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Department of the Treasury trust must complete Schedule B.

The
income distribution deduction determines
Internal Revenue Service the amount of the distribution that is to be
taxed to the beneficiary.
For this reason, sometimes an estate
Instructions for Form 1041 or trust is referred to as a “pass through”
entity since it may distribute its income,
and Schedules A, B, D, G, J, and K-1 and certain allocable deductions, to the
beneficiary. It is the beneficiary, and not
the estate or trust, that pays the income
U. S. Fiduciary Income Tax Return tax on such amounts. Schedule K-1 is
(Section references are to the Internal Revenue Code unless otherwise noted.) used to notify the beneficiaries of the
amounts to be included on their
Paperwork Reduction Act Notice.—We ask for the information on this form to carry out respective tax returns.
the Internal Revenue laws of the United States. You are required to give us the Before beginning preparation of Form
information. We need it to ensure that taxpayers are complying with these laws and to 1041, the fiduciary must compute the
allow us to figure and collect the right amount of tax. accounting income of the estate or trust
The time needed to complete and file this form and related schedules will vary under the will or trust instrument to
determine the amount, if any, of income
depending on individual circumstances. The estimated average times are: that is required to be distributed since the
income distribution deduction is based, in
Form 1041 Schedule D Schedule J Schedule K-1 part, on that amount.
Recordkeeping 2 hrs. 11 min. 46 min. 1 hr. 58 min. 2 hrs. 11 min.
Learning about the Additional Information
law or the form 2 hrs. 45 min. 35 min, 25 min, 34 min. In addition to the publications listed
throughout these instructions, you may
Preparing the form 2 hrs. 22 min. 55 min. 1 hr. 2 min. 38 min. wish to get:
Copying, assembling, Publication 448, Federal Estate and Gift
and sending the form Taxes;
to IRS 35 min. 35 min. 35 min. 20 min.
Publication 550, Investment Income and
If you have comments concerning the accuracy of these time estimates or Expenses; and
suggestions for making these forms more simple, we would be happy to hear from you.
You can write to both the Internal Revenue Service, Washington, DC 20224, Attention: Publication 559, Tax Information for
Survivors, Executors, and Administrators.
IRS Reports Clearance Officer, T:FP; and the Office of Management and Budget,
Paperwork Reduction Project (1545-0092), Washington, DC 20503. DO NOT send the These publications, along with other
tax forms to either of these offices. Instead, see the “Where To File” instructions on page publications, may be obtained at most
3. IRS offices. To order publications and
forms, call our toll-free number
1-800-TAX-FORM (829-3676).
Changes You Should Note Schedule J—Trust Allocation of an
Accumulation Distribution . . . . . . 15 Who Must File
• For tax years beginning In 1990, the
filing requirement for bankruptcy estates Schedule K-1—Beneficiary's Share of 1. Decedent's Estate.—The fiduciary (or
is increased to $4,775. Income, Deductions, Credits, Etc. . . 16 one of the joint fiduciaries) must file Form
1041 for the estate of a domestic
• For tax years beginning in 1990, the
tax rates are revised to reflect the
General Instructions decedent that has:
cost-of-living adjustment. Purpose of Form (a) Gross income for the tax year of
$600 or more, or
• There are revised rules for trusts that
are participants in common trust funds
Form 1041 is used by the fiduciary of a
domestic estate, trust, or bankruptcy (b) A beneficiary who is a nonresident
(CTFs) that were required to change to estate, to report: (1) the income received alien.
the calendar year under section 584(h). by the estate or trust; (2) the income that 2. Trust.—The fiduciary (or one of the
is either accumulated or held for future
• For tax years beginning in 1990, only
10% of personal interest paid is
distribution or distributed currently to the
joint fiduciaries) must file Form 1041 for a
domestic trust taxable under section 641
beneficiaries; and (3) any applicable tax that has:
deductible. liability of the fiduciary.
Contents (a) Any taxable income for the tax year
Introduction to the Income or
Who Must File . . . . . . . . . . 1 Taxation of Estates and Trusts
Definitions . . . . . . . . . . . . 2 (b) Gross income of $600 or more
A decedent's estate or a trust (except for regardless of the taxable income, or
Additional Returns You May Have To a grantor type trust) is a separate legal
File . . . . . . . . . . . . . . 2 entity for Federal tax purposes. An estate (c) A beneficiary who is a nonresident
Participants in Common Trust Funds . 3 is created upon the death of an individual. alien.
When To File . . . . . . . . . . 3 A trust may be created during an If you are a fiduciary of a nonresident
Where To File . . . . . . . . . . 3 individual's life (inter vivos) or upon his or alien estate or foreign trust with U.S.
Estimated Income Tax Payments . . 4 her death under a will (testamentary). If source income, you should file Form
Income in Respect of a Decedent . . 4 the trust instrument contains certain 1040NR, U.S. Nonresident Alien income
Interest and Penalties . . . . . . . 5 provisions, then the person creating the Tax Return.
Grantor Type Trust . . . . . . . . 5 trust (the grantor) is deemed to be the 3. Bankruptcy Estate.—The fiduciary
Amended Return . . . . . . . . . 6 owner of the trust's assets and the trust is must file Form 1041 for the estate of an
Income . . . . . . . . . . . . . 6 treated as a “grantor type trust.” individual involved in bankruptcy
Deductions . . . . . . . . . . . 7 An estate or trust computes its gross proceedings under chapter 7 or 11 of
Schedule A—Charitable Deductions . 10 income in much the same manner as an Title 11 of the United States Code if the
Schedule B—Income Distribution individual. Generally, the deductions and estate has gross income for the tax year
credits allowed to individuals are also of $4,775 or more. Form 1041 is used
Deduction . . . . . . . . . . . . 10 allowed to estates and trusts. However, ONLY as a transmittal for Form 1040.
Schedule G—Tax Computation . . . 11 there is one major distinction. An estate or Figure the tax for the bankruptcy estate
Other Information . . . . . . . . . 12 trust is allowed an income distribution on Form 1040 by using the tax rate
Signature . . . . . . . . . . . . 13 deduction for distributions to beneficiaries. schedule for a married person filing
Schedule D—Capital Gains and Losses 13 To compute this deduction, the estate or separately and enter the tax on page 2 of
Form 1040. Attach Form 1040 to your performs, The trust instrument usually Income of Foreign Persons; and Foreign
return. provides: Person's U.S. Source Income Subject to
Withholding. Use these forms to report
Definitions • Evidence of ownership, such as
certificates of beneficial interest in the and transmit withheld tax on payments or
trust. distributions made to nonresident alien
Fiduciary.—A fiduciary is a trustee of a individuals, foreign partnerships, or
trust or the executor, executrix,
administrator, administratrix, personal
• That the grantor is a trustee and
executive officer.
foreign corporations to the extent such
payments or distributions constitute gross
representative, or a person in possession
of property of a decedent's estate. • That the trust pays the living expenses
for the grantor and the grantor's family.
income from sources within the U.S. that
is not effectively connected with a U.S.
trade or business. For more information,
Decedent's Estate.—An estate of a
deceased person is a taxable entity
• That the corpus and undistributed
income are distributed to the owners after see sections 1441 and 1442, and
separate from the decedent. It generally the trust is terminated. Publication 515, Withholding of Tax on
continues to exist until the final Nonresident Aliens and Foreign
If the family estate trust is treated as a Corporations.
distribution of the assets of the estate are grantor trust, see the “Grantor Type Trust”
made to the heirs and other beneficiaries. Instructions. For more information about
The income earned by the property of the Forms 1099-A, B, INT, MISC, OID, R
classification as a grantor trust, see Rev. and S.
estate during the period of administration Rul. 75-257, 1975-2 C.B. 251.
or settlement must be accounted for and You may have to file these information
reported by the estate. Pooled Income Fund.—A pooled returns to report abandonments and
Simple Trust.—A trust may qualify as income fund is a split-interest trust with a acquisitions through foreclosure,
remainder interest for a public charity and proceeds from broker and barter
“simple” If the trust instrument: a life income interest retained by the exchange and real estate transactions,
(1) Requires that all income must be donor or for another person. The property interest payments, medical and dental
distributed currently, is held in a pool with other pooled income health care payments, miscellaneous
fund property and does not include any income, original issue discount, and total
(2) Does not allow amounts to be paid, tax-exempt securities. The income for a distributions from profit-sharing plans,
permanently set aside, or used in the tax retained life interest is figured using the retirement plans, individual retirement
year for charitable purposes, and yearly rate of return earned by the trust. arrangements, and insurance contracts.
(3) The trust does not distribute See section 642(c) and the related Also, use these returns to report
amounts allocated to the corpus of the regulations for more information. amounts that were received as a nominee
trust. Decedent's Will and Trust Instrument.— on behalf of another person.
Income Required To Be Distributed You do not have to file a copy of the Some of the above 1099 forms do not
Currently.—Income required to be decedent's will or the trust instrument have to be filed if it would result in the
distributed currently generally means unless IRS requests it. If IRS requests it, duplication of income information required
income that is required to be distributed in file a copy (including any amendments) to be reported on Schedule K-1 of Form
the year it is received. The fiduciary must with the following: 1041.
be under a duty to distribute the income 1. A signed statement that, under the Form 8300, Report of Cash Payments
currently, even if the actual distribution is penalties of perjury, the copy of the will or Over $10,000 Received in a Trade or
not made until after the close of the trust's the trust instrument is true and complete. Business. Generally, this form is used to
tax year. See Regulations section 2. A statement naming the provisions report the receipt of more than $10,000 in
1.651(a)-2. of the will or the trust instrument that you cash or foreign currency in one
believe determine how the income is to be transaction (or a series of related
See “Participants in Common Trust split up among the estate or trust, the transactions).
Funds” on page 3 for a special rule grantor (if applicable), and the
regarding treatment of income required to Form 8656, Alternative Minimum Tax—
beneficiaries. Fiduciaries.
be distributed currently.
Complex Trust.—A complex trust is Additional Returns You May Have Note: Most filers of Form 1041 need to
complete part, if not all, of Form 8656.
any trust that does not qualify as a simple To File See Form 8656 for details.
trust as explained above. Form 1040, U.S. Individual Income Tax
Return. Form 8822, Change of Address.
Bankruptcy Estate.—A bankruptcy
estate is a separate and distinct taxable Form 1040NR, U.S. Nonresident Alien
entity from the individual debtor. It is Income Tax Return. Period Covered by the Return
created when an individual debtor files for Form 1041-A, U.S. Information Return— For an estate, the moment of death
bankruptcy under chapter 7 or 11 of Title Trust Accumulation of Charitable determines the end of the decedent's tax
11 of the United States Code. This Amounts. year and the beginning of the estate's tax
creates a separate “estate” consisting of year. As executor or administrator, you
property that belongs to the debtor before Form 1041-ES, Estimated Income Tax for
Fiduciaries. choose the estate's tax period when you
the filing date. See Publication 908, file its first income tax return. The estate's
Bankruptcy and Other Debt Cancellation, Form 1041-T, Allocation of Estimated Tax first tax year may be any period of 12
for more information about an individual's Payments to Beneficiaries. months or less that ends on the last day
bankruptcy. Form 56, Notice Concerning Fiduciary of a month. If you select the last day of
Grantor Type Trust.—A grantor type Relationship. any month other than December, then
trust is a legal trust under applicable state Form 706, United States Estate (and you are adopting a fiscal tax year.
law that is not recognized as a separate Generation-Skipping Transfer) Tax Generally, a trust must adopt a
taxable entity for income tax purposes Return; or Form 706NA, United States calendar year. The following trusts are
because the grantor or other substantial Estate (and Generation-Skipping exempt from this requirement:
owners have not relinquished complete
dominion and control over the trust. See
Transfer) Tax Return, Estate of
Nonresident Not a Citizen of the United • a trust that is exempt from tax under
section 501(a);
sections 671 through 678 for more States.
information on the characteristics of a Form 706GS(D), Generation-Skipping • a charitable trust described in section
4947(a)(1); and
grantor type trust. Transfer Tax Return for Distributions.
Family Estate Trust.—A family estate Form 706GS(D-1), Notification of • a trust that is treated as wholly-owned
by a grantor under the rules of sections
trust also known as a family, family Distribution From A Generation-Skipping 671 through 679.
estate, pure, equity, equity pure, prime, or Trust.
constitutional trust. Form 706GS(T), Generation-Skipping File Form 1041 for the calendar year
In most cases, the grantor transfers Transfer Tax Return for Terminations. 1990 (it this is the initial year of the estate
property to the trust or assigns to the trust Forms 1042 and 1042S, Annual or trust, the tax period that ends on
the income for services the grantor Withholding Tax Return for U.S. Source
Page 2
December, 31, 1990), or for a fiscal year CTF before the last tax year of the Where To File
beginning in 1990. four-year spread, it may have to Except for charitable and split-interest
For more information, see Publication accelerate the reporting of all or a portion trusts and pooled income funds:
538, Accounting Periods and Methods. of the remaining spread amounts. Please mail to the
Compute a fraction and use the table following Internal
Revenue Service
If you are located in
Participants In Common Trust below to determine whether the trust must Center

Funds (CTFs) accelerate the reporting of the spread


amounts.
