Respondents v. Commissioner of Revenue to set precedent for trusts administered in Minnesota

Case Background

Last year (2017), the Minnesota Tax Court ruled that treating irrevocable trusts as residents in Minnesota for income taxes is unconstitutional in Fielding v. Commissioner of Revenue. The state of Minnesota appealed the ruling bringing the case to the Minnesota Supreme Court where a new ruling is expected to be decided this month (June 2018).

In 2009, Reid MacDonald established four irrevocable trusts, one for each of his children, while residing in Minnesota. The trusts were deemed to become irrevocable in 2011, at which time the grantor resided in Minnesota.

No trustees were Minnesota residents. All but one beneficiary resided outside the state of Minnesota. The trusts only held investment accounts administered in the state of California.

However, the trusts owned stocks of a Minnesota company (Faribault Foods) and sold them in 2014 to a third party placing significant proceeds in an investment account.