All income of an estate or trust is taxed to the
fiduciary or the beneficiary. The conduit rules for taxing estates
and trusts are applicable for North Carolina income tax purposes.
Under the conduit rules, regardless of who is taxed, the income
retains its same character as when received by the estate or trust.
North Carolina's trust and estate tax is based on the state of residence of the trust's income beneficiaries and not on the situs of the trust's trustees or where the trust is created. North Carolina law requires the tax to be computed on the taxable income of the trust that is for the benefit of a resident of this State, or for the benefit of a nonresident to the extent that the income (1) is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State or (2) is derived from a business, trade, profession, or occupation carried on in this State.