Instructions for IRS Form 1041 Schedule a, B, G, J, and K-1 - U.S. Income Tax Return for Estates and Trusts 2018

January 1, 2018 "Instructions For Irs Form 1041 Schedule A, B, G, J, And K-1 - U.s. Income Tax Return For Estates And Trusts" contain the updated filing procedures for the IRS-issued Form 1041. Download your copy of the instructions by clicking the link below.

IRS Form 1041 is tax form released and collected by the Internal Revenue Service of the United States.

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2018
Department of the Treasury
Internal Revenue Service
Instructions for Form 1041
and Schedules A, B, G, J,
and K-1
U.S. Income Tax Return for Estates and Trusts
administration of an estate or a
Section references are to the Internal Revenue
Contents
Page
Code unless otherwise noted.
non-grantor trust that would not have
Schedule B—Income Distribution
been incurred if the property were not
Deduction . . . . . . . . . . . . . . .
28
Contents
Page
held in such estate or trust. See
Notice
Schedule G—Tax Computation . . . .
30
What's New . . . . . . . . . . . . . . . . . .
1
2018-61
for more information. Also see
Net Investment Income Tax . . . . . . .
33
Reminders . . . . . . . . . . . . . . . . . . .
2
Regulations section 1.67-4 for costs that
Other Information . . . . . . . . . . . . .
33
Photographs of Missing Children . . . .
2
are commonly or customarily incurred
Schedule J (Form 1041) —
Unresolved Tax Issues . . . . . . . . . . .
3
by an individual.
Accumulation Distribution for
How To Get Forms and
Certain Complex Trusts . . . . . .
34
Publications . . . . . . . . . . . . . . .
3
Section 965 deferred foreign in-
Schedule K-1 (Form 1041)—
General Instructions . . . . . . . . . . . . .
3
come. If you own (directly or indirectly)
Beneficiary's Share of
certain foreign corporations, you may
Purpose of Form . . . . . . . . . . . . . . .
3
Income, Deductions, Credits,
etc. . . . . . . . . . . . . . . . . . . .
36
have to include on your return certain
Income Taxation of Trusts and
Decedents' Estates . . . . . . . . . .
3
deferred foreign income. You may pay
Index . . . . . . . . . . . . . . . . . . . . .
43
Abusive Trust Arrangements . . . . . . .
3
the entire amount of tax due with
Future Developments
Definitions . . . . . . . . . . . . . . . . . . .
4
respect to this deferred foreign income
Who Must File . . . . . . . . . . . . . . . .
5
this year or elect to make payment in
For the latest information about
Electronic Filing . . . . . . . . . . . . . . .
8
eight installments or in the case of
developments related to Form 1041 and
When To File . . . . . . . . . . . . . . . . .
8
certain stock owned through an S
Schedules A, B, G, J, K-1 and its
corporation, elect to defer payment until
Period Covered
. . . . . . . . . . . . . . .
8
instructions, such as legislation enacted
occurrence of a triggering event. See
Where To File . . . . . . . . . . . . . . . . .
9
after they were published, go to
the instructions for Lines 24 and 25f;
Who Must Sign . . . . . . . . . . . . . . . .
8
IRS.gov/Form1041.
Form 965; and Form 965-A.
Accounting Methods . . . . . . . . . . . .
9
What's New
Accounting Periods . . . . . . . . . . . . .
9
Qualified business income deduc-
Rounding Off to Whole Dollars . . . . . .
9
tion. For tax years beginning after
Expired tax benefits. At the time
Estimated Tax . . . . . . . . . . . . . . .
10
2017, taxpayers other than corporations
these instructions went to print, several
Interest and Penalties . . . . . . . . . . .
10
may be entitled to a deduction of up to
credits and deductions available to
Other Forms That May Be
20% of their qualified business income
estates and trusts expired December
Required . . . . . . . . . . . . . . . .
11
from a qualified trade or business plus
31, 2017. To find out if legislation
Additional Information
. . . . . . . . . .
12
20% of the aggregate amount of
extended these credits and deductions
Assembly and Attachments . . . . . . .
12
qualified real estate investment trust
and made them available for 2018, go to
Special Reporting Instructions . . . . .
13
(REIT) dividends and qualified publicly
IRS.gov/Extenders.
Specific Instructions . . . . . . . . . . . .
17
traded partnership income. The
Name of Estate or Trust . . . . . . . . .
