of the Bankruptcy Code creates a bankruptcy estate for federal and Connecticut income tax purposes.

The estate’s Connecticut income tax liability is computed on its Connecticut taxable income, but the starting point in computing the estate’s Connecticut taxable income is its federal taxable income. In computing the estate’s Connecticut taxable income, not all items of income or gain taxable to the estate for federal income tax purposes are taxable for Connecticut income tax purposes and not all items of loss and deduction allowable to the estate for federal income tax purposes are allowable for Connecticut income tax purposes. The computation of an estate’s Connecticut fiduciary adjustment takes into account items of income taxable for federal income tax purposes but not for Connecticut income tax purposes or vice versa and items of deduction allowable for federal income tax purposes but not for Connecticut income tax purposes or vice versa. An estate’s share of the Connecticut fiduciary adjustment is added to or subtracted from the estate’s federal taxable income in computing its Connecticut taxable income. In the case of the bankruptcy estate of a debtor who is an individual, the estate’s share of the Connecticut fiduciary adjustment is 100%. The estate is also subject to the Connecticut alternative minimum tax if applicable.

The rates at which Connecticut income tax is imposed on the bankruptcy estate of a debtor who is an individual are the rates generally applicable to estates under Chapter 229 of the Connecticut General Statutes. Except as otherwise provided by BAPCPA, the time and manner of filing tax returns are determined under the Connecticut Income Tax Act. While the federal taxable income of a bankruptcy estate of a debtor who is an individual is computed on a federal Form 1040, or federal Form 1040‑SR, with federal Form 1041 being used only as a transmittal for the estate’s federal Form 1040, or federal Form 1040‑SR, the Connecticut taxable income of the bankruptcy estate of a debtor who is an individual is computed on Form CT‑1041. Therefore, where Form CT‑1041 is filed for a bankruptcy estate, references on Form CT‑1041 to federal taxable income (from federal Form 1041, Line 23) are references to the federal taxable income computed on the estate’s federal Form 1040, or federal Form 1040‑SR. To determine whether the trustee of a bankruptcy estate is required to file Form CT‑1041, see Who Must File.

Note: In a case under Chapter 11 of the Bankruptcy Code where the debtor is an individual, earnings from services performed by the debtor after the commencement of the case and income from property acquired by the debtor after the commencement of the case (but before, in each instance, the case is closed, dismissed, or converted to a case under Chapter 7, 12, or 13 of the Bankruptcy Code, whichever occurs first) are, in general, includible in the estate’s gross income rather than in the debtor’s gross income for federal and Connecticut income tax purposes. See Internal Revenue Service (IRS) Notice 2006‑83, Individual Chapter 11 Debtors, I.R.B. 2006‑40 (October 2, 2006), for more details. This provision does not apply to a case under Chapter 7 of the Bankruptcy Code where the debtor is an individual.

Cases under Chapter 12 or Chapter 13 of the Bankruptcy Code

No Form CT‑1041 must be filed where a case under Chapter 12 or Chapter 13 of the Bankruptcy Code has been commenced.

Connecticut Income Taxation of Debtors Who Are Individuals

Taxation of a debtor who is an individual in a case under Chapter 7 or Chapter 11 of the Bankruptcy Code

The income, gain, loss, and deduction taxed to and claimed by the estate for federal income tax purposes will not be taxed to and claimed by the debtor for federal income tax purposes. The Connecticut income tax liability of a debtor who is an individual is computed on his or her Connecticut adjusted gross income, but the starting point in computing the debtor’s Connecticut adjusted gross income is his or her federal adjusted gross income. In computing the debtor’s Connecticut adjusted gross income, not all items of income or gain taxable to the debtor for federal income tax purposes are taxable for Connecticut income tax purposes and not all items of loss and deduction allowable to the debtor for federal income tax purposes are allowable for Connecticut income tax purposes. To determine whether the debtor is required to file a Connecticut income tax return (Form CT‑1040 if a resident individual or Form CT‑1040NR/PY if a nonresident or part‑year resident individual), see the filing instructions for those returns.

Debtors in a case under Chapter 11 of the Bankruptcy Code should review the Note in the Connecticut Income Taxation of Bankruptcy Estates section.