Trusts that are participants in a Common New Jersey, New York (New Holtsville, NY 00501
York City and counties of
Trust Fund (CTF) must include in income To compute the numerator: add the Nassau, Rockland, Suffolk, and
one-fourth of income in excess of value of any investments withdrawn Westchester)
expenses attributable to the CTF's 1988 during the tax year plus any withdrawals New York (all other counties), Andover, MA 05501
short tax year. When computing the from any prior tax year during the spread Connecticut, Maine,
income distribution deduction for a trust period. From that amount, subtract the Massachusetts, New
Hampshire, Rhode Island,
that is required to distribute its income value of any additional investments Vermont
currently under section 651 or 661, the contributed during the spread period.
income that is required to be distributed Florida, Georgia, South Atlanta, GA 39901
To compute the denominator: add to Carolina
currently is deemed to be increased by the value of the participating trust's
the amount included in the distributable investment in the CTF at the end of the Indiana, Kentucky, Michigan, Cincinnati, OH 45999
Ohio, West Virginia
net income. year any investments withdrawn during
The amount of the increase is only the spread period. From that amount, Kansas, New Mexico, Austin, TX 73301
hypothetical and does not increase the Oklahoma, Texas
subtract the value of any additional
actual amount required to be distributed investments contributed during the spread Alaska, Arizona, California Ogden, UT 84201
currently. period. (counties of Alpine, Amador,
Butte, Calaveras, Colusa,
Grantor Trusts.—The grantor is treated Use the fraction to determine the Contra Costa, Del Norte, El
as the participant in the common trust Dorado, Glenn, Humboldt,
spread amount to be included in income Lake, Lassen, Marin,
fund and is the party entitled to the this year from the table below: Mendocino, Modoc, Napa,
four-year spread of items from the CTF's Nevada, Placer, Plumas,
short tax year. Sacramento, San Joaquin,
If the fraction is: Include in income: Shasta, Sierra, Siskiyou,
Change in Income Beneficiary.—If the Solano, Sonoma, Sutter,
less than 1/3 . . . . . . continue 4 year spread Tehama, Trinity, Yolo, and
beneficiary was an income beneficiary of Yuba), Colorado, Idaho,
a participant trust during 1988, and 1/3 or more 50% of remaining Montana, Nebraska, Nevada.
North Dakota, Oregon, South
ceases to be an income beneficiary of the but less than 2/3 . . . . . . spread Dakota, Utah, Washington,
participant trust in 1990, the participant Wyoming
trust is required to accelerate the 2/3 or more . . . . . . . . remaining spread
California (all other counties), Fresno, CA 93888
remaining spread items that would be Hawaii
includable in distributable net income. Note: The inclusion of 50% of the
remaining spread (a fraction equal to or Illinois, Iowa, Minnesota, Kansas City, MO
The beneficiary may elect to take the more than 1/3 but less than 2/3) can be Missouri, Wisconsin 64999
accelerated spread amount into income applied only once during the spread. Alabama, Arkansas, Louisiana,
ratably over the remaining number of Mississippi, North Carolina, Memphis, TN 37501
years in the spread period if the trustee Notice 90-1 I.R.B. 1990-2, dated Tennessee
provides the beneficiary with a written 1/8/90, provides an alternative to using Delaware, District of Columbia,
statement attached to Schedule K-1. That the value of the participant's investment in Maryland, Pennsylvania, Philadelphia, PA
statement must notify the beneficiary: the CTF to determine the fraction. Virginia any U.S. possession, 19255
or foreign country
• to include the entire amount
attributable to the accelerated spread in
See Notice 89-22, 1989-1 C.B. 652,
and Notice 90-1 for more details. For a charitable or split-interest trust
income for 1990 or to elect to take the
accelerated spread amount into income When To File described in section 4947(a) and a pooled
ratably over two years (the number of income fund defined in section 642(c)(5):
years remaining in the spread period); File Form 1041 by the 15th day of the 4th Please mail to the
month following the close of the tax year following Internal

• of the amount accelerated and the


number of years over which that amount
of the estate of trust. For calendar year
trusts, file Form 1041 and Schedules K-1
If you are located in Revenue Service
Center

may be taken into account if the on or before April 15, 1991. A fiscal year Alabama, Arkansas, Florida, Atlanta, GA 39901
beneficiary so elects; estate, for example, would file Form 1041 Georgia, Louisiana, Mississippi,
• that any balance of accelerated items
is to be included in the beneficiary's final
by October 15, 1991, for an estate that
has a tax year that ends on June 30,
North Carolina, South Carolina,
Tennessee
income tax return if the beneficiary dies 1991. Arizona, Colorado, Kansas, Austin, TX 73301
during the spread period; New Mexico, Oklahoma, Texas,
Utah, Wyoming
• to make the election to continue the
spread by writing “Electing spread
Extension of Time To File Indiana, Kentucky, Michigan, Cincinnati, OH 45999
Estates.—Use Form 2758, Application Ohio, West Virginia
procedures under Notice 90-1” at the top
of the beneficiary's Schedule E (Form for Extension of Time To File Certain Alaska, California, Hawaii, Fresno, CA 93888
1040); Excise, Income, Information, and Other Idaho, Nevada, Oregon,
Returns, to apply for an extension of time Washington
• that by writing this statement on
Schedule E the beneficiary is agreeing to
to file. Connecticut, Maine, Holtsville, NY 00501
Massachusetts, New
abide by all the special spread Trusts.-Use Form 8736, Application for Hampshire, New York, Rhode
procedures described in the statement. Automatic Extension of Time To File Island, Vermont
Return for a U.S. Partnership, REMIC, or Illinois, Iowa, Minnesota, Kansas City, MO
Methods for Determining Amounts for Certain Trusts, to request an Missouri, Montana, Nebraska, 64999
Withdrawn.—If a participating trust automatic 3-month extension of time to North Dakota, South Dakota,
withdraws from the CTF before the last Wisconsin
file. If more time is needed, file Form
year of the four-year spread (1991), the 8800, Application for Additional Extension Delaware, District of Columbia, Philadelphia, PA
trust must include in income in the year of Time To File a Return for a U.S. Maryland, New Jersey, 19255
Pennsylvania, Virginia, any
the terminating event occurs the Partnership, REMIC, or for Certain Trusts. U.S. possession, or foreign
remaining amounts that would have been For more information, see Regulations country
included in subsequent years. section 1 6081-3T.
If a participating trust makes a partial
withdrawal of its corpus investment in the
Page 3
Electronic Filing of Form 1041.— section 643(g) and instructions for line passive activities to the amount of income
Qualified tax return filers can file Form 24b. derived from all passive activities.
1041 and related schedules via magnetic Magnetic Tape Filing Requirements.— Similarly, credits from passive activities
media (magnetic tapes, floppy diskettes) Under the provisions of Revenue are limited to the tax attributable to such
or electronically. If the fiduciary files the Procedure 89-49, 1989-2 C.B. 615, activities. These limitations are first
estate's or trust's return electronically or fiduciaries that have a Treasury Tax and applied at the estate or trust level.
on magnetic tape, he or she must also file Loan (TT&L) Account for deposited Interests in activities acquired before
Form 8453-F, U.S. Fiduciary Income Tax Federal taxes and administer at least 200 10/23/86 are referred to as pre-enactment
Declaration and Signature for taxable trusts are required to submit the interests. Interests in activities acquired
Electronic/Magnetic Media Filing. See data on estimated tax payments on after 10/22/86 are interests other than
Pub. 1437, Procedures for magnetic tape. See Rev. Pros. 89-49 for pre-enactment interests.
Electronic/Magnetic Media Filing of details on this filing requirement. Losses and credits from pre-enactment
Fiduciary Returns. Form 1041, Tax Year activities are eligible for a phase-in of the
1990, for more information. Income and Deductions in Respect limitations. For 1990, 10% of the current
An application form to participate in the of a Decedent year passive activity loss from these
electronic filing program and Pub. 1437 When completing Form 1041, the activities is allowed to offset nonpassive
may be obtained by calling the Magnetic fiduciary should take into account any income.
Media Unit at the Philadelphia Service items that are income in respect of a Generally, an activity is deemed to be a
Center at (215) 969-7533 (not a toll-free decedent (IRD). passive activity if it involves the conduct
number) or by writing to: In general, the term “income in respect of any trade or business, and the taxpayer
Internal Revenue Service of a decedent” means income which a does not materially participate in the
Philadelphia Service Center decedent was entitled to receive but activity. Passive activities do not include
11601 Roosevelt Blvd. which was not properly includable in the working interests in oil and gas properties.
Philadelphia, PA 19155 decedent's final Form 1040 under the See section 469(c).
ATTN: Magnetic Media Unit-DP 115 decedent's method of accounting. In the case of a grantor trust, material
See Rev. Proc. 90-46 I.R.B. 1990-35. IRD includes: (1) all accrued income of participation is determined at the grantor
a decedent who reported his income on a level.
Estimated Income Tax Payments cash method of accounting; (2) income Rental activities are passive activities,
Trusts.—A trust must pay estimated accrued solely by reason of the whether or not the taxpayer materially
income tax if it expects to owe, after decedent's death in the case of a participates.
subtracting any withholding and credits, at decedent who reported his income on an Note: Material participation standards for
least $500 in tax for 1990, and it expects accrual method of accounting; and (3) estates and trusts had not been
the withholding to be less than: income to which the decedent had a established by regulations at the time
(1) 90% of the tax shown on the 1990 tax contingent claim at the time of his death. these instructions went to print.
return, or Some examples of IRD of a decedent In the case of taxable years of an
who kept his or her books on a cash estate ending less than 2 years after the
(2) 100% of the tax shown on the 1989 method are: date of death of the decedent, up to
tax return (assuming the return covered
all 12 months). • deferred salary payments that are
payable to the decedent's estate;
$25,000 of deductions and deduction
equivalents of credits attributable to all
A grantor trust which receives the rental real estate activities in which the
residue of the decedent's estate is exempt • uncollected interest on U.S. savings
bonds; and decedent actively participated is allowed.
from estimated tax payments for any tax Any unused losses and/or credits are
year ending before the date two years • proceeds from the completed sale of
farm produce.
deemed “suspended” passive activity
after the date of the decedent's death. losses for the year, and are carried
Estates.—An estate is required to make The character of the IRD is the same in forward indefinitely.
estimated income tax payments for any the hands of the estate as if the decedent If the estate or trust distributes any
tax year ending two or more years after had lived and received such amount. interest in a passive activity, the basis of
the date of decedent's death. Section 691(b) also allows the following the property immediately before the
Exceptions.—Generally, the estate or deductions and credits, when paid by the distribution is increased by the passive
trust will not have to pay estimated tax if decedent's estate, on Form 1041 that activity losses allocable to the interest;
its 1991 income tax return will show (1) a were not allowable on the decedent's final and such losses are not allowable as a
tax balance due of less than $500; or (2) Form 1040: deduction. See section 469(j).
the estate or trust had no tax liability in
the preceding tax year and the preceding
• business expenses deductible under
section 162
Note: Losses from passive activities are
first subject to the at-risk rules. When the
tax year was a full 12 months. For more losses are deductible under the at-risk
information see Form 1041-ES. • interest deductible under section 163
rules, the passive activity rules then
Section 643(g) Election.—Fiduciaries of • taxes deductible under section 164 apply.
both estates and trusts that pay estimated • investment expenses described in
section 212 (in excess of 2% of AGI)
Portfolio income is not treated as
tax may elect to have any portion of their income from a passive activity, and
estimated tax payments allocated to any
of the beneficiaries. To make a section
• percentage depletion allowed under
section 611
passive losses and credits generally may
not be applied to offset it. Portfolio income
643(g) election a fiduciary must file Form
1041-T, Allocation of Estimated Tax
• foreign tax credit generally includes interest, dividends,
royalties, and income from annuities.
For more information, see section 691.
Payments to Beneficiaries and show the Portfolio income of an estate or trust must
allocation of any estimated tax payments Limitations be accounted for separately. See Form
among the beneficiaries. At-Risk Loss Limitations.—Generally, 8582, Passive Activity Loss Limitations, to
Note: The fiduciary of an estate may the amount the estate or trust has “at risk” compute the amount of allowable passive
make a section 643(g) election only for limits the loss it can deduct for any tax activity loss. See Form 8582-CR, Passive
the last tax year of the estate. year. Use Form 6198, At-Risk Limitations, Activity Credit Limitations, to compute the
to figure the deductible loss for the year amount of credit allowed for the current
Amounts applied to each beneficiary year.
are treated as paid or credited to the and file it with Form 1041, For more
beneficiary on the last day of the trust's information, see Publication 559 and Special Rule for Blind Trust
tax year and should be reported on Publication 925, Passive Activity and If you are reporting income from a
Schedule K-1 (Form 1041) and Form At-Risk Rules. qualified blind trust (under the Ethics in
1041-T. Be sure to copy the name, Passive Activity Loss and Credit Government Act of 1978), do not identify
address, and EIN of the estate or trust Limitations.—Section 469 and the the payer of any income to the trust but
exactly as reported on Form 1041. See regulations thereunder limit losses from complete the rest of the return as
Page 4
provided in the instructions. Also write Enter the estate's or trust's employer fiduciary has a P. O. box, show the P. O.
“Blind Trust” at the top of page 1. identification number on each sheet. Also, box number instead of the street address.
use sheets that are the same size as the Check boxes.—Special filing
Multiple Trust Rules forms and schedules and indicate clearly
Two or more trusts are treated as one requirements apply to bankruptcy estates
the line of the printed form to which the and certain trusts. These requirements
trust if such trusts have substantially the information relates.
same grantor(s) and substantially the are described below.
same primary beneficiary(ies), and a Rounding Off to Whole-dollar Decedent's Estate.—Check this box if
principal purpose of such trusts is Amounts you are filing for the estate of a domestic
avoidance of tax. This provision applies decedent.