17
Due date of return. File Form 1041 by
deduction is subject to multiple
April 15, 2019. If the estate or trust is
Name and Title of Fiduciary . . . . . . .
17
limitations such as the type of trade or
located in Maine or Massachusetts, you
Address . . . . . . . . . . . . . . . . . . .
17
business, the taxpayer's taxable
have until April 17, 2019, because of the
A. Type of Entity . . . . . . . . . . . . . .
17
income, the amount of W-2 wages paid
Patriots’ Day holiday in those states and
B. Number of Schedules K-1
with respect to the qualified trade or
Attached . . . . . . . . . . . . . . . .
18
the Emancipation Day holiday in the
business, and the unadjusted basis
C. Employer Identification
District of Columbia.
immediately after acquisition (UBIA) of
Number . . . . . . . . . . . . . . . . .
18
qualified property held by the trade or
Address change for filing returns.
D. Date Entity Created . . . . . . . . . .
18
business. For more information, see
The filing address for estates or trusts
E. Nonexempt Charitable and
section 199A, Form 1040 Instructions,
located in certain states has changed.
Split-Interest Trusts . . . . . . . . .
18
and Pub. 535, Business Expenses.
See
Where To
File, later.
F. Initial Return, Amended Return,
etc. . . . . . . . . . . . . . . . . . . .
19
Net operating loss. The Tax Cuts and
Deductions allowable under section
G. Section 645 Election . . . . . . . . .
19
Jobs Act of 2017 (P.L. 115-97)
67(e). Miscellaneous itemized
Income . . . . . . . . . . . . . . . . . . . .
19
eliminated the option to carry back a net
deductions subject to the 2% floor aren’t
Deductions . . . . . . . . . . . . . . . . .
21
operating loss (NOL) for most
deductible for tax years 2018 through
taxpayers. Generally, an NOL
Limitations on Deductions . . . . . . . .
22
2025. However, deductions under
generated in a tax year ending after
Tax and Payments . . . . . . . . . . . . .
26
section 67(e)(1) continue to be
2017 can only be carried forward to
Schedule A—Charitable
deductible if they are costs that are
Deduction . . . . . . . . . . . . . . .
27
subsequent years. The 2-year
incurred in connection with the
carryback rule no longer applies. See
Feb 05, 2019
Cat. No. 11372D
2018
Department of the Treasury
Internal Revenue Service
Instructions for Form 1041
and Schedules A, B, G, J,
and K-1
U.S. Income Tax Return for Estates and Trusts
administration of an estate or a
Section references are to the Internal Revenue
Contents
Page
Code unless otherwise noted.
non-grantor trust that would not have
Schedule B—Income Distribution
been incurred if the property were not
Deduction . . . . . . . . . . . . . . .
28
Contents
Page
held in such estate or trust. See
Notice
Schedule G—Tax Computation . . . .
30
What's New . . . . . . . . . . . . . . . . . .
1
2018-61
for more information. Also see
Net Investment Income Tax . . . . . . .
33
Reminders . . . . . . . . . . . . . . . . . . .
2
Regulations section 1.67-4 for costs that
Other Information . . . . . . . . . . . . .
33
Photographs of Missing Children . . . .
2
are commonly or customarily incurred
Schedule J (Form 1041) —
Unresolved Tax Issues . . . . . . . . . . .
3
by an individual.
Accumulation Distribution for
How To Get Forms and
Certain Complex Trusts . . . . . .
34
Publications . . . . . . . . . . . . . . .
3
Section 965 deferred foreign in-
Schedule K-1 (Form 1041)—
General Instructions . . . . . . . . . . . . .
3
come. If you own (directly or indirectly)
Beneficiary's Share of
certain foreign corporations, you may
Purpose of Form . . . . . . . . . . . . . . .
3
Income, Deductions, Credits,
etc. . . . . . . . . . . . . . . . . . . .
36
have to include on your return certain
Income Taxation of Trusts and
Decedents' Estates . . . . . . . . . .
3
deferred foreign income. You may pay
Index . . . . . . . . . . . . . . . . . . . . .
43
Abusive Trust Arrangements . . . . . . .
3
the entire amount of tax due with
Future Developments
Definitions . . . . . . . . . . . . . . . . . . .
4
respect to this deferred foreign income
Who Must File . . . . . . . . . . . . . . . .
5
this year or elect to make payment in
For the latest information about
Electronic Filing . . . . . . . . . . . . . . .