Taxation of a debtor who is an individual in a case under Chapter 12 or Chapter 13 of the Bankruptcy Code

Where the debtor is an individual, the commencement of a case under Chapter 12 or Chapter 13 of the Bankruptcy Code does not create a bankruptcy estate for federal or Connecticut income tax purposes. The Connecticut income tax liability of a debtor who is an individual is computed on his or her Connecticut adjusted gross income, but the starting point in computing the debtor’s Connecticut income tax liability is the amount of his or her federal adjusted gross income. In computing the debtor’s Connecticut adjusted gross income, not all items of income, gain, loss, or deduction taxed to and claimed by the debtor for federal income tax purposes are taxed to and claimed by the debtor for Connecticut income tax purposes. To determine whether the debtor is required to file a Connecticut income tax return (Form CT‑1040 if a resident individual, or Form CT‑1040NR/PY if a nonresident or part‑year resident individual), see the filing instructions for those returns.

Qualified Funeral Trusts (QFT)

A trustee that makes the election to be taxed as a QFT for federal income tax purposes and files federal Form 1041‑QFT, U.S. Income Tax Return for Qualified Funeral Trusts, will file Form CT‑1041 in the same manner as any other inter vivos trust. See Form CT‑1041 Quick‑File Requirements, in the Form CT-1041 instructions. If you do not meet the Quick‑File Requirements, see the Form CT‑1041 Line Instructions. The trustee should write “QFT election” at the top of the front of Form CT‑1041.

In the case of a QFT, wherever reference is made in the instructions and on Form CT‑1041 to federal Form 1041, Line 23, substitute federal Form 1041‑QFT, Line 11.

Composite Return

A trustee that files one aggregate federal Form 1041‑QFT for all QFTs of which he or she is the trustee must provide an attachment with Form CT‑1041 to provide the following information:

  • The number of QFTs included in the aggregate return;
  • The name, address, and Social Security Number (SSN) of the grantor(s) for each QFT; and
  • All corresponding beneficiaries for each QFT.

A trustee may file one aggregate Form CT‑1041 for all Connecticut resident QFTs. The trustee must be able to provide to DRS, upon request, detailed information for each separate QFT that would have been reported on Schedule CT‑1041B, Fiduciary Adjustment Allocation, Part 1, and if applicable, Schedule CT‑1041B, Part 2, Schedule CT‑1041C, Connecticut Taxable Income Calculation, and Schedule CT‑1041FA.

A trustee may file one aggregate Form CT‑1041 for all nonresident 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 have been reported on Schedule CT‑1041B, Part 1, and ScheduleCT‑1041FA, Parts 3, 2, and 1.

A trustee filing Form CT‑1041‑QFT electronically should retain a copy of any attachments/schedules for three years from the date of the filing. The attachments/schedules must be provided to DRS upon request.

Reporting for a Portion of a Resident Trust

If a QFT has both resident and nonresident grantors, the trustee will show how the resident percentage is arrived at for the QFT. This percentage should be multiplied by the federal taxable income to arrive at the amount to report on Schedule CT‑1041C, Line 4.

Special Accruals

A part‑year resident trust must recognize and report items of income, gain, loss, or deduction on the accrual basis regardless of the method of accounting normally used. In general, an item of income is subject to special accrual if the right to receive it is fixed and the amount to be paid is determinable with reasonable accuracy at the time the trust changes residency status.

Example: A part‑year resident trust sold property on an installment basis prior to changing from a resident trust to a nonresident trust and accrued the entire gain on the sale of that property to the residency portion of the year.

If the trust became a Connecticut resident trust during the taxable year, it must accrue to the nonresidency portion of the year any item of income, gain, loss, or deduction which under an accrual method of accounting would be reportable at the time it changed its residence. No accrual is required or allowed for items of income, gain, loss, or deduction derived from or connected with sources within Connecticut.

If the trust ceases to be a Connecticut resident trust, it must accrue any item of income, gain, loss, or deduction which under an accrual method of accounting would be reportable at the time the residence was changed. This includes income or gain it elected to report on the installment basis.