You may show the money items on the
only to that portion of the trust that is return and accompanying schedules as Note: When reporting interest or dividend
attributable to contributions to corpus whole-dollar amounts. To do so, drop any income on Form 1041 for the first year of
made after March 1, 1984. amount less than 50 cents and increase the decedent's estate and on the final
any amount from 50 cents through 99 income tax return, Forms 1099-DIV and
Interest and Penalties 1099-INT issued in the name of the
Interest.—Interest will be charged on cents to the next higher dollar.
decedent may reflect earnings for the
taxes not paid by their due date, even if Unresolved Tax Problems entire year. The fiduciary, when preparing
an extension of time to file is granted. the final income tax return of the
IRS has a Problem Resolution Program decedent, should indicate on Schedule B,
Interest is also charged on penalties for taxpayers who have been unable to
imposed for failure to file, negligence, Form 1040, or Schedule 1, Form 1040A,
resolve their problems with IRS. If you that the balance of any interest or
substantial understatement of tax, have a tax problem you have been unable
substantial valuation overstatement, and dividend income is reported on Form
to resolve through normal channels, write 1041. The name and address of the
fraud. to your local IRS District Director, or call
Late Filing of Return.—The law provides fiduciary return, Form 1041, should also
your local IRS office and ask for Problem be shown.
a penalty of 5% of the tax due for each Resolution assistance.
month, or part of a month, that the return Simple Trust.—Check this box if you are
is late (maximum 25%) unless you can The Problem Resolution Office will take
responsibility for your problem and ensure filing for a simple trust.
show reasonable cause for the delay. If Grantor Type Trust.—Check this box, if
you file a return late, attach a full that it receives proper attention. Although
this office cannot change the tax law or you are filing for a trust that is treated as
explanation to your return. If your return is totally or partly owned by the grantor or
more than 60 days late, the minimum technical decisions, it can frequently clear
up misunderstandings that resulted from another person.
penalty is the lesser of $100 or the tax
due on your return. previous contacts. Generally, transfers made in trust after
Hearing impaired taxpayers who have March 1, 1986, are subject to section
Late Payment of Tax.—Generally, the access to TV/Telephone (TTY) 673(a), which treats the grantor as the
penalty for not paying tax when due is ½ equipment, may call 1-800-829-4059 to owner of any portion of a trust in which he
of 1% of the unpaid amount for each ask for help from Problem Resolution. or she has a reversionary interest in either
month or part of a month it remains the income or corpus therefrom, if, as of
unpaid. The maximum penalty is 25% of the inception of that portion of the trust,
the unpaid amount. The penalty applies to
any unpaid tax shown on a return. Any Specific Instructions the value of that interest is more than 5%
of the value of that portion.
penalty is in addition to interest charges Employer Identification Number
on late payments. Further, section 672(e) treats the
(EIN).—Use Form SS-4, Application for grantor as holding any power or interest
Note: If you include interest or either of Employer Identification Number, to apply that was held by either the grantor's
these penalties with your payment, for the EIN for the estate or trust. You spouse at the time that the power or
identify and enter these amounts in the may get this form from IRS or the Social interest was created or who became the
bottom margin of Form 1041, page 1. Do Security Administration. A separate EIN is grantor's spouse subsequent to the
not include the interest or penalty amount required for the estate and for each trust. creation of that power or interest.
in the balance of tax due on line 27. See Publication 583, Taxpayers Starting
a Business, for more information. Report on Form 1041 the part of the
Penalty for Failure To Supply Schedule income that is taxable to the trust. Do not
K-1.—The fiduciary is required to provide If you are filing a return for a mortgage
pool, such as one created under the report on Form 1041 the income that is
Schedule K-1 (Form 1041) to each taxable to the grantor or another person.
beneficiary who receives a distribution of mortgage-backed security programs
administered by the Federal National Instead, attach a separate sheet to report
property or an allocation of an item of the the following:
estate. A penalty of $50 (not to exceed Mortgage Association (“Fannie Mae”) or
$100,000 for any calendar year) will be the Government National Mortgage.
Association (“Ginnie Mae”), the EIN stays
• The income of the trust that is taxable
to the grantor or another person under
imposed on the fiduciary for each failure
to furnish Schedule K-1 to each with the pool if that pool is traded from sections 671 through 678.
beneficiary unless reasonable cause for
each failure is established.
one financial institution to another.
• The name, identifying number, and
address of the person(s) to whom the
Date Entity Created.—Enter the date the
Underpaid Estimated Tax.—If the trust was created, or, if an estate, the date income is taxable.
fiduciary underpaid estimated tax, attach of the decedent's death. • Any deductions or credits applied to
this income.
Form 2210, Underpayment of Estimated
Tax by Individuals and Fiduciaries, to Identification Area On page 1 at the top of Form 1041,
compute any penalties. Enter the amount Please copy the exact name of the estate write the name, identification number, and
of any penalties on line 26, Form 1041. or trust from the Form SS-4 that you used address of the grantor(s) or other
Other Penalties.—There are also other to apply for the number. person(s) in parentheses after the name
penalties that can be imposed for of the trust.
Fill in the information called for at the The income taxable to the grantor or
negligence and substantial underpayment top of the form and check the appropriate
of tax. See Publication 17, Your Federal another person under sections 671
entity box. See the definition section on through 678 and the deductions and
Income Tax, for details on these page 2 for descriptions of the types of
penalties. credits applied to the income must be
trusts and estates. reported on the income tax return that
Attachments Address.—Include the suite, room, or person files.
If you need more space on the forms or other unit number after the street address. Simplified Filing Requirement.—The
schedules, attach separate sheets If the postal service does not deliver grantor/trustee for a trust described below
showing the same information in the mail to the street address and the that was created in a tax year beginning
same order as on the printed forms. Show on or after January 1, 1981, should not
the totals on the printed forms. file Form 1041 and therefore will not
Page 5
need an EIN for the trust. The You must also file Form 5227, Form 1041 if its gross receipts are
grantor/trustee must furnish his or her Split-Interest Trust Information Return. normally more than $25,000. If the trust
social security number to payers of Initial Return.—Check this box if this is has zero taxable income under Subtitle A,
income and report all items of income, the initial return for the estate or trust. it may satisfy its Form 1041 filing
deduction, and credit from the trust on his Also be sure to enter the date the entity requirement by filing Form 990 or Form
or her Form 1040. was created in the space provided. 990EZ.
Method of Reporting.—This special Amended Return.—If you are filing an Split-interest trusts must file Form 5227
rule applies to certain revocable trusts amended Form 1041, check the amended and are also required to file Form 1041-A
located in the United States and that have return box. Complete the entire return, it they are not required to distribute all of
all assets located in the United States if: correct the appropriate line(s) with the their net income currently to beneficiaries.
• The same individual is both grantor and
trustee (or co-trustee) of the trust; and
new information, and recompute your tax
liability. On an attached sheet explain the
Any split-interest trust reporting unrelated
business taxable income must file Form
reason for the amendment(s) and identify 1041 separately.
• Tthe individual is treated as owner of
all trust assets for the tax year under the line(s) and amount(s) being changed Nonexempt charitable trusts do not
section 676 (power to revoke). on the amended return. have to file either Form 5227 or Form
If the amended return results in a 1041-A.
• These rules also apply to certain other
revocable trusts in which: change to income, or a change in
Income
distribution of any income or other
• A husband and wife are the sole
grantors;
information provided to a beneficiary, an
amended Schedule K-1 (Form 1041) must
Line 1
Interest Income.—Enter the total of all
• One spouse is trustee or co-trustee
with a third party or both spouses are
also be filed with the amended Form 1041
and given to each beneficiary. Check the
taxable interest including any original
issue discount, and income received as a
trustees or co-trustees with a third party; Amended K-1 box at the top of the regular interest holder of a Real Estate
amended Schedule K-1.
• One or both spouses are treated as
owners of all trust assets for the tax year Final Return.—Check this box if this is a
Mortgage Investment Conduit (REMIC).
For taxable bonds acquired after
under section 676 (power to revoke); and final return because the estate or trust December 31, 1987, amortizable bond
has terminated. Also, check the Final K-1 premium is treated as an offset to the
• The husband and wife file a joint
income tax return for the tax year.
box at the top of Schedule K-1. interest income instead of as a separate
On the final return, neither an estate interest deduction. See Publication 550.
Grantor Trusts Created in Tax Years nor a trust is allowed an exemption. If
Beginning Before 1981.—The grantor/ there is an unused loss carryover or Line 2
trustee for a trust described above who excess deductions on the final return, see Dividends.—Enter the total of all taxable
has previously filed Form 1041 can take the “Unused loss carryover” and “Excess dividends.
advantage of the simplified reporting deductions on termination” discussion in
requirements in the future by filing a Form the Schedule K-1 instructions. Figure the Line 3
1041 for the current year, writing on it deductions on an attached sheet. Do not Income (or losses) from partnerships,
“Pursuant to section 1.671-4(b), this is the complete Schedule B (Form 1041). other estates, or other trusts.—Enter
final return for this grantor trust,” and Number of Schedules K-1 Attached.— the total income or losses from all
checking the “Final return” box. Every estate or trust claiming an income partnerships, other estates, or trusts
A grantor/trustee who chooses this distribution deduction on line 18 must except the following:
option must furnish his or her social enter the number of Schedules K-1 (Form (a) Interest (enter on line 1).
security number to payers of income for 1041) that are attached to Form 1041.
(b) Dividends (enter on line 2).
the next year and report the trust income Nonexempt Charitable and Split-
on his or her Form 1040 for the next tax Interest Trust.—Check the first box if the (c) Capital gain (or loss) (enter on
year and for future years. The trust is a nonexempt charitable trust Schedule D (Form 1041)).
grantor/trustee must not file Form 1041 described in section 4947(a)(1). Check (d) Ordinary gain or loss (enter on
for future years. the second box if the trust is not treated Form 4797, Sales of Business Property).
Bankruptcy Estate.—Check this box if as a private foundation as explained in Attach a separate sheet showing the
you are filing for the estate of an Regulations sections 53.4947-1 and name of the partnership, other estate, or
individual involved in bankruptcy 53.4947-2. Check the third box if the trust trust and its EIN. If the amount is from
proceedings. Remember to figure the tax is a nonexempt split-interest trust more than one source, list the names and
on Form 1040 and to attach Form 1040 to described in section 4947(a)(2). numbers and also identify the amount
Form 1041, complete the identification If the trust is treated as a private from each source on an attached sheet.
area at the top of Form 1041, enter any foundation, see Regulations sections Any losses and credits from passive
tax due, and sign and date the Form 53.4947-1 and 53.4947-2 for private activities may be limited. See the
1041. foundation rules that apply to charitable discussion under “Passive Activity Loss
Pooled Income Fund.—Check this box if and split-interest trusts. You must file and Credit Limitations” on page 4.
you are filing for a pooled income fund. Form 990-PF, Return of Private
You must attach a statement to support Foundation, in addition to Form 1041 if Line 4
the following: the charitable trust is treated as a private
• The calculation of the yearly rate of
return. (See Regulations section
foundation. You may also have to file
Form 4720, Return of Certain Excise
Net rent and royalty income (or
loss).—Enter the net rent and royalty
1.642(c)-6(c) for the calculation rules.) Taxes on Charities and Other Persons income or loss. Attach Schedule E (Form
Under Chapters 41 and 42 of the Internal 1040), Supplemental Income and Loss, to
• The computation of the deduction for
distributions to the beneficiaries.
Revenue Code. Do not deduct on Form show the fiduciary's share of income and
1041 any private foundation taxes paid. expenses including depreciation and
• The computation of any charitable
deduction.
If the nonexempt charitable trust is a depletion.
For a trust, divide the deductions for
private foundation that has zero taxable
You do not have to complete Schedule income under Subtitle A, it may file Form amortization, depreciation, and depletion
A (Form 1041) or Schedule B (Form 990-PF to satisfy its Form 1041 filing between the fiduciary and the
1041). requirements. beneficiaries as specified in the trust
If the fund has accumulations of A nonexempt charitable trust not treated instrument. If the trust instrument does
income, file Form 1041-A, U.S. as a private foundation must file Form 990 not so specify, divide the deductions on
Information Return-Trust Accumulation of (or Form 990EZ), Return of Organization the same basis as the trust instrument
Charitable Amounts, unless the fund is Exempt From Income Tax, and Schedule provides for dividing the income between
required to distribute all of its net income A (Form 990), Organization Exempt Under the fiduciary and the beneficiaries.
to beneficiaries currently. 501(c)(3), in addition to
Page 6
For an estate, divide the deductions for
amortization, depreciation, and depletion
•Form
Any part of a total distribution shown on
1099-R, Statement for Recipients of
(1) interest paid or accrued on
indebtedness incurred in connection with
between the estate and the beneficiaries Total Distributions From Profit-Sharing, the conduct of a trade or business;
in the same way the estate income is Retirement Plans, Individual Retirement (2) any investment interest;
allocated to each. See Regulations Arrangements, Insurance Contracts, Etc.,
sections 1.642(e)-1, 1.642(f)-1, 1.167(f)-1, that is treated as ordinary income. (3) any interest which is taken into
1.167(h)-1, and 1.611-1(c) for more account, under section 469 in computing
information about the division of these income or loss from a passive activity;
For more Information, see the separate
deductions. If the estate or trust has a instructions for Form 4972, Tax on (4) any “qualified residence interest”; or
loss from an activity, see “At-Risk Loss Lump-Sum Distributions. (5) any interest payable under section
Limitations” and “Passive Activity Loss 6601 on any unpaid portion of the estate
and Credit Limitations” discussed on page Deductions tax attributable to the value of a
4. reversionary or remainder interest in
Allocation of deductions for tax-exempt
Note: An estate or trust cannot make an Income.—All deductions entered on lines property, or an interest in a closely held
election under section 179 to expense 10 through 15c must include only the business for the period during which an
certain tangible property. fiduciary's share of deductions related to extension of time for payment of such tax
taxable income. If the estate or trust has is in effect.
Line 5 tax-exempt income, the amount included Interest paid or accrued by an estate or
Net business and farm Income (or on lines 10 through 15c must be reduced trust on indebtedness secured by a
loss).—Enter the net profit or loss from by the allocable portion attributed to qualified residence of a beneficiary of an
business and farming during the tax year. tax-exempt income. The allocable amounts estate or trust is treated as “qualified
Attach Schedule C (Form 1040), Profit or to be included on lines 10 through 15c are residence interest” if the residence would
Loss From Business, to report the determined as follows: be a qualified residence (i.e., the principal
business income or loss. Attach residence or the second residence
1. Determine the percentage of selected by the beneficiary) if owned by
Schedule F (Form 1040), Farm Income tax-exempt income to gross income.—
and Expenses, to report the farm income the beneficiary. The beneficiary must
Divide the total tax-exempt income have a present interest in the estate or
or loss. Complete all information on received by the total of all items of gross
Schedules C and F (Form 1040) that trust or an interest in the residuary of the
income (including tax-exempt income) estate or trust. See Publication 936,
applies to the estate or trust. included in distributable net income. Limits on Home Mortgage Interest
See the instructions for lines 4 and 15a 2. Determine the excludable amount of Deduction, for an explanation of the
for more information on dividing the each specific deduction.—Multiply the general rules for deducting home
deductions for amortization, depreciation, percentage of tax-exempt income by each mortgage interest.
and depletion between the fiduciary and specific deduction. See section 163(h)(3) for a definition of
the beneficiaries. “qualified residence interest” and
3. Determine the amount deductible on
Line 6 lines 10 through 15c.—Subtract the limitations on indebtedness.
excludable amount of each specific Generally, “investment interest” is
Capital gain (or loss).—Enter the net interest (including amortizable bond
capital gain (or loss) from Schedule D deduction from the specific deduction and
enter the balance on the appropriate line. premium on taxable bonds acquired after
(Form 1041). 10/22/86, but before 1/1/88) that is paid or
For more information, see Publications accrued on indebtedness that is properly
Line 7 550 and 559.
