This educational guide is based on the linked primary sources. It is not a Court publication, is not affiliated with the Court, and is not legal advice.
In brief
Overview
The petitioner, North Carolina Department of Revenue, argues that a state may tax trust income because beneficiaries are the true owners of that income.
Background and question before the Court
Justice Ginsburg asked whether a state could tax beneficiaries on accumulated income they have not yet received.
Justice Kagan asked whether the analysis would change if the trustee lacked discretion and whether the state of administration could tax the income.
According to Justice Ginsburg, justice Ginsburg questioned the uncertainty of the beneficiary’s survival and its effect on tax liability.
What each side argues
Petitioner Position – North Carolina Department of Revenue
According to North Carolina Department of Revenue, the petitioner argues that a state’s pro‑rata tax on trust income complies with due process because trust beneficiaries are the true owners of the income.
Respondent Position – The Kimberley Rice Kaestner 1992 Family Trust
According to Mr. O'Neil, the respondent maintains that a state may tax a beneficiary when the beneficiary has an absolute right to the income in a particular year.
According to Mr. O'Neil, if the beneficiary had a vested right in a certain percentage of the trust, then we would treat her as having a current interest in that trust.
According to Mr. O'Neil, a state could enact a wealth tax if the person being taxed has a current vested right to the assets and the right is alienable.
What happened at oral argument
Justice Ginsburg asked whether a state could tax beneficiaries on accumulated income they have not yet received.
Justice Kagan asked whether the analysis would change if the trustee lacked discretion and whether the state of administration could tax the income.
Justice Gorsuch asked whether tax jurisdiction ever exceeds adjudicative jurisdiction.
What the Court decided
Why it matters
The case raises a due‑process challenge to the way many states tax trust income, potentially affecting tax rules in dozens of states.
Terms to know
No glossary terms are available for this guide.
Primary sources
Read the source materials on the official site or open the immutable repository copy used for this guide.
- 63e0506b3e868828092a-r1-b95094278ea0a0ae.pdforal argument transcript
Guide generated September 26, 2026. Automated validation accepted this version.