8
eight installments or in the case of
developments related to Form 1041 and
When To File . . . . . . . . . . . . . . . . .
8
certain stock owned through an S
Schedules A, B, G, J, K-1 and its
corporation, elect to defer payment until
Period Covered
. . . . . . . . . . . . . . .
8
instructions, such as legislation enacted
occurrence of a triggering event. See
Where To File . . . . . . . . . . . . . . . . .
9
after they were published, go to
the instructions for Lines 24 and 25f;
Who Must Sign . . . . . . . . . . . . . . . .
8
IRS.gov/Form1041.
Form 965; and Form 965-A.
Accounting Methods . . . . . . . . . . . .
9
What's New
Accounting Periods . . . . . . . . . . . . .
9
Qualified business income deduc-
Rounding Off to Whole Dollars . . . . . .
9
tion. For tax years beginning after
Expired tax benefits. At the time
Estimated Tax . . . . . . . . . . . . . . .
10
2017, taxpayers other than corporations
these instructions went to print, several
Interest and Penalties . . . . . . . . . . .
10
may be entitled to a deduction of up to
credits and deductions available to
Other Forms That May Be
20% of their qualified business income
estates and trusts expired December
Required . . . . . . . . . . . . . . . .
11
from a qualified trade or business plus
31, 2017. To find out if legislation
Additional Information
. . . . . . . . . .
12
20% of the aggregate amount of
extended these credits and deductions
Assembly and Attachments . . . . . . .
12
qualified real estate investment trust
and made them available for 2018, go to
Special Reporting Instructions . . . . .
13
(REIT) dividends and qualified publicly
IRS.gov/Extenders.
Specific Instructions . . . . . . . . . . . .
17
traded partnership income. The
Name of Estate or Trust . . . . . . . . .
17
Due date of return. File Form 1041 by
deduction is subject to multiple
April 15, 2019. If the estate or trust is
Name and Title of Fiduciary . . . . . . .
17
limitations such as the type of trade or
located in Maine or Massachusetts, you
Address . . . . . . . . . . . . . . . . . . .
17
business, the taxpayer's taxable
have until April 17, 2019, because of the
A. Type of Entity . . . . . . . . . . . . . .
17
income, the amount of W-2 wages paid
Patriots’ Day holiday in those states and
B. Number of Schedules K-1
with respect to the qualified trade or
Attached . . . . . . . . . . . . . . . .
18
the Emancipation Day holiday in the
business, and the unadjusted basis
C. Employer Identification
District of Columbia.
immediately after acquisition (UBIA) of
Number . . . . . . . . . . . . . . . . .
18
qualified property held by the trade or
Address change for filing returns.
D. Date Entity Created . . . . . . . . . .
18
business. For more information, see
The filing address for estates or trusts
E. Nonexempt Charitable and
section 199A, Form 1040 Instructions,
located in certain states has changed.
Split-Interest Trusts . . . . . . . . .
18
and Pub. 535, Business Expenses.
See
Where To
File, later.
F. Initial Return, Amended Return,
etc. . . . . . . . . . . . . . . . . . . .
19
Net operating loss. The Tax Cuts and
Deductions allowable under section
G. Section 645 Election . . . . . . . . .
19
Jobs Act of 2017 (P.L. 115-97)
67(e). Miscellaneous itemized
Income . . . . . . . . . . . . . . . . . . . .
19
eliminated the option to carry back a net
deductions subject to the 2% floor aren’t
Deductions . . . . . . . . . . . . . . . . .
21
operating loss (NOL) for most
deductible for tax years 2018 through
taxpayers. Generally, an NOL
Limitations on Deductions . . . . . . . .
22
2025. However, deductions under
generated in a tax year ending after
Tax and Payments . . . . . . . . . . . . .
26
section 67(e)(1) continue to be
2017 can only be carried forward to
Schedule A—Charitable
deductible if they are costs that are
Deduction . . . . . . . . . . . . . . .
27
subsequent years. The 2-year
incurred in connection with the
carryback rule no longer applies. See
Feb 05, 2019
Cat. No. 11372D
Pub. 536, Net Operating Loss for
from indebtedness incurred on or before
e-file Signature Authorization for Form
Individuals, Estates, and Trusts, for
December 15, 2017. See section 163(h)
1041.
additional information. Exceptions apply
for more information.