Ordinary gain (or loss).—Enter from allocable to property held for investment.
Form 4797 the gain or loss from the sale Deductions that may be allowable for Investment interest does not include any
or exchange of property other than capital estate tax purposes.—Administration “qualified residence interest,” or interest
assets and also from involuntary expenses and losses deductible on Form that is taken into account under section
conversions (other than casualty or theft). 706 may be deducted on Form 1041 469 in computing income or loss from a
For more information, see the instructions instead, if the fiduciary files a statement passive activity.
for Form 4797. waiving the right to deduct the expenses Generally, net investment income is the
and losses on Form 706. The statement excess of investment income over
Line 8 investment expenses. Investment
must be filed before the expiration of the
Other Income.—Enter the total taxable statutory period of limitations applicable to expenses are those expenses (other than
income not reportable elsewhere. State the tax year for which the deduction is interest) allowable after application of the
the type and amount of the income. claimed. You cannot deduct on Form 2% floor on miscellaneous itemized
Attach a separate sheet if necessary. 1041 a decedent's medical and dental deductions.
Examples of income to be reported on expenses that are paid by the fiduciary. The amount of investment interest
line 8 are: See Publication 559 for more information. deduction may be limited. Use Form
4952, Investment Interest Expense
• Unpaid compensation received by the
decedent's estate that is income in
Accrued expenses.—Generally, an
accrual basis taxpayer can deduct Deduction, to compute the allowable
accrued expenses in the tax year that: (1) investment interest deduction.
respect of a decedent.
all events have occurred that determine Any disallowed investment interest
• The estate's or trust's share of
aggregate income or loss that is ordinary the liability; and (2) the amount of the expense is allowed as a carryforward to
liability can be figured with reasonable the next tax year. See section 163(d) and
income if the estate or trust is a Publication 550, for more information.
shareholder of an S corporation. Also accuracy. However, all the events that
state the name and EIN of the establish liability are treated as occurring If the allowable part of the excess
corporation. Report capital gain income, only when economic performance takes investment interest expense is deductible
dividend income, etc., on other place. There are exceptions for recurring and Form 4952 is required to be
appropriate lines. items. See section 461(h). completed, write “Form 4952 attached” on
line 10. Then add the deductible interest
• The estate's or trust's share of taxable
income (or loss) if the estate or trust is a
Line 10
Interest.—Enter any deductible interest
to the other types of deductible interest
and enter the total on line 10.
residual holder of a REMIC. You should paid or accrued that is not deductible
receive Schedule Q (Form 1066), Note: See section 1277 for rules on
elsewhere on Form 1041. Do not include the deferral of the interest deduction that
Quarterly Notice to Residual Interest interest on a debt that was incurred or
Holders of REMIC Taxable Income or Net is allocable to accrued market discount on
continued in order to buy or carry bonds acquired after July 18, 1984, and
Loss Allocation, and instructions from the obligations that yield tax-exempt interest.
REMIC for each quarter. section 1282 for rules on the deferral of
If unpaid interest is due related persons, the interest deduction that is allocable to
See Part IV, Schedule E, Form 1040, see Publication 545, Interest Expense. the accrued discount on certain
Instructions for reporting requirements, Examples of interest (subject to short-term obligations acquired after July
and attach Schedule E (Form 1040). limitations) reportable on line 10 Include: 18, 1984.
Page 7
For tax years beginning in 1990, only Casualty and theft losses.—Use Form For estates and trusts, the AGI is
10% of personal interest is deductible. 4684, Casualties and Thefts, to report computed by subtracting the following
Personal interest includes interest paid casualty and theft losses. from total income (line 9):
on: Net operating loss deduction.—An (1) the administration costs of the
estate or trust is allowed the net operating estate or trust (line 12);
• Revolving charge accounts.
loss deduction (NOLD) under section 172. (2) the income distribution deduction
• Personal notes for money borrowed
from a bank, credit union, or another
In computing the net operating loss, under section 651 or 661 (line 18);
exclude that portion of the income and
person. deductions attributable to the grantor (3) the amount of the exemption under
section 642(b) (line 20); and
• Installment loans on personal property. under sections 671 through 678. Also, the
charitable contribution deduction under (4) other deductions claimed on lines
• Taxes. section 642(c) and the income distribution 10 through 15a that were incurred in the
Line 11 deductions under sections 651 and 661 conduct of a trade or business, or the
Taxes.—Enter any deductible taxes paid are not allowed. production of income.
or accrued during the tax year that are not The estate or trust is allowed the Allowable administration costs are
deductible elsewhere on Form 1041. carryback and carryforward period for the those costs incurred with the
State and local sales taxes are not NOLD. administration of the estate or trust which
deductible. Instead, they are to be treated For more information, see Publication would not have been incurred if the
as part of the cost of the property upon 536, Net Operating Losses, and Form property were not held in such estate or
acquisition, or as a reduction in the 1045, Application for Tentative Refund. If trust. These administration costs are not
amount realized upon disposition. you claim a net operating loss deduction subject to the two percent floor.
Deductible taxes include: for the estate or trust, figure the deduction For those estates and trusts whose
on a separate sheet and attach it to this income distribution deduction is limited to
• State and local income or real property
tax. return. the actual distribution, and NOT the
distributable net income (DNI) (i.e., the
• The Generation-Skipping Transfer
(GST) tax imposed on income
Fiduciary's share of amortization,
depreciation, and depletion not claimed income distribution is less than the DNI),
elsewhere.—If you cannot deduct the when computing the AGI, use the amount
distributions. of the actual distribution.
amortization, depreciation, and depletion
Nondeductible taxes include: as rent or royalty expenses on Schedule For those estates and trusts whose
• Federal income and excise taxes. E (Form 1040), or as business or farm income distribution deduction is limited to
• Customs duties. expenses on Schedules C and F (Form the DNI (i.e., the actual distribution
• State and local sales taxes. 1040), itemize the fiduciary's share of the
deductions on an attached sheet. Then
exceeds the DNI), the DNI must be
computed taking into account the
Line 12 include them on line 15a. Itemize each allowable miscellaneous itemized
Fiduciary fees.—Enter the deductible beneficiary's share of the deductions on deductions (AMID) after application of the
fees paid to the fiduciary for administering the appropriate line of Schedule K-1 two percent floor. In this situation there
the estate or trust during the tax year. (Form 1041). See the instructions for are two unknown amounts: the AMID; and
Schedule K-1 for more information, the DNI.
Note: Fiduciary fees deducted on Form including the rules for dividing the
706 cannot be deducted on Form 1041. The following example illustrates how
deductions between the fiduciary and the an algebraic equation can be used to
Line 13 beneficiaries. solve for these unknown amounts:
Charitable deduction.—Enter the total Restricted deductions.—For the special
rules on real property construction period The Malcolm Smith Trust, a complex
from Schedule A (Form 1041), line 6. trust, earned $20,000 of dividend income,
interest and taxes for trade or business
Line 14 and activities conducted for profit, see $20,000 of capital gains, and a fully
Attorney, accountant, and return Publication 535, Business Expenses. deductible $5,000 loss from XYZ
preparer fees.—Enter the deductible partnership (chargeable to corpus) in
For information on unpaid expenses 1990. The trust instrument provides that
attorney, accountant, and return preparer due related persons, see Publication 550.
fees paid by the estate or trust during the capital gains be added to corpus. 50% of
tax year. For the rules on the tax year for which the fiduciary fees were allocated to
a deduction is claimed, including the limit income and 50% to corpus. The trust
Line 15a for expenses paid in advance, see claimed a $2,000 deduction on line 12 of
Other deductions NOT subject to the Publication 538. Form 1041. The trust incurred $1,500 of
2% floor.—Attach a separate sheet listing miscellaneous itemized deductions
For the limit on deductions for certain (chargeable to income), which are subject
all authorized deductions that are not farming syndicates, see Publication 535.
deductible elsewhere on Form 1041. to the two percent floor. There are no
Do not include on line 15a any losses Line 15b other deductions. The trustee made a
on worthless bonds and similar discretionary distribution of the accounting
Allowable miscellaneous itemized income of $17,500 to the trust's sole
obligations and nonbusiness bad debts. deductions subject to the 2% floor.—
These items are reported on Schedule D beneficiary.
Miscellaneous itemized deductions are
(Form 1041). deductible only to the extent that the Since the actual distribution exceeds
The following are examples of aggregate amount of such deductions the DNI, the trust must compute the DNI,
deductions that are reported on line 15a. exceeds two percent of adjusted gross taking into account the allowable
Bond premium(s).—For taxable bonds income (AGI). miscellaneous itemized deductions, to
acquired before 10/23/86, if the fiduciary determine the amount to be entered on
The term “miscellaneous itemized line 15b.
elected to amortize the premium, report deductions” does not include deductions
the amortization on this line. For The trust also claims an exemption of
relating to: $100 on line 20.
tax-exempt bonds, the amortization
cannot be deducted. In all cases where • interest under section 163.
To compute line 15b, use the equation
the fiduciary has made an election to
amortize the premium, the basis must be
• taxes under section 164. below:
reduced by the amount of amortization. • the amortization of bond premium
under section 171.
AMID = total miscellaneous itemized
For more information, see section 171 deductions - (.02(AGI))
and Publication 550. • estate taxes in the case of income in
respect of a decedent under section
In the above example:
If you claim a bond premium deduction 691(c). AMID = 1,500 - (.02(AGI))
for the estate or trust, figure the deduction
on a separate sheet and attach it to this For more exceptions, see section In all situations, use the following
return. 67(b). equation to compute the AGI:
Page 8
AGI = (line 9) - (the total of lines 12, 14, If this trust was identified as a trust the amount of any estimated tax payment
and 15a to the extent they are costs other than a “Pooled Income Fund” on you made on Form 1041-ES for 1990 plus
incurred in the administration of the estate page 1, Form 1041, complete Schedule B the amount of any overpayment from the
or trust) - (line 18) - (line 20) on page 2. However, if line 17 is equal to 1989 return that was applied to the 1990
In the above example: or less than zero and no distributions estimated tax.
were actually made or available on If the trust is the beneficiary of another
AGI = 35,000 - 2,000 - DNI - 100 demand to the beneficiaries in the tax trust, and received a payment of
Since the value of line 18 is not known year, then do not complete Schedule B. estimated tax that was credited to the
because it is limited to the DNI, you are Cemetery perpetual care fund.—On trust (as reflected on the Schedule K-1
left with the following: line 18, deduct the amount, not more than issued to the trust), then report this
AGI = 32,900 - DNI $5 per gravesite, paid for maintenance of amount separately with the notation
cemetery property. Write the number of “section 643(g)” in the space next to line
Substitute the value of AGI in the 24a.
equation: gravesites to the right of the entry space
for line 18. Also write “Section 642(i) trust” Note: Do not include on Form 1041
AMID = 1,500 - (.02(32,900 - DNI)) in parentheses after the trust's name at estimated tax paid by an individual before
The equation cannot be solved until the the top of Form 1041. You do not have to death. Instead, include the payments on
value of DNI is known. The DNI can be file Schedules B (Form 1041) and K-1 the decedent's final Form 1040.
expressed in terms of the AMID. To do (Form 1041).
this, compute the DNI using the known Line 24b
values. In this example, the DNI is equal Line 19
Treated as credited to beneficiaries.—
to the total income of the trust (less any Estate tax deduction (including certain The trustee (or executor, under certain
capital gains allocated to corpus); less generation-skipping transfer taxes).— circumstances) may elect under section
total deductions from line 16 (computed See Publication 559 and section 691(c) 643(g) to have any portion of its estimated
without regard to any miscellaneous and related regulations for information on tax treated as a payment of estimated tax
itemized deductions); less the AMID. how to figure the estate tax deduction. made by a beneficiary or beneficiaries.
Thus, DNI = (line 9) - (line 17 column The section 691(c) regulations also have The election is made on Form 1041-T
(b) of Schedule D (Form 1041)) - (line examples of how to figure the deduction. which must be filed on or before the 65th
16) - (AMID) Figure the deduction on a separate sheet. day after the close of the trust's tax year.
Attach the sheet to your return. Also, a Form 1041-T shows the amounts to be
Substitute the known values: deduction is allowed for the GST tax allocated to each beneficiary. This
DNI = 35,000 - 20,000 - 2,000 - AMID imposed as a result of a taxable amount is to be reflected on the
termination, or a direct skip occurring as a beneficiary's Schedule K-1, line 12a.
DNI = 13,000 - AMID result of the death of the transferor. See Failure to file Form 1041-T by March 6,
Publication 448 and section 691(c)(3). 1991, will result in an invalid election. An
Substitute the value of DNI in the Enter the fiduciary's share of these
equation to solve for AMID: invalid election will require the filing of
deductions on line 19. amended Schedules K-1 for each
AMID = 1,500 - (.02(32,900 - (13,000 - beneficiary who was allocated a payment
AMID))) Line 20
of estimated tax. Be sure to attach Form
AMID = 1,500 - (.02(32,900 - 13,000 + Exemption.—The amount of the 1041-T to your return ONLY if you have
AMID)) exemption deduction depends on either not already filed it. If you have already
the language in the governing trust filed Form 1041-T, do not attach a copy to
AMID = 1,500 - (658 - 260 + .02 AMID) instrument or whether a decedent's estate your return.
AMID = 1,102 - .02AMID has been created. The applicable
exemption amount must be excluded in Line 24d
AMID = 1,080 determining the NOL and any excess Tax paid with extension of time to
DNI = 11,920 (i.e., 13,000 - 1,080) deduction amounts. file.—If you filed either Form 2758 (for
AGI = 20,980 (i.e., 32,900 - 11,920) Note: No exemption is allowed on the estates only), Form 8736, or Form 8800
final return of an estate or trust. to request an extension of time to file,
Note: The income distribution deduction enter the amount that you paid and check
is equal to the lesser of the distribution Estate.—The estate of a decedent is the appropriate box(es).
($17,500) or the DNI ($11,920). entitled to a $600 deduction.
