When a beneficiary of a trust receives dividends from the trust, does the beneficiary have to pay tax on the net income of the trust?

[243 N.Y. 182]We may reach the same end by another path. The shares, while in the hands of the fiduciary, were not gains or income of the trust. The trust was not increased by the subdivision of its parts (Towne v. Eisner, supra). That being so, the dividends would have no place in the information return to be made by the fiduciary. He is not required to make report of changes of the corpus. If the dividends were not income of the trust, in the hands of the fiduciary, they were not transmuted into income of the trust as they passed out of his hands into those of the beneficiary. Payment is indeed an irrelevant circumstance in the measurement of the tax. The beneficiary must bear a tax upon his distributive share of the net income of the trust, whether distributed or not. Tax Law, 365, subd. 4. The income of the trust as reported in his return should be the same as that reported in the return of the trustee.