Note. Form 8879-F can only be
to certain farming losses. See Pub. 225,
associated with a single Form 1041.
No deduction for home equity loan
Farmer's Tax Guide for more
Form 8879-F can no longer be used
interest. No matter when the
information.
with multiple Forms 1041.
indebtedness was incurred, you can no
Deduction of taxes. The deduction for
longer deduct the interest from a loan
For more information about e-filing
state and local taxes is limited to
secured by your home to the extent the
returns through MeF, see Pub. 4164,
$10,000. The deduction for foreign real
loan proceeds weren't used to buy,
Modernized e-File (MeF) Guide for
property taxes is no longer allowed. See
build, or improve your home. See
Software Developers and Transmitters.
Line
11—Taxes, later.
section 163(h) for more information.
Form 8975. Certain United States
Capital gains and qualified divi-
Credit for paid family and medical
persons that are the ultimate parent
dends. For tax year 2018, the 20%
leave. Eligible employers may qualify
entity of a United States multinational
maximum capital gains rate applies to
for a credit for wages paid in tax years
enterprise group with annual revenue
estates and trusts with income above
beginning after 2017 to qualifying
for the preceding reporting period of
$12,700. The 0% and 15% rates apply
employees on family and medical leave.
$850 million or more are required to file
to certain threshold amounts. The 0%
See section 45S. Also see Form 8994
Form 8975. Form 8975 and its
rate applies to amounts up to $2,600.
and its instructions.
Schedules A (Form 8975) must be filed
The 15% rate applies to amounts over
with the income tax return of the
Reminders
$2,600 and up to $12,700.
ultimate parent entity of a U.S.
multinational enterprise group for the tax
Review a copy of the will or trust
Bankruptcy estate filing threshold.
year in or within which the reporting
instrument, including any amendments
For tax year 2018, the requirement to
period covered by Form 8975 ends. For
or codicils, before preparing an estate's
file a return for a bankruptcy estate
more information, see Form 8975,
or trust's return.
applies only if gross income is at least
Schedule A (Form 8975) and the
We encourage you to use Form
$12,000.
Instructions for Form 8975 and
1041-V, Payment Voucher, to
Qualified disability trust. For tax year
Schedule A (Form 8975).
accompany your payment of a balance
2018, a qualified disability trust can
of tax due on Form 1041, particularly if
Information reporting by specified
claim an exemption of up to $4,150.
your payment is made by check or
domestic entities. Certain domestic
This amount is not subject to phaseout.
money order.
trusts that hold specified foreign
Business interest expense limita-
financial assets ("specified domestic
Extension of time to file. The
tion. Every taxpayer who deducts
entities") must file Form 8938,
extension of time to file an estate (other
business interest is required to file Form
Statement of Specified Foreign
than a bankruptcy estate) or trust return
8990, Limitation on Business Interest
Financial Assets, along with their Form
is 5
/
months.
1
2
Expense Under Section 163(j), unless
1041. See Other Information, Question
Item A. Type of Entity. On page 1 of
an exception for filing is met. For more
10, later.
Form 1041, Item A, taxpayers should
information, see Form 8990 and its
Form 8971. Form 8971, Information
select more than one box, when
instructions.
Regarding Beneficiaries Acquiring
appropriate, to reflect the type of entity.
Inclusion of global intangible
Property From a Decedent, along with
Item F. Net operating loss (NOL) car-
low-taxed income (GILTI). Public
Schedule A, is used to comply with the
ryback. If an amended return is filed for
Law 115-97 enacted new section 951A,
filing requirements regarding consistent
an NOL carryback, check the box in
which requires U.S. shareholders of
basis reporting between an estate and a
Item F Net operating loss carryback.
controlled foreign corporations to
person acquiring property from an
See Amended Return, later, for
determine and include their GILTI in
estate.
complete information.
taxable income every year. Section
For more information, see the
951A is effective for tax years of foreign
Item G. Section 645 election. If the
Instructions for Form 8971 and
corporations beginning after 2017, and
estate has made a section 645 election
Schedule A
and Column (e)—Cost or
to tax years of U.S. shareholders in
the executor must check Item G and
Other Basis in the
Instructions for Form
which or with which such tax years of
provide the taxpayer identification
8949.
foreign corporations end. Use Form
number (TIN) of the electing trust with
8992 to figure the U.S. shareholder's
Photographs of Missing
the highest total asset value in the box
GILTI and attach it to Form 1041. See
provided.