Enter the value of AMID on line 15b Trust.—Any trust that is required by its Line 24e
(the DNI should equal line 9 of Schedule governing trust instrument to distribute Federal income tax withheld.—If you
B) and complete the rest of Form 1041 currently all its income is entitled to a claim a credit for Federal income tax
according to the instructions. $300 deduction. erroneously withheld (and not repaid) by
Any trust that is not required by its an employer on wages and salaries of a
Line 17 decedent received by the decedent's
governing instrument to distribute
Adjusted total income (or loss).—If the currently all its income is entitled to a estate, attach Form W-2, Wage and Tax
amount on line 16 is more than the $100 deduction. Generally, complex trusts Statement.
amount on line 9, then you have excess will be entitled to the $100 deduction.
deductions. Excess deductions can only Line 24f
be distributed to a beneficiary on the final See Publication 559 and Regulations Credit from regulated investment
return of the estate or trust. For more section 1.642(b)-1 for exceptions. companies.—Attach copy B of Form
information, see the instructions for 2439, Notice to Shareholder of
Schedule K-1, line 9. Line 22
Undistributed Long-Term Capital Gains.
Taxable income of fiduciary.—If line 22
Line 18 is less than zero, you may have a net Line 24g
Income distribution deduction.— operating loss (NOL) that you can carry to
Complete Schedule B (Form 1041) to another tax year. If you carry the loss Credit for Federal tax on fuels.—Include
determine the amount of the income back to earlier tax years, use Form 1045 on line 24g any credit for Federal excise
distribution deduction. If you claim an (or file an amended return) to apply for a taxes paid on fuels that are ultimately
income distribution deduction, complete refund of taxes. See the line 15a used for “nontaxable” purposes (e.g., an
and attach: instructions for a discussion of off-highway business use) and any credit
for the purchase of a diesel-powered car,
• Parts I and II of Form 8656 to
recompute the deduction on a minimum
computation of an NOL for an estate or
trust. van, or light truck. Attach Form 4136,
Credit for Federal Tax on Fuels. See
tax basis; AND
Line 24a
• Schedule K-1 (Form 1041) for each
beneficiary to which a distribution was 1990 Estimated tax payments and 1989
made. overpayment credited to 1990.—Enter
Page 9
Publication 378, Fuel Tax Credits and deducted only if authorized for certain General Instructions
Refunds, for more information. events that happened on or before The term “distributable net income” (DNI)
October 9, 1969. limits the income distribution deduction
Line 24h
3. Estates.—Estates may deduct any allowable to estates and trusts for
Include on line 24h any credit for backup part of gross income that under the terms amounts paid, credited, or required to be
withholding (under section 3406) for of the will is paid or permanently set aside distributed to beneficiaries and is used to
income retained by the estate or trust. for a charitable purpose during the tax determine how much of an amount paid,
Report on Schedule K-1 (Form 1041), line year. credited, or required to be distributed to a
12, any credit for backup withholding for beneficiary will be includible in his or her
income distributed to the beneficiary. What Must Be Filed gross income.
Line 26 1. Complex Trusts and Estates.— Separate share rule.—If a single trust
Underpayment of estimated tax.—If line Complete Schedule A (Form 1041) to has more than one beneficiary, and if
27 is at least $500 and more than 10% of compute the charitable deduction for an different beneficiaries have substantially
the tax shown on your return, or you estate or a complex trust. separate and independent shares, their
underpaid your 1990 estimated tax liability 2. Complex Trusts.—All complex trusts shares are treated as separate trusts for
for any payment period, you may owe a claiming a charitable deduction must also the sole purpose of determining the DNI
penalty. See Form 2210, Underpayment file Form 1041-A, U.S. Information allocable to the respective beneficiaries. If
of Estimated Tax by Individuals and Return—Trust Accumulation of Charitable the separate share rule applies, figure the
Fiduciaries, to determine whether you Amounts. DNI allocable to each beneficiary on a
owe a penalty, and to figure the amount of 3. Other.—A pooled income fund, separate sheet and attach the sheet to
the penalty. nonexempt private foundation, or trust this return. For more information, see
Note: The penalty may be waived under with unrelated business income should section 663(c) and related regulations.
certain conditions. See Publication 505, attach a separate sheet to Form 1041
Tax Witholding and Estimated Tax, for instead of using Schedule A (Form 1041) Line-by-Line Instructions
details. to compute the charitable deduction. Line 1
Line 27 For more information about the
charitable deduction, see Publication 559, Adjusted total income.—If the amount
Tax due.—The tax of both a trust and an section 642(c), and related regulations. on line 17 of page 1 is less than zero and
estate must be paid in full when the return the negative number is attributable wholly
is filed. Line-by-Line Instructions or in part to the capital loss limitation rules
Make your check or money order under section 1211(b) (line 6), then enter
payable to “Internal Revenue Service.” Line 1.—Enter the full amount paid or as a negative number on Schedule B, line
Write the EIN and “1990 Form 1041” on permanently set aside from the current 1, the lesser of the loss from line 17 on
the payment. year's gross income that qualifies for the page 1, or the loss from line 6 on page 1.
charitable deduction. Do not include If the negative number is not attributable
Line 29a capital gain allocable to corpus. Do to the capital loss on line 6, enter -0-.
Credit to your 1991 estimated tax.— include capital gain treated as income
Enter the amount from line 28 that you under the governing instrument and local Line 2
want applied to your 1991 estimated tax. law. Adjusted tax-exempt interest.—Figure
See page 13 for “Signature” Line 2.—Multiply the amount on line 1 by the adjusted tax-exempt interest as
Instructions. the total of all tax-exempt interest follows: From the amount of tax-exempt
included in the current year's income. interest received, subtract the total of (1)
Then divide the result by the total of all and (2) below:
Instructions for Schedule A the current year's income. (Do not (1) Tax-exempt interest on Schedule A
(Form 1041) Charitable subtract any losses, such as from the sale (Form 1041), line 2.
or exchange of property.) Enter the result (2) Any expenses allowable under
Deductions on line 2. section 212 allocable to tax-exempt
Line 4.—Enter the total of all net interest, and any interest expense
General Instructions short-term capital gain and net long-term allocable to tax-exempt interest.
The percentage limitations applicable to capital gain of the current year that is: Figure section 212 expenses allocable
individuals do not apply to estates and
trusts.
• Allocable to corpus; to tax-exempt interest as follows: Divide
the total tax-exempt interest received by
The charitable contribution must be
•charitable
Paid or permanently set aside for
purposes; and
the total of all the items of gross income
(including tax-exempt interest) included in
authorized by the governing instrument.
Distributions of corpus generally do not
qualify for the charitable deduction. If you
• Not included on line 1. DNI. Multiply the result by the total section
212 expenses that are not directly
Line 5.—Enter the total of deductible attributable to any items of income.
elect to treat a charitable contribution as amounts paid or permanently set aside for
paid in the preceding tax year, you must Figure the interest expense allocable to
charitable purposes from gross income of tax-exempt interest according to the
file the statement described in a prior tax year (and for which no
Regulations section 1.642(c)-1 with the guidelines in Rev. Proc. 72-18, 1972-1
charitable deduction was claimed in the C.B 740.
return (or amended return) for the tax prior tax year). Attach a statement to
year in which the contribution is treated as show the details. See Regulations sections 1.643(a)-5,
paid. The statement must be filed by the 1.265-1, and 1.265-2 for more information
due date including extensions for the about the adjustments to deductions for
return for the succeeding tax year. Instructions for Schedule B expenses and interest relating to
(Form 1041) income tax-exempt interest.
Who Must File Distribution Deduction
Use Schedule A (Form 1041) to Line 5
determine the charitable contribution Note: Both “simple” and “complex” trusts, Figure the amount to enter on line 5 as
deduction for an estate or trust. and estates are required to complete follows: Multiply line 1 of Schedule A by a
1. Simple Trusts.—Simple trusts may Schedule B. Pooled income funds are not fraction; the numerator of which is the
not claim the charitable deduction. required to complete Schedule B for amount of long-term capital gains that are
regular tax purposes. See Schedule G, included in the accounting income of the
2. Complex Trusts.—Complex trusts estate or trust (i.e., not allocated to
may deduct amounts actually paid, but line 6 instructions for alternative minimum
tax rules. corpus) AND are distributed to charities;
amounts permanently set aside may be the denominator of which is all items of
Page 10
income (including the amount of such
long-term capital gains) included in DNI.
•forAmount paid or permanently set aside
charitable purposes or otherwise Tax Rate Schedule
qualifying for the charitable deduction. If the amount on
Line 6 line 22, page 1, is:
Figure line 6 in the same manner as line Line 13 Of the
Over— But not Enter on amount
5, except the numerator of the fraction Total distributions.—Add lines 11 and over— line 1a: over—
includes only short-term capital gains that 12 and enter the total on line 13. If line 13 $0 $5,450 15% $0
are included in the accounting income of is more than line 10 and you are filing for 5,450 14,150 $817.50 + 28% 5,450
the estate or trust and distributed to a complex trust, complete Schedule J 14,150 28,320 3,253,50 + 33% 14,150
charities. 28,320 ...... 28% -0-
(Form 1041) and file it with Form 1041
Line 10 unless the complex trust has no
previously accumulated income. Line 1b
If you are filing for an estate, enter -0-. If Other taxes.—Include on line 1b any
you are filing for a simple or a complex Line 14 additional tax from the following and
trust, enter the income for the tax year In computing the income distribution attach each form to the return. If there is
determined under the terms of the deduction for beneficiaries, the estate or more than one, list on a separate sheet:
governing instrument and applicable local trust is not allowed a deduction for any
law. Do not include extraordinary
dividends or taxable stock dividends
item of DNI that is not included in the • Form 4970, Tax on Accumulation
Distribution of Trusts.
gross income of the estate or trust. Thus,
determined under the governing
instrument and applicable local law to be
for purposes of computing the allowable
income distribution deduction, the DNI
• Form 4972, Tax on Lump-Sum
Distributions.
allocable to corpus. (line 9) is computed without regard to any
Line 11 tax-exempt interest. • Section 644 tax on trusts.
If tax-exempt interest is the only Section 644 tax.—If the trust sells or
Enter income of the estate or trust that is exchanges property at a gain within 2
required to be distributed currently to all tax-exempt income included in the total
distributions (line 13), and the DNI (line 9) years after receiving it from a transferor, a
beneficiaries, whether it is distributed or section 644 tax may be due. The tax may
not. The governing instrument and local is less than or equal to line 13, then enter
on line 14 the amount from line 2. be due if both (i) and (ii) below apply:
law determine the items of income and (i) There is an “includible gain”
whether an amount must be distributed If tax-exempt interest is the only
tax-exempt income included in the total recognized by the trust; and
currently. If the governing instrument
requires that stated amounts be paid to a distributions (line 13), and the DNI is more (ii) At the time the trust received the
beneficiary and that these amounts may than line 13 (i.e., the estate or trust made property, the property had a fair market
come from either income or corpus, a distribution that is less than the DNI), value higher than its adjusted basis.
include on line 11 any part of these then compute the adjustment as follows: The trustee is authorized by section
amounts paid from the current year's Multiply line 2 by a fraction, the 6103(e)(1)(A)(ii) to inspect the transferor's
income. numerator of which is the total income tax return to the extent necessary
distributions (line 13), and the to figure the section 644 tax if the
Line 12 transferor refuses to make a disclosure to
denominator of which is the DNI (line 9).
Enter other amounts actually paid, Enter the result on line 14. the trustee.
credited, or required to be distributed to Includible gain is the smaller of (i) or (ii)
beneficiaries in the tax year, whether from If line 13 includes tax-exempt income
other than tax-exempt interest, figure line below:
income or corpus.
14 as follows: (i) The gain recognized by the trust on
Unless a section 643(e)(3) election is
made, the value of all noncash property From tax-exempt income included on the sale or exchange of the property; or
actually paid, credited, or required to be line 13, subtract the total of: (ii) The amount by which the fair
distributed to any beneficiaries after June (1) the charitable contribution market value of the property at the time of
1, 1984, is the smaller of: deduction allocable to such tax-exempt the initial transfer to the trust exceeds the
income, and adjusted basis of the property
(1) The estate's or trust's adjusted
basis in the property immediately before (2) expenses allocable to tax-exempt immediately after the transfer.
distribution, plus any gain or minus any income. Figure the tax on the includible gain by
loss recognized to the estate or trust on To compute the expenses allocable to subtracting the transferor's actual tax for
the distribution (basis of beneficiary), or tax-exempt income, divide tax-exempt the tax year of the sale or exchange from
(2) The fair market value of such income by total income. Multiply the result the transferor's tax for the year of the sale
property. This rule does not apply to any by expenses not directly allocable to any or exchange refigured to include the
noncash property distributed in item of income. recognized gain minus any deductions
satisfaction of a specific sum of money. If allocable to the gain.
a section 643(e)(3) election is made by See section 644 for additional
the fiduciary, then the amount entered on Instructions for Schedule G information, including character rules,
line 12 will be the fair market value of the special rules, exceptions, installment sale
property. (Form 1041) Tax Computation rules, and the interest due on the tax if the
transferor and the trust have different tax
Lines 11 and 12 years.
Line 1a
Do not include any: Tax rate schedule.—For tax years If the section 644 tax is the only tax
due on line 1b, enter the amount of the
• Amounts deducted on an earlier year's
return that were required to be distributed
beginning in 1990, figure the tax using the
tax rate schedule below. Enter the tax on tax on line 1b and write “section 644 tax”
in the earlier year. line 1a. to the right of the amount column on line
1c. If there is more than one tax, include
• Amount that is properly paid or credited
as a gift or bequest of a specific amount
the amount of the section 644 tax in the
total tax entered on line 1b.
of money or specific property. (To qualify
as a gift or bequest, the amount must be Attach the section 644 tax computation
paid in three or fewer installments.) An to the return. Do not include the section
amount that can be paid or credited only 644 gain in the trust's taxable income.
from income is not considered a gift or Line 2a
bequest.
Fiduciary's share of foreign tax credit.—
Attach Form 1116, Computation of
Page 11
Foreign Tax Credit—Individual, Fiduciary, Line 2d Attach a schedule showing the
or Nonresident Alien Individual, if you Credit for prior year minimum tax.—If computation.
elect to claim credit for income or profits the estate or trust paid alternative Interest under the look-back method for
taxes paid or accrued to a foreign country minimum tax in a previous year, it may be completed long-term contracts.—
or a U.S. possession. The estate or trust eligible for a minimum tax credit in 1990. Include the interest due under the
may claim credit for that part of the See Form 8801, Credit for Prior Year look-back method of section 460(b)(2). To
foreign taxes not allocable to the Minimum Tax. the left of the entry space, write “From
beneficiaries (including charitable Form 8697” and the amount of interest due.
beneficiaries). Enter the fiduciary's share Line 5
of the credit on line 2a. See Publication Recapture taxes.—Figure the increase in Other Information
514, Foreign Tax Credit for Individuals, for tax allocable to the fiduciary on an
more information about the foreign tax Question 1.—If the estate or trust
attached Form 4255, Recapture of received tax-exempt income, figure the
credit. Investment Credit. Enter the tax on line 5. allocation of expenses between
Also, attach Form 8611, Recapture of tax-exempt and taxable income on a
Line 2b Low-Income Housing Credit, for any separate sheet and attach it to the return.
Credit for fuel produced from a recapture allocable to the fiduciary. Enter only the deductible amounts on the
nonconventional source.—If you claim return. Do NOT figure the allocation on
any section 29 credit for producing fuel Line 6
the return itself. For more information, see
from a nonconventional source, figure the Alternative minimum tax.—Estates and Publications 550 and 559.
credit on a separate sheet. Write “section trusts compute their alternative minimum Report the amount of tax-exempt
29 computation” on the separate sheet tax by determining distributable net interest income received or accrued in the
and attach it to the return. income on a minimum tax basis. space provided below Question 1.
Use Form 8656, Alternative Minimum Also, include any exempt-interest
Line 2c Tax–Fiduciaries, to compute: (1) the dividends the estate or trust received as a
General Business Credit.—Complete estate's or trust's alternative minimum shareholder in a mutual fund or other
this line if the estate or trust is claiming taxable income; (2) the income regulated investment company.
any of the credits listed below. Use the distribution deduction on a minimum tax Question 2.—See the instructions on
appropriate credit form to figure the credit, basis; and (3) the estate's or trust's page 4 and Publication 925, Passive
if the estate or trust is claiming only one alternative minimum tax. If the estate or Activity and At-Risk Rules, for a
credit, enter the form number in the space trust takes an income distribution discussion of the rules of passive activity
provided and the amount of the credit. deduction, be sure to attach Form 8656 to losses and credits. If you checked “Yes,”
Form 1041, regardless of whether the complete Form 8582, Passive Activity
If the estate or trust is claiming more estate or trust is liable for the alternative
than one credit, a credit from a passive Loss Limitations, to determine allowable
minimum tax. In computing distributable passive losses, and the amount of
activity, or a credit carryforward, also net alternative minimum taxable income
complete Form 3800, General Business carryforward of any “suspended” passive
(DNAMTI) of the estate or trust, no activity losses for the year.
Credit, to figure the total credit and enter deduction is allowed for any:
the amount from Form 3800 on line 2c. Question 3.—All salaries, wages, and
Also, be sure to check the box for Form (1) Miscellaneous itemized deduction other compensation for personal services
3800. (except for administration expenses of the must be included in the return of the
estate or trust); or person who earned the income, even
Do not include any amounts allocated (2) Taxes described in section though the income was irrevocably
to the beneficiary. 164(a)(1), (2), or (3) (State and local assigned to a trust by a contract
Form 3468, Investment Credit.—This income and property taxes). assignment or similar arrangement.
credit was generally repealed for property Additional adjustments may apply. The grantor or person creating the trust
placed in service after 1985. For is considered the owner if he or she
exceptions, see Form 3468. To determine the DNAMTI of the estate
or trust, both items of adjustment and keeps “beneficial enjoyment” of or
Form 5884, Jobs Credit.—If the estate or items of tax preference under sections 56, substantial control over the trust property.
trust operates a business that hires 57, and 58, must be taken into account. The trust's income, deductions, and
people who are members of special Some of these items include: credits are allocable to the owner.
targeted groups, it may qualify for this If you checked “Yes” for Question 3,
credit. Use Form 5884 to figure the • Accelerated depreciation
see the Specific Instructions for “Grantor
fiduciary's share of the credit. • Mining exploration and development
costs
Type Trust.”
Form 6478, Credit for Alcohol Used as Question 4.—Check the “Yes” box and
Fuel.—If the estate or trust sells straight • Installment sales of certain property enter the name of the foreign country if
alcohol (or an alcohol mixture) at retail or
uses it as fuel in a trade or business, it • Depletion either (1) or (2) below applies.
may be able to take a credit for the • Intangible drilling costs (1) At any time during the year the
estate or trust had an interest in or
alcohol used as fuel. Use Form 6478 to
figure the fiduciary's share of the credit.
• Tax-exempt interest from specified
private activity bonds
signature or other authority over a
financial account in a foreign country
Form 6765, Credit for Increasing
Research Activities.—The estate or trust
• Tax shelter farm losses (such as a bank account, securities
account, or other financial account).
may be able to take a credit for research • Passive activity losses.
Exception: Check “No,” if either of the
and experimental expenditures paid or See Publication 909, Alternative
Minimum Tax for Individuals, for more following applies to the estate or trust:
incurred in carrying on a trade or
business. Use Form 6765 to figure the information. • The combined value of the accounts
was $10,000 or less during the whole
fiduciary's share of the credit. Line 7 year; OR
Form 8586, Low-Income Housing Credit Interest on tax deferred under the
and Form 8609, Low-Income Housing
Credit Allocation Certification.—If the
installment method for certain • The accounts were with a U.S. military
banking facility operated by a U.S.
nondealer real property installment financial institution.
estate or trust owned a building that was obligations.—If an obligation arising from
part of a low-income housing project, it the disposition of real property to which (2) The estate or trust owns more than
may be able to take a credit. Use Form section 453A applies is outstanding at the 50% of the stock in any corporation that
8586, Schedule A (Form 8609), and Form close of the year, the estate or trust must owns one or more foreign bank accounts.
8609 to figure the fiduciary's share of the include the interest due under section Get Form TD F 90-22.1, Report of
credit. 453A(c) in the amount to be entered on Foreign Bank and Financial Accounts, to
Form 8826, Disabled Access Credit. line 7 of Schedule G, Form 1041, with the see if the estate or trust is considered to
notation “Section 453A(c) interest.” have an interest in or signature or other
Page 12
authority over a bank account, securities capacity leave this space blank. DO NOT Short-term or long-term.—Separate
account, or other financial account in a enter your individual social security your capital gains and losses according to
foreign country. number (SSN). how long the estate or trust held or owned
If you checked “Yes” for Question 4, file If you, as fiduciary, fill in Form 1041, the property. The holding period for
Form TD F 90-22.1 by June 30, 1991, the Paid Preparer's space should remain short-term capital gains and losses is one
with the Department of the Treasury at blank. If someone prepares this return year or less. The holding period for
the address shown on the form. Form TD and does not charge you, that person long-term capital gains and losses is more
F 90-22.1 is not a tax return, so do not file should not sign the return. than one year. Property acquired by a
it with Form 1041. decedent's estate from the decedent and
Generally, anyone who is paid to sold or otherwise disposed of within one
You may order Form TD F 90-22.1 prepare a tax return must sign the return
from an IRS Forms Distribution Center. year is considered as held for more than
and fill in the other blanks in the Paid one year.
Question 5.—An estate or trust that Preparer's Use Only area of the return.
transferred property to a foreign The person required to sign the return When you figure the length of the
corporation, foreign estate or trust, or must complete the required preparer period the estate or trust held property,
foreign partnership must file Form 926, information and: begin counting on the day after the estate
Return by a U.S. Transferor of Property to or trust acquired the property and include
a Foreign Corporation, Foreign Estate or • Sign it in the space provided for the
preparer's signature. A facsimile signature
the day the estate or trust disposed of it.
Trust, or Foreign Partnership, even if the Use the trade dates for the date of
is acceptable if certain conditions are met. acquisition and sale of stocks and bonds
transfer is nontaxable. Form 926 is also See Notice 89-48, 1989-1 C.B. 688.
used to pay any excise tax due under on an exchange or over-the-counter
section 1491. • Give you a copy of the return in
addition to the copy to be filed with IRS.
market.
Form 3520, Creation of or Transfers to Section 643(e)(3) election.—For
Certain Foreign Trusts, is used by the noncash property distributions a fiduciary
grantor of an inter vivos trust or the Instructions for Schedule D may elect to have the estate or trust
fiduciary of a testamentary trust, or the (Form 1041) Capital Gains recognize gain or loss in the same
transferor, to meet the reporting manner as if the distributed property had
requirements under section 6048 with and Losses been sold to the beneficiary at its fair
respect to transfers of money or property market value. This election applies to all
to a foreign trust, or the creation of a distributions made by the estate or trust
General Instructions during the tax year.
foreign trust.
File Schedule D (Form 1041) with Form
Form 3520-A, Annual Return of Foreign 1041 to report gains and losses from the Note that section 267 does not allow a
Trust With U.S. Beneficiaries, is required sale or exchange of capital assets by an deduction for any loss from the sale of
to be filed under section 6048(c) by any estate or trust. property on which a trust makes a section
U.S. person who directly or indirectly 643(e)(3) election. In addition, when a
transfers property to a foreign trust (with To report sales or exchanges of trust distributes depreciable property,
certain exceptions) that has one or more property other than capital assets, section 1239 applies to deny capital gains
U.S. beneficiaries. including the sale or exchange of property treatment on the gain to the trust if the
used in a trade or business and trust makes a section 643(e)(3) election.
Question 7.—Check the box for a involuntary conversions (other than
complex trust making the section 663(b) casualties and thefts), see Form 4797 and Section 644 tax on trusts.—If a trust
election to treat any amount properly paid related instructions. sells or exchanges property at a gain
or credited to a beneficiary within the first within 2 years after receiving it from a
65 days following the close of the tax year If property is involuntarily converted
because of a casualty or theft, use Form transferor, a special tax may be due: Do
as being properly paid or credited on the not include section 644 gains on
last day of the preceding tax year. 4684, Casualties and Thefts.
Schedule D. The tax is reported
Capital Asset.—Each item of property separately on Form 1041. For more
Question 8.—Section 643(e)(3) held by the estate or trust (whether or not
election.—To make the section 643(e)(3) information see the instructions for
connected with its trade or business) is a Schedule G, line 1b.
election to recognize gain on property capital asset except:
distributed in kind, check the box and see
the Instructions for Schedule D (Form • Inventoriable assets or property held
primarily for sale to customers;
Transfer of appreciated property to a
political organization.—If an estate or
1041). trust transfers property to a political
Question 9.—Check the box if the • Depreciable or real property used in a
trade or business;
organization as defined in section
decedent's estate has been open for more 527(e)(1), and if at the time of the transfer
than two years and attach an explanation • Certain copyrights, literary, musical, or
artistic compositions, letters or
the fair market value of the property is
more than the adjusted basis, treat the
for the delay in closing the estate.
memorandums or similar property; transfer as a sale of property on the date
Question 10.—Check the box if the trust
participates in a Common Trust Fund that • Accounts or notes receivable acquired
in the ordinary course of a trade or
of transfer. Report the fair market value of
the property at the time of transfer as the
was required to change its tax year in sale price. Ordinary income or capital gain
1988. Also, be sure to see “Participants in business for services rendered or from
the sale of inventoriable assets or provisions apply as if a sale had actually
Common Trust Funds” on page 3 for occurred. For more information, see
additional amounts that may be required property held primarily for sale to
customers; and section 84 and Publication 559.
to be included in income.

Signature
• Certain U.S. Government publications
not purchased at the public sale price.
Exchange of “like-kind” property.—
Generally no gain or loss is recognized
You may find additional helpful when property held for productive use in a
Form 1041 must be signed by the trade or business or for investment is
fiduciary or by an authorized information in the following publications
that are available from the Internal exchanged solely for property of a
representative. “like-kind” to be held either for productive
Revenue Service:
Financial institutions that submitted use in a trade or business or for
estimated tax payments for trusts for Publication 559, Tax Information for investment. However, if a trust exchanges
which they are the trustee must enter their Survivors, Executors, and Administrators. “like-kind” property with a “related person”
Employer Identification Number (EIN) in Publication 537, Installment Sales. (see discussion below), and before two
the space provided. Do not enter the EIN years after the date of the last transfer
of the trust. For this purpose a financial Publication 544, Sales and Other which was part of the exchange the
institution is one which maintains a Dispositions of Assets. related person disposes of the property or
Treasury Tax and Loan account. Publication 550, Investment Income and the trust disposes of the property received
Note: If you are an attorney or other Expenses. in exchange from the related person, then
individual functioning in a fiduciary Publication 551, Basis of Assets. the original exchange
Page 13
will not qualify for nonrecognition. See Redemption of stock to pay death If you file Form 6252, enter on
section 1031(f) for exceptions. taxes.—If stock is redeemed under the Schedule D (Form 1041), line 2, the
Report on Schedule D (or Form 4797, provisions of section 303, list and identify short-term capital gain from installment
whichever applies) the exchange of it on line 7 and give the name of the sales from Form 6252. Enter on Schedule
like-kind property, even if no gain or loss decedent and the IRS office where the D (Form 1041), line 8, the long-term
is recognized. Also complete and attach estate tax or generation-skipping transfer capital gain from installment sales from
Form 8824, Like-Kind Exchanges. To tax return was filed. Form 6252.
identify the exchange, in column (a) write If you are reporting capital gain from a
“From Form 8824.” lump-sum distribution, see the instructions Line 5
Skip columns (b) through (e). Enter the for Form 4972 for information about the Short-term capital loss carryover.—
gain or loss, if any, from Form 8824 in death benefit exclusion and the Federal Enter the amount from line 28 of your
column (f) and write “Like-Kind Exchange” estate tax. retained copy of your 1989 Schedule D
(or if the exchange involved a related Column (d). Gross sales price.—Enter (Form 1041).
party, write “Related Party Like-Kind the selling price of the property sold.