Children
section 951A for more information.
The executor must also attach a
The Internal Revenue Service is a proud
Domestic production activities de-
statement to Form 1041 providing the
partner with the
National Center for
duction (DPAD). The DPAD has been
following information for each electing
Missing & Exploited Children®
repealed for tax years beginning after
trust (including the electing trust
(NCMEC). Photographs of missing
2017, with limited exceptions. See Form
provided in Item G): (a) the name of the
children selected by the Center may
8903 and its instructions for details.
electing trust, (b) the TIN of the electing
appear in instructions on pages that
trust, and (c) the name and address of
Limitation on deduction for qualified
would otherwise be blank. You can help
the trustee of the electing trust.
residence interest. The deduction of
bring these children home by looking at
qualified residence interest may apply
Form 1041 E-filing. When e-filing
the photographs and calling
only on the first $750,000 of
Form 1041 use either Form 8453-FE,
1-800-THE-LOST (1-800-843-5678) if
indebtedness. Higher limitations apply if
U.S. Estate or Trust Declaration for an
you recognize a child.
deducting qualified residence interest
IRS e-File Return, or Form 8879-F, IRS
-2-
Instructions for Form 1041 (2018)
Unresolved Tax Issues
How To Get Forms and
deduction for distributions to
beneficiaries. To figure this deduction,
Publications
If you have attempted to deal with an
the fiduciary must complete Schedule B.
IRS problem unsuccessfully, you should
The income distribution deduction
Internet. You can access the
contact the Taxpayer Advocate Service
determines the amount of any
IRS website 24 hours a day, 7
(TAS). The Taxpayer Advocate
distributions taxed to the beneficiaries.
days a week, at
IRS.gov
to:
independently represents the estate's or
trust's interests and concerns within the
Download forms, including talking tax
For this reason, a trust or decedent's
IRS by protecting its rights and resolving
forms, instructions, and publications;
estate sometimes is referred to as a
problems that have not been fixed
Order IRS products;
“pass-through” entity. The beneficiary,
through normal channels.
Use the online Internal Revenue
and not the trust or decedent's estate,
Code, regulations, and other official
pays income tax on his or her
While Taxpayer Advocates can't
guidance;
distributive share of income.
change the tax law or make a technical
Research your tax questions;
Schedule K-1 (Form 1041) is used to
tax decision, they can clear up problems
Search publications by topic or
notify the beneficiaries of the amounts
that resulted from previous contacts and
keyword;
to be included on their income tax
ensure that the estate's or trust's case is
Apply for an Employer Identification
returns.
given a complete and impartial review.
Number (EIN); and
Sign up to receive local and national
Before preparing Form 1041, the
The estate's or trust's assigned
tax news by email.
fiduciary must figure the accounting
personal advocate will listen to its point
income of the estate or trust under the
of view and will work with the estate or
will or trust instrument and applicable
General Instructions
trust to address its concerns. The estate
local law to determine the amount, if
or trust can expect the advocate to
any, of income that is required to be
provide:
Purpose of Form
distributed, because the income
An impartial and independent look at
distribution deduction is based, in part,
The fiduciary of a domestic decedent's
your problem,
on that amount.
estate, trust, or bankruptcy estate uses
Timely acknowledgment,
Form 1041 to report:
The name and phone number of the
Abusive Trust
The income, deductions, gains,
individual assigned to its case,
Arrangements
losses, etc. of the estate or trust;
Updates on progress,
The income that is either
Certain trust arrangements claim to
Timeframes for action,
accumulated or held for future
reduce or eliminate federal taxes in
Speedy resolution, and
distribution or distributed currently to the
ways that are not permitted under the
Courteous service.
beneficiaries;
law. Abusive trust arrangements
Any income tax liability of the estate
When contacting the Taxpayer
typically are promoted by the promise of
or trust;
Advocate, you should provide the
tax benefits with no meaningful change
Employment taxes on wages paid to
following information.
in the taxpayer's control over or benefit
household employees; and
The estate's or trust's name, address,
from the taxpayer's income or assets.
Net Investment Income Tax. See
and employer identification number
The promised benefits may include
Schedule G, line 4, and the Instructions
(EIN).
reduction or elimination of income
for Form 8960.