Exchange”) across the top margin of Line 10
Column (e). Cost or other basis, as Capital gain distributions.—Enter any
Schedule D. adjusted, plus expense of sale.—Enter
Related persons.—A trust cannot deduct amounts shown on Form 2439, Notice to
the cost or adjusted basis of the property Shareholder of Undistributed Long-Term
a loss from the sale or exchange of sold or exchanged, plus any expense of
property directly or indirectly between any Capital Gains, that represent the estate's
sale, such as broker's fees, commissions, or trust's share of the undistributed capital
of the following: etc. Note: See section 852(f) for gains of a regulated investment company.
• A grantor and a fiduciary of a trust, treatment of load charges incurred in Include on Form 1041, line 24f, the tax
• A fiduciary and a fiduciary or
beneficiary of another trust created by the
acquiring stock in a regulated investment
company.
paid by the company as shown on Form
2439. To the basis of the stock, add the
same grantor, The basis of property acquired from, or excess of the amount included in income
• A fiduciary and a beneficiary of the
same trust,
passing from, a decedent is generally the
fair market value at the date of death. For
over the credit if the amount is not
distributed.
more information, see Publication 551,
• A trust fiduciary and a corporation of
which more than 50% in value of the Publication 559, and section 1014. Line 13
outstanding stock is owned directly or For an election under section 2032A Long-term capital loss carryover.—
indirectly by or for the trust or by or for the (special valuation for farm or business Enter the amount from line 35 of the
grantor of the trust. real property), use the rules of section retained copy of your 1989 Schedule D
2032A to determine basis. See section (Form 1041).
Items for Special Treatment.—The 1040 for amount of gain to be recognized
following items may require special by the estate.
treatment: Line 15, column (a)
Carryover basis determined under Net short-term capital gain or loss
• Wash sales of stock or securities
(section 1091).
repealed section 1023 applies to property allocated to beneficiaries.—Enter the
acquired from a decedent who died after amount of net short-term capital gain or
• Gain or loss on options to buy or sell
(section 1234).
December 31, 1976, and before
November 7, 1978, only if the executor
loss allocable to the beneficiary or
beneficiaries. Include only those
elected it on a Form 5970-A, Election of
• Certain real estate subdivided for sale
which may be considered a capital asset Carryover Basis, that was filed on time.
short-term capital losses that are taken
into account in determining the amount of
(section 1237). The basis of property acquired by gifts gain from the sale or exchange of capital
assets that is paid, credited, or required to
• Gain on disposition of stock in an
Interest Charge Domestic International
made before January 1, 1977, generally is
the basis of the property in the hands of be distributed to any beneficiary during
Sales Corporation (section 995(c)). the donor plus any gift tax paid. For gifts the tax year. See Publication 559 and
Regulations section 1.643(a)-3 for more
• Gain on the sale or exchange of stock
in certain foreign corporations (section
made after December 31, 1976, only part
of the gift tax may be added to the basis information about allocation of capital
of the property in the hands of the donor. gains and losses.
1248).
See Publication 448 and section 1015 for
• Gain on the sale of qualified reinvested
dividends from a qualified public utility.
more information. Line 15, column (b)
See Publication 550 for details. For any debt instrument having original Net short-term capital gains or loss
issue discount issued after July 1, 1982, allocated to the fiduciary.—Enter the
• Loss on sale, exchange, or
worthlessness of small business stock the basis is increased by the amount of amount of the net short-term capital gain
original issue discount that has been or loss allocable to the fiduciary. Include
(section 1244 stock). any capital gain paid or permanently set
included in gross income. See Publication
• Distributions received from an
employee pension, profit-sharing, or stock
550. aside for the charitable purpose specified
in section 642(c).
bonus plan. See Form 4972. Attach an explanation if the basis used
is other than the actual cash cost of the Except for the final year of an estate or
Disposition of market discount bonds.— property. trust, if the losses from the sale or
See section 1276 for rules on the exchange of capital assets are more than
disposition of any market discount bonds the gains, all of the losses are allocated to
that were issued after July 18, 1984. Lines 2 and 8 the fiduciary and none are allocated to the
Installment sales.—If you sold estate or beneficiaries. For more information, see
Section 1256 Contracts and Publication 559.
Straddles.—Use Form 6781, Gains and trust property at a gain this year and are
Losses From Section 1256 Contracts and to receive any payment in a later tax year,
use the installment method and file Form Line 15, column (c)
Straddles, to report gains or losses from
section 1256 contracts or straddles that 6252, Installment Sale Income, unless Total.—Enter the total of the amounts
you held during the tax year. See you elect not to. entered in columns (a) and (b). The
Publication 550. Also use Form 6252 if you received a amount in column (c) should be the same
payment in 1990 from a sale made in an as the amount on line 6.
Line-by-Line Instructions earlier year on the installment basis.
Line 16
If you elect not to use the installment
Lines 1 and 7 method and are reporting a note or other Net long-term capital gain or loss.—
Short-term and long-term capital gains obligation at less than full face amount, Treat the net long-term capital gain or
and losses.—Enter all sales of stocks, state that fact in the margin and give the loss on line 16 the same as the net
bonds, etc. percentage of valuation. short-term capital gain or loss on line 15.
Page 14
Part IV. Computation of Capital Loss 665 and 667(c) for exceptions relating to 1968, in which there is undistributed net
Limitation.—If the sum of all the capital multiple trusts. The trustee reports to IRS income. Then it is thrown back beginning
losses is more than the sum of all the the total amount of the accumulation with the next earliest year to any
capital gains, then these capital losses distribution before any reduction for remaining preceding tax years of the trust.
are allowed as a deduction only to the income accumulated before the The portion of the accumulation
extent of the smaller of the net loss or beneficiary becomes age 21. Then the distribution allocated to the earliest
$3,000. beneficiary claims the exclusion when preceding tax year is the amount of the
Part V. Computation of Capital Loss filing Form 4970, Tax on Accumulation undistributed net income for that year.
Carryovers from 1990 to 1991.—For any Distribution of Trusts, if the multiple trust The portion of the accumulation
year (including the final year) in which rules do not apply. This is because one distribution allocated to any remaining
capital losses exceed capital gains, trustee may be unaware that the preceding tax year is the amount by which
complete Part V to figure the capital loss beneficiary may be a beneficiary of other the accumulation distribution is larger
carryover. A capital loss carryover may be trusts with other trustees. than the total of the undistributed net
carried forward indefinitely. Capital losses There are examples of accumulation income for all earlier preceding tax years.
keep their character as either short-term distributions in Regulations section A tax year of a trust during which the trust
or long-term when carried over to the 1.665(b)-1A(b) that include: (1) payments was a simple trust for the entire year is
following year. To the extent the capital from one trust to another trust, and (2) not a “preceding tax year” unless: (1)
loss subject to the limitation is deducted amounts distributed for a dependent's during that year the trust received
from ordinary income, consider the net support. “outside income” or (2) the trustee did not
short-term capital loss as deducted first. distribute all of the income of the trust that
Part II.—Ordinary Income was required to be distributed currently for
Accumulation Distribution that year. In this case, undistributed net
Instructions for Schedule J income for that year must not be more
Line 6 than the greater of the “outside income” or
(Form 1041) Trust Allocation income not distributed during that year.
of an Accumulation Distributable net Income for earlier The term “outside income” means
years.-Enter the applicable amounts as amounts that are included in DNI of the
Distribution (Section 665) follows: trust for that year but that are not
Throwback year(s) Amount from line “income” of the trust as defined in
1969-1977 . . Schedule C (Form 1041), line 5 Regulations section 1.643(b)-1. Some
General Instructions examples of “outside income” are: (1)
1978-1979 . . . . . . Form 1041, line 61
Purpose of Form.—File Schedule J income taxable to the trust under section
(Form 1041) with Form 1041 to report an 1980 . . . . . . . . Form 1041, line 60
691, (2) unrealized accounts receivable
accumulation distribution by a domestic 1981-1982 . . . . . . Form 1041, line 58 that were assigned to the trust, and (3)
complex trust. 1983-1989 . . Schedule B (Form 1041), line 9 distributions from another trust that
For information about throwback years, include DNI or undistributed net income of
Line-by-Line Instructions see the instructions for line 13. For the other trust. Enter the applicable year
purposes of line 6 of Schedule J, in figuring at the top of each column for each
Part I.— Accumulation Distribution throwback year.
in 1990 the DNI of the trust for a throwback year,
Line 1 subtract any estate tax deduction for Line 16
income in respect of a decedent if the
Distribution under section 661(a)(2).— income is includible in figuring the DNI of Tax-exempt interest included on line
Enter the amount from Schedule B (Form the trust for that year. 13.—For each throwback year, divide line
1041), line 12, for 1990. This is the 15 by line 6 and multiply the result by one
amount properly paid, credited, or Line 7 of the following:
required to be distributed other than the Throwback year(s) Amount from line
amount of income for the current tax year Distributions made during earlier
required to be distributed currently. years.—Enter the applicable amounts as 1969-1977 . Schedule C (Form 1041), line 2(a)
follows: 1978-1979 . . . . . Form 1041, line 58(a)
Line 2 Throwback year(s) Amount from line 1980 . . . . . . . Form 1041, line 57(a)
Distributable net income.—Enter the 1969-1977. . . Schedule C (Form 1041), line 8 1981-1982 . . . . . Form 1041, line 55(a)
amount from Schedule B (Form 1041), 1978 . . . . . . . . Form 1041, line 64 1983-1989 . Schedule B (Form 1041), line 2
line 9, for 1990. This is the amount of 1979 . . . . . . . . Form 1041, line 65
distributable net income (DNI) for the
current tax year determined under section 1980 . . . . . . . . Form 1041, line 64 Part III .—Taxes Imposed on
643(a). 1981-1982 . . . . . . Form 1041, line 62 Undistributed Net Income
1983-1989 . Schedule B (Form 1041), line 13 Note: The alternative tax on capital gains
Line 3 was repealed for tax years beginning after
Distribution under section 661(a)(1).— Line 11 December 31, 1978. Neither the 1981 nor
Enter the amount from Schedule B (Form Prior accumulation distribution thrown 1987 maximum rate on net capital gains
1041), line 11, for 1990. This is the back to any throwback year.—Enter the is an alternative tax for this purpose.
amount of income for the current tax year amount of prior accumulation distributions
required to be distributed currently. For the regular tax computation, if there
thrown back to the throwback years. Do is a capital gain, complete lines 18 through
Line 5 not enter distributions excluded under 25 for each throwback year. If the trustee
section 663(a)(1) for gifts, bequests, etc. elected the alternative tax on capital gains,
Accumulation distribution.—Subtract
line 4 from line 1. If Schedule B (Form Line 13 complete lines 26 through 31 instead of
1041), line 13, is more than Schedule B lines 18 through 25 for each applicable
(Form 1041), line 10, complete the rest of Throwback years.—Allocate the amount year. (If there is no capital gain for any year
Schedule J and file it with Form 1041, on line 5 that is an accumulation (or there is a capital loss for every year),
unless the trust has no previously distribution to the earliest applicable year enter on line 9 the amount of the tax for
accumulated income. first, but do not allocate more than the each year identified in the instruction for
amount on line 12 for any throwback year. line 18; do not complete Part III.) If the trust
Generally, amounts accumulated before An accumulation distribution is thrown
a beneficiary becomes age 21 may be received an accumulation distribution from
back first to the earliest preceding tax another trust, see the regulations under
excluded by the beneficiary. See sections year beginning after December 31, sections 665 through 668.

Page 15
A. Regular Tax Computation B. Alternative Tax on Capital Gain the beneficiary's share of income from the
estate or trust.
Line 18 Line 26 Who Must File.—The fiduciary (or one of
Tax.—Enter the applicable amounts as Tax on income other than long-term the joint fiduciaries) must file Schedule
follows: capital gain.—Enter the applicable K-1. A copy of each beneficiary's
Throwback year(s) Amount from line amounts as follows: Schedule K-1 is attached to the Form
1041 filed with the IRS and each
1969-1976 . . . . Form 1041, page 1, line 24 Throwback year(s) Amount from line beneficiary is given a copy of his or her
1977 . . . . . . Form 1041, page 1, line 26 1969 . . . . . . . . Schedule D, line 20 respective Schedule K-1. One copy of
1978-1979 . . . . . . Form 1041, line 27 1970 . . . . . . . . Schedule D, line 19 each Schedule K-1 must be retained for
1980-1984 . . . . . . Form 1041, line 26c 1971 . . . . . . . . Schedule D, line 50 the fiduciary's records.
1985-1986 . . . . . . Form 1041, line 25c 1972-1975 . . . . . . Schedule D, line 48 Beneficiary's identifying number.—As
1987 . . . . . . . . Form 1041, line 22c a payer of income, you are required under
1976-1978 . . . . . . Schedule D, line 27
section 6109 to request and provide a
1988-1989 . . . . . . Form 1041, line 23 proper identifying number for each
Line 27 recipient of income. Enter the
Line 19 Net short-term gain taxable to the beneficiary's number on the respective
Net short-term gain allocated to trust.—If there is a loss on any of the Schedules K-1 when you file your return.
trust.—For each throwback year, enter following lines, enter zero on line 27 for Individuals and business recipients are
the smaller of the capital gain from the the applicable throwback year. Otherwise, responsible for giving you their taxpayer
two lines indicated; if there is a capital enter the applicable amounts as follows: identification numbers upon request. You
loss or a zero on either or both of the two Throwback year(s) Amount from line may use Form W-9, Request for
lines indicated, enter zero on line 19. 1969-1970 . . . Schedule D, line 10, column 2
Taxpayer Identification Number and
Throwback year(s) Amount from line Certification, to request the beneficiary's
1971-1978 . . . Schedule D, line 14, column 2 identifying number.
1969-1970 . Schedule D, line 10, column 2, or
Schedule D, line 12, column 2. Line 28 Penalty.—Under section 6723, the payer
1971-1978 . Schedule D, line 14, column 2, or is charged a $50 penalty for each failure
Schedule D, line 16, column 2. Total taxable income less section 1202 to provide a required taxpayer
1979. . . . Schedule D, line 18, column (b), or deduction for capital gain allocated to
Schedule D, line 20, column (b). identification number, unless reasonable
Schedule D, line 14, column (b), or the trust.—Enter the applicable amounts cause is established for not providing it. If
1980-1981 . as follows:
Schedule D, line 16, column (b). reasonable cause exists, please explain
1982 . . . Schedule D, line 16, column (b), or
Schedule D, line 18, column (b). Throwback year(s) Amount from line in a signed affidavit and attach to this
1983-1989 . Schedule D, line 15, column (b), or 1969 . . . . . . . . Schedule D, line 19 return.