The name and telephone number of
subject to tax; deductions for personal
an authorized contact person and the
expenses paid by the trust; depreciation
Income Taxation of Trusts
hours he or she can be reached.
deductions of an owner's personal
and Decedents' Estates
The type of tax return and year(s)
residence and furnishings; a stepped-up
involved.
basis for property transferred to the
A trust or a decedent's estate is a
A detailed description of the problem.
trust; the reduction or elimination of
separate legal entity for federal tax
Previous attempts to solve the
self-employment taxes; and the
purposes. A decedent's estate comes
problem and the office that had been
reduction or elimination of gift and
into existence at the time of death of an
contacted.
estate taxes. These promised benefits
individual. A trust may be created during
A description of the hardship the
are inconsistent with the tax rules
an individual's life (inter vivos) or at the
estate or trust is facing and supporting
applicable to trust arrangements.
time of his or her death under a will
documentation (if applicable).
(testamentary). If the trust instrument
Abusive trust arrangements often use
contains certain provisions, then the
You can contact a Taxpayer
trusts to hide the true ownership of
person creating the trust (the grantor) is
Advocate as follows.
assets and income or to disguise the
treated as the owner of the trust's
Call the Taxpayer Advocate's toll-free
substance of transactions. These
assets. Such a trust is a grantor type
number: 877-777-4778.
arrangements frequently involve more
trust. See Grantor Type Trusts, later,
Call, write, or fax the Taxpayer
than one trust, each holding different
under Special Reporting Instructions.
Advocate office in its area (see Pub.
assets of the taxpayer (for example, the
1546, Taxpayer Advocate Service, Your
A trust or decedent's estate figures
taxpayer's business, business
Voice At The IRS, for addresses and
its gross income in much the same
equipment, home, automobile, etc.).
phone numbers).
manner as an individual. Most
Some trusts may hold interests in other
TTY/TDD help is available by calling
deductions and credits allowed to
trusts, purport to involve charities, or are
800-829-4059.
individuals are also allowed to estates
foreign trusts. Funds may flow from one
Visit the website at
IRS.gov/
and trusts. However, there is one major
trust to another trust by way of rental
advocate.
distinction. A trust or decedent's estate
agreements, fees for services, purchase
is allowed an income distribution
agreements, and distributions.
Instructions for Form 1041 (2018)
-3-
Some of the abusive trust
4. The domestic production
Some examples of IRD for a
arrangements that have been identified
activities deduction claimed on line 15a;
decedent who kept his or her books on
include unincorporated business trusts
and
the cash method are:
(or organizations), equipment or service
Deferred salary payments that are
5. The net operating loss deduction
trusts, family residence trusts, charitable
payable to the decedent's estate,
(NOLD) claimed on line 15b.
trusts, and final trusts. In each of these
Uncollected interest on U.S. savings
Electing small business trust
trusts, the original owner of the assets
bonds,
(ESBT). Compute the AGI of the S
nominally subject to the trust effectively
Proceeds from the completed sale of
portion of an ESBT in the same manner
retains the authority to cause financial
farm produce, and
as an individual taxpayer, except that
benefits of the trust to be directly or
The portion of a lump-sum
administration costs allocable to the S
indirectly returned or made available to
distribution to the beneficiary of a
portion (to the extent they are costs
the owner. For example, the trustee may
decedent's IRA that equals the balance
incurred in the administration of the trust
be the promoter, a relative, or a friend of
in the IRA at the time of the owner's
that wouldn't have been incurred if the
the owner who simply carries out the
death. This includes unrealized
property were not held by the estate or
directions of the owner whether or not
appreciation and income accrued to that
trust) shall be deducted in arriving at
permitted by the terms of the trust.
date, less the aggregate amount of the
AGI.
owner's nondeductible contributions to
When trusts are used for legitimate
the IRA. Such amounts are included in
Beneficiary. A beneficiary includes an
business, family, or estate planning
the beneficiary's gross income in the tax
heir, a legatee, or a devisee.
purposes, either the trust, the
year that the distribution is received.
beneficiary, or the transferor of assets to
Decedent's estate. The decedent's
The IRD has the same character it
the trust will pay the tax on income
estate is an entity that is formed at the
would have had if the decedent had
generated by the trust property. Trusts
time of an individual's death and
lived and received such amount.
can't be used to transform a taxpayer's
generally is charged with gathering the
personal, living, or educational
decedent's assets, paying the
Deductions and credits in respect
expenses into deductible items, and
decedent's debts and expenses, and
of a decedent. The following
can't seek to avoid tax liability by
distributing the remaining assets.
deductions and credits, when paid by
ignoring either the true ownership of
Generally, the estate consists of all the
the decedent's estate, are allowed on
income and assets or the true
property, real or personal, tangible or
Form 1041 even though they were not
substance of transactions. Therefore,
intangible, wherever situated, that the
allowable on the decedent's final
the tax results promised by the
decedent owned an interest in at death.
income tax return.
promoters of abusive trust
Business expenses deductible under
Distributable net income (DNI). The
arrangements are not allowable under
section 162.
income distribution deduction allowable
the law, and the participants in and
Interest deductible under section 163.
to estates and trusts for amounts paid,
promoters of these arrangements may
Taxes deductible under section 164.
credited, or required to be distributed to
be subject to civil or criminal penalties in
Percentage depletion allowed under
beneficiaries is limited to DNI. This
appropriate cases.
section 611.
amount, which is figured on Schedule B,
Foreign tax credit.
line 7, is also used to determine how
For more details, including the legal
For more information on IRD, see
much of an amount paid, credited, or
principles that control the proper tax
section 691 and Pub. 559, Survivors,
required to be distributed to a
treatment of these abusive trust
Executors, and Administrators.
beneficiary will be includible in his or her
arrangements, see Notice 97-24,
gross income.
1997-1 C.B. 409.
Income required to be distributed
currently. Income required to be
Income in respect of a decedent.
For additional information about
distributed currently is income that is
When completing Form 1041, you must
abusive tax arrangements, visit the IRS
required under the terms of the
take into account any items that are
website at
IRS.gov
and type “Abusive
governing instrument and applicable
income in respect of a decedent (IRD).
Trusts” in the search box.
local law to be distributed in the year it is
In general, IRD is income that a
received. The fiduciary must be under a
decedent was entitled to receive but
Definitions
duty to distribute the income currently,
that was not properly includible in the
even if the actual distribution is not
Adjusted gross income (AGI).
decedent's final income tax return under
made until after the close of the trust's
Compute the AGI of an estate or
the decedent's method of accounting.
tax year. See Regulations section
non-grantor trust by subtracting the
IRD includes:
1.651(a)-2.
following from total income on line 9 of
All accrued income of a decedent
page 1:
Fiduciary. A fiduciary is a trustee of a
who reported his or her income on the
trust, or an executor, executrix,
1. The administration costs of the
cash method of accounting,
administrator, administratrix, personal
estate or trust (the total of lines 12, 14,
Income accrued solely because of
representative, or person in possession
and 15a to the extent they are costs
the decedent's death in the case of a
of property of a decedent's estate.
incurred in the administration of the
decedent who reported his or her
estate or trust) that wouldn't have been
income on the accrual method of
Note. Any reference in these
incurred if the property were not held by
accounting, and
instructions to “you” means the fiduciary
the estate or trust;
Income to which the decedent had a
of the estate or trust.
contingent claim at the time of his or her
2. The income distribution
death.
Trust. A trust is an arrangement
deduction (line 18);
created either by a will or by an inter
3. The amount of the exemption
vivos declaration by which trustees take
(line 20);
-4-
Instructions for Form 1041 (2018)
title to property for the purpose of
Two or more trusts are treated as
Special Rule for Certain Revocable
protecting or conserving it for the
one trust if the trusts have substantially
Trusts
beneficiaries under the ordinary rules
the same grantor(s) and substantially
Section 645 provides that if both the
applied in chancery or probate courts.
the same primary beneficiary(ies) and a
executor (if any) of an estate (the
principal purpose of such trusts is
Revocable living trust. A revocable
related estate) and the trustee of a
avoidance of tax. This provision applies
living trust is an arrangement created by
qualified revocable trust (QRT) elect the
only to that portion of the trust that is
a written agreement or declaration
treatment in section 645, the trust must
attributable to contributions to corpus
during the life of an individual and can
be treated and taxed as part of the
made after March 1, 1984.
be changed or ended at any time during
related estate during the election period.
the individual's life. A revocable living
A trust is a domestic trust if:
This election may be made by a QRT
trust is generally created to manage and
A U.S. court is able to exercise
even if no executor is appointed for the
distribute property. Many people use
primary supervision over the
related estate.
this type of trust instead of (or in
administration of the trust (court test),
addition to) a will.
and
In general, Form 8855, Election To
Because this type of trust is
One or more U.S. persons have the
Treat a Qualified Revocable Trust as
revocable, it is treated as a grantor type
authority to control all substantial
Part of an Estate, must be filed by the
trust for tax purposes. See Grantor Type
decisions of the trust (control test).
due date for Form 1041 for the first tax
Trusts under Special Reporting
year of the related estate. This applies
See Regulations section 301.7701-7
Instructions, later, for special filing
even if the combined related estate and
for more information on the court and
instructions that apply to grantor trusts.
electing trust don't have sufficient
control tests.
income to be required to file Form 1041.