Schedule D, line 17, column (b).
1970 . . . . . . . . Schedule D, line 18 Tax shelter's identification number.—If
Line 20 1971 . . . . . . . . Schedule D, line 38 the estate or trust is a tax shelter, is
Net long-term gain taxable to the 1972-1975 . . . . . . Schedule D, line 39
involved in a tax shelter, or is considered
trust.—Enter the applicable amounts as to be the organizer of a tax shelter, there
1976-1978 . . . . . . Schedule D, line 21 are reporting requirements under section
follows:
Throwback year(s) Amount from Line 6111 for both the fiduciaries and the
Part IV.—Allocation to Beneficiary beneficiaries.
1969-1970 . . . . 50% of Schedule D, line 13(e)
1971-1977 . . . . 50% of Schedule D, line 17(e) Complete Part IV for each beneficiary. If See Form 8264, Application for
the accumulation distribution is allocated Registration of a Tax Shelter, and Form
Schedule D, line 17(e) or line 31,
. . . . . .
1978 whichever is applicable, less to more than one beneficiary, attach an 8271, Investor Reporting of Tax Shelter
Form 1041, line 23. additional copy of Schedule J with Part IV Registration Number, and their related
Schedule D, line 25 or 27, completed for each additional beneficiary. instructions for information regarding the
. . . . . .
1979 whichever is applicable, less Give each beneficiary a copy of his or her fiduciary's reporting requirements.
Form 1041, line 23.
respective Part IV information. If more Substitute forms.—You do not need
Schedule D, line 21, less than five throwback years are involved,
1981-1981 . . . . Schedule D, line 22. prior IRS approval for a substitute
attach additional schedules. Schedule K-1 (Form 1041) that follows
1982 . . . . . . Schedule D, line 23, less
Schedule D, line 24. If the beneficiary is a nonresident alien the specifications in Publication 1167 or is
Schedule D, line 22, less individual or a foreign corporation, see an exact copy of an IRS Schedule K-1.
1983-1986 . . . . Schedule D, line 23. section 667(e) about retaining the Other substitute Schedules K-1 require
character of the amounts distributed to approval. You may apply for approval of a
Schedule D, the smaller
1987-1989 . . . . of any gain on line 16 or determine the amount of the United substitute form by writing to: Internal
17, column (b). States withholding tax. Revenue Service; Attention: Substitute
Line 22 Forms Program Coordinator, R:R:R; 1111
The beneficiary uses Form 4970 to Constitution Ave. NW; Washington, DC
Total taxable Income.—Enter the compute the tax on the distribution. The
applicable amounts as follows: 20224.
beneficiary also uses Form 4970 for the
section 667(b)(6) tax adjustment if an Beneficiary's income.—If no special
Throwback year(s) Amount from line computations are required, use the
accumulation distribution is subject to
1969-1976 . . . Form 1041, page 1, line 23 estate or generation-skipping transfer tax. following instructions to compute the
1977 . . . . . Form 1041, page 1, line 25 This is because the trustee may not be beneficiary's income from the estate or
1978-1979 . . . . . . Form 1041, line 26 the estate or generation-skipping transfer trust. In other cases, see Publication 559
tax return filer. and sections 652, 662, and 663, and
1980-1984 . . . . . . Form 1041, line 25 related regulations. For example, special
1985-1986 . . . . . . Form 1041, line 24 computations are required for capital
1987 . . . . . . . . Form 1041, line 21 gains and losses or a charitable
1988-1989 . . .
Instructions for Schedule K-1 deduction. In addition, the terms of the
. . . Form 1041, line 22
(Form 1041) Beneficiary's governing instrument or local law may
Share of Income, Deductions, require different computations.
Credits, Etc. Income.—The beneficiary must include in
gross income the smaller of: (1) the
amounts paid, credited, or required to be
General Instructions distributed; or (2) the proportionate share
of distributable net income, reduced in
Purpose of Form.—File Schedule K-1 either case by the share of distributable
(Form 1041) with Form 1041 to report tax-exempt income minus the allocable
Page 16
expense not allowable as a deduction on Beneficiary's tax year.—The directly. These deductions may also be
Form 1041. beneficiary's income from the estate or eligible for the phase-in rules of section
Character of Income.—The beneficiary's trust must be included in the beneficiary's 469(m).
income is considered to have the same tax year during which the tax year of the
estate or trust ends. See Publication 559 If there is more than one activity, one
proportion of each class of items entering or more of which is a passive activity,
into the computation of DNI that the total for more information including the effect of
the death of a beneficiary during the tax income and deductions are to be shown
of each class has to the DNI (for example, separately for each activity on an
half dividends and half interest if the year of the estate or trust.
attached schedule.
entity's income is half dividends and half
interest). Line-by-Line Instructions Line 4a
Allocation of deductions.—Generally, Other taxable income.—Use the first
items of deduction that enter into the Line 1
Interest.—Enter the beneficiary's share of entry to report the beneficiary's share of
computation of DNI are to be allocated annuities, royalties, or any other income
among the items of income to the extent the taxable interest income.
that is NOT subject to any passive activity
such allocation is not inconsistent with the loss limitation rules at the beneficiary
rules set out in section 469 and the Line 2
level. You may use lines 4a(1)–(3) to
regulations thereunder, relating to passive Dividends.—Enter the beneficiary's share report income items that could be subject
activity loss limitations, in the following of dividend income. to the passive activity rules at the
order. beneficiary's level.
First, all deductions directly attributable Line 3a
to one class of income are deducted from Net short-term capital gain.—Enter the To assist the beneficiary in computing
that income. For example, rental beneficiary's share of the net short-term any applicable passive activity loss
expenses, to the extent allowable, are capital gain. Do not enter a loss for any limitations, also attach a separate
deducted from rental income. year before the final year of the estate or schedule showing the beneficiary's share
trust, If, for the final year, there is a capital of income derived from: (a) rental; (b)
Second, deductions which are not rental real estate; and (c) business
directly attributable to one class of loss carryover, enter on line 12c the
beneficiary's share of short-term capital activities.
income, such as fiduciary fees, may be
allocated to any class of income, as long loss carryover as a loss in parentheses.
However, if the beneficiary is a Line 4b
as a reasonable portion is allocated to
any tax-exempt income. corporation, enter the beneficiary's share Depreciation (Including cost
of all short- and long-term capital loss recovery).—Enter the beneficiary's share
Finally, any excess deductions which carryovers as a single item in of the depreciation deductions attributable
are directly attributable to a class of parentheses. See Publication 559 and to each activity reported on lines 4a(1)–
income may be allocated to another class section 642(h) and related regulations for (3). See the instructions for line 4 on page
of income. In no case can excess more Information. 6 for a discussion of the allocation of the
deductions from a passive activity be depreciation deduction between the
allocated to income from a non-passive Line 3b beneficiaries and the estate or trust.
activity, or to portfolio income earned by Net long-term capital gain.—Enter the Report any tax preference attributable to
the estate or trust. Excess deductions beneficiary's share of the net long-term depreciation separately on line 11a.
attributable to tax-exempt income cannot capital gain. Do not enter a loss for any Note: An estate or trust cannot make an
offset any other class of income. year before the final year of the estate or election under section 179 to expense
In no case can deductions be allocated trust. If, for the final year, there is a capital certain tangible property.
to an item of income that is not included in loss carryover, enter on line 12d the
the computation of DNI, or attributable to beneficiary's share of the long-term Line 4c
corpus. capital loss carryover as a loss in Depletion.—Enter the beneficiary's share
Except for the final year and for parentheses. (If the beneficiary is a of depletion deduction under section 611
depreciation or depletion allocations in corporation, see the instructions for line attributable to each activity reported on
excess of income (see Rev. Rul. 74-530, 3a.) See Publication 559 and section lines 4a(1)–(3). See the instructions for
1974-2 C.B. 188), you may not show any 642(h) and related regulations for more line 4 on page 6 for a discussion of the
negative amounts for any class of income information. allocation of the depletion deduction
because the beneficiary generally may Gains, or losses, from the complete, or between the beneficiaries and the estate
not claim losses or deductions from the partial, disposition of a rental, rental real or trust. Report any tax preference
estate or trust. estate, or trade or business activity that is attributable to depletion separately on line
a passive activity, must be shown as an 11b.
Allocation of credits.—In general, the attachment to Schedule K-1.
estate or trust or the beneficiaries may Line 4d
claim applicable tax credits according to Lines 4a through 4d.—Caution: The
how the income is divided. For more limitations on passive activity losses and Amortization deductions.—Itemize the
information, see Form 3800. credits under section 469 apply to estates beneficiary's share of the amortization
and trusts. Estates and trusts that deductions attributable to each activity
Also, see Form 8582-CR, Passive distribute income to beneficiaries are reported on lines 4a(1)–(3). Divide the
Activity Credit Limitations, for rules on allowed to allocate depreciation, amortization deductions between the
credits from passive activities. depletion, and amortization deductions to fiduciary and the beneficiaries in the same
Gifts and bequests.—Do not include in the beneficiaries. These deductions are way that the depreciation and depletion
the beneficiary's income any gifts or referred to as “directly allocable deductions are divided. Report any tax
bequests of a specific sum of money or of deductions.” preference attributable to amortization
specific property under the terms of the The rules for treating a beneficiary's separately on line 11c.
governing instrument that are paid or income and directly allocable deductions
credited in three installments or less. Line 5
from an estate or trust and other rules for
Amounts that can be paid or credited applying the passive loss and credit Income for minimum tax purposes.—
only from income of the estate or trust do limitations to beneficiaries will be provided Enter the beneficiary's share of the
not qualify as a gift or bequest of a in future regulations. income distribution deduction computed
specific sum of money. Any directly allocable deduction, such on a minimum tax basis from line 27 of
as depreciation, is treated by the Form 8656.
Past years.—Do not include in the
beneficiary's income amounts deducted beneficiary as having been incurred in the Line 7
on Form 1041 for an earlier year that same activity as incurred by the estate or
trust. However, the character of such Adjustment for minimum tax
were credited or required to be distributed purposes.—To assist the beneficiary in
in that earlier year. deduction may be determined as if the
beneficiary incurred the deduction computing the correct credit for prior year
Page 17
minimum tax, enter the beneficiary's NOL carryover is not available to a fund or other regulated investment
share of this adjustment that is beneficiary as an excess deduction and company),
attributable to exclusion items (lines 4e
and 6d of form 8656) separately on line
should be entered on line 12. However, if • short-term capital loss carryover,
12.
the last tax year of the estate or trust is
also the last year in which an NOL • long-term capital loss carryover,
carryover may be taken (see section • gross farming and fishing income,
Line 8
Estate tax deduction (including
172(b)), then the NOL carryover is
considered an excess deduction on the
• credit for backup withholding (section
3406),
generation-skipping transfer taxes).— termination of the entity to the extent it is • investment income (section 163(d)),
Enter the beneficiary's share of not absorbed by the estate or trust during • qualified rehabilitation expenditure,
deductions. Figure the deductions on a
separate sheet and attach the sheet to
its final tax year. For more information,
see Publication 559, section 642(b), and • low-income housing credit,
this return. See Publication 448 and the related regulations. • the jobs credit,
section 691(c) and related regulations for • the alcohol fuel credit,
information on how to figure these Line 10 • the increased research credit,
deductions. Foreign taxes.—List on a separate sheet
the beneficiary's share of the applicable
• the information a beneficiary will need
to refigure an earlier year investment
Line 9 foreign taxes paid or accrued and the credit,
Excess deductions on termination.—If
this is the final return and there are
various foreign source figures needed to
compute the beneficiary's foreign tax • the information a beneficiary will need
to compute any recapture taxes, and
excess deductions on termination or a net credit. See Publication 559, Publication
operating loss carryover, then enter the 514, section 642(a), and related • exclusion items from AMT adjustment.
Unused capital loss carryover.—Upon
beneficiary's share of the excess regulations for special rules about foreign
deductions on line 9. taxes. termination of the estate or trust the
beneficiary succeeding to the property is
(a) Excess Deductions. Excess allowed as a deduction any unused
deductions on termination occur only Line 11
capital loss carryover under section 1212.
during the last taxable year of the estate Tax preference items.—Enter any If the estate or trust incurs capital losses
or trust when the total deductions (other minimum tax adjustments or tax in the final year, use Part V of Schedule D
than the deductions allowed under section preference items attributable to (Form 1041) to compute the amount of
642(b) (relating to the exemption depreciation, depletion, or amortization capital loss carryover to be allocated to
amount)) or section 642(c) (relating to the that were allocated to the beneficiary. For the beneficiary.
charitable contributions) are greater than property placed in service before 1987,
the gross income during that tax year. Unused net operating loss carryover.—
report separately the accelerated Upon termination of an estate or trust, a
Figure the deductions on a separate depreciation of real and leased personal
sheet and attach to the form. beneficiary succeeding to its property is
property. allowed to deduct any unused net
Only the beneficiary of an estate or operating loss (NOL) carryover. Enter on
trust that succeeds to its property is Line 12 line 12 the unused carryover amount and
allowed to deduct that entity's excess Other.—Itemize on line 12 or on a write “NOL CARRYOVER” (see line 9
deductions on termination. A beneficiary separate sheet the beneficiary's tax instructions) to the left of the figure.
who does not have enough income in that information for which there is no other line
year to absorb the entire deduction may on Schedule K-1. This includes the Note: Upon termination of an estate or
not carry the balance over to any allocable share, if any, of: trust, any suspended passive activity
losses (PALS) relating to an interest in a
succeeding year. An individual beneficiary
must be able to itemize deductions in
• overpayment of estimated tax to be
credited to the beneficiary (section
passive activity cannot be distributed to
order to claim the excess deductions in the beneficiary. Instead, the basis in such
643(g)). activity is increased by the amount of any
determining taxable income.
(b) Net Operating Loss (NOL) Carryover.
• tax-exempt interest realized by the trust
(including exempt-interest dividends
PALS allocable to the interest, and no
losses are allowed as a deduction on the
Generally, a deduction based upon an received as a shareholder in a mutual estate's or trust's final Form 1041.

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