Be sure to read Optional Filing
However, if the estate is granted an
Also treated as a domestic trust is a
Methods for Certain Grantor
TIP
extension of time to file Form 1041 for
trust (other than a trust treated as wholly
Type Trusts. Generally, most
its first tax year, the due date for Form
owned by the grantor) that:
people that have revocable living trusts
8855 is the extended due date.
will be able to use Optional Method 1.
Was in existence on August 20, 1996,
This method is the easiest and least
Was treated as a domestic trust on
Once made, the election is
burdensome way to meet your
August 19, 1996, and
irrevocable.
obligations.
Elected to continue to be treated as a
domestic trust.
Qualified revocable trusts (QRT). In
Who Must File
general, a QRT is any trust (or part of a
A trust that isn't a domestic trust is
trust) that, on the day the decedent
treated as a foreign trust. If you are the
Decedent's Estate
died, was treated as owned by the
trustee of a foreign trust, file Form
decedent because the decedent held
The fiduciary (or one of the joint
1040NR instead of Form 1041. Also, a
the power to revoke the trust as
fiduciaries) must file Form 1041 for a
foreign trust with a U.S. owner generally
described in section 676. An electing
domestic estate that has:
must file Form 3520-A, Annual
trust is a QRT for which a section 645
1. Gross income for the tax year of
Information Return of Foreign Trust With
election has been made.
$600 or more, or
a U.S. Owner.
Election period. The election period is
2. A beneficiary who is a
If a domestic trust becomes a foreign
the period of time during which an
nonresident alien.
trust, it is treated under section 684 as
electing trust is treated as part of its
having transferred all of its assets to a
An estate is a domestic estate if it
related estate.
foreign trust, except to the extent a
isn't a foreign estate. A foreign estate is
The election period begins on the
grantor or another person is treated as
one the income of which is from sources
date of the decedent's death and
the owner of the trust when the trust
outside the United States that isn't
terminates on the earlier of:
becomes a foreign trust.
effectively connected with the conduct
The day on which the electing trust
of a U.S. trade or business and isn't
Grantor Type Trusts
and related estate, if any, distribute all of
includible in gross income. If you are the
their assets, or
If all or any portion of a trust is a grantor
fiduciary of a foreign estate, file Form
The day before the applicable date.
type trust, then that trust or portion of a
1040NR, U.S. Nonresident Alien
To determine the applicable date, first
trust must follow the special reporting
Income Tax Return, instead of Form
determine whether a Form 706, United
requirements discussed later, under
1041.
States Estate (and Generation-Skipping
Special Reporting Instructions. See
Transfer) Tax Return, is required to be
Trust
Grantor Type Trust under Specific
filed as a result of the decedent's death.
Instructions for more details on what
The fiduciary (or one of the joint
If no Form 706 is required to be filed, the
makes a trust a grantor type trust.
fiduciaries) must file Form 1041 for a
applicable date is 2 years after the date
domestic trust taxable under section
of the decedent's death. If Form 706 is
Note. A trust may be part grantor trust
641 that has:
required, the applicable date is the later
and part “other” type of trust, for
1. Any taxable income for the tax
of 2 years after the date of the
example, simple or complex, or electing
year,
decedent's death or 6 months after the
small business trust (ESBT).
2. Gross income of $600 or more
final determination of liability for estate
Qualified subchapter S trusts
(regardless of taxable income), or
tax. For additional information, see
(QSSTs). QSSTs must follow the
Regulations section 1.645-1(f).
3. A beneficiary who is a
special reporting requirements for these
nonresident alien.
Taxpayer identification number
trusts discussed later, under Special
(TIN). All QRTs must obtain a new TIN
Reporting Instructions.
Instructions for Form 1041 (2018)
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Download Instructions for IRS Form 1041 Schedule a, B, G, J, and K-1 - U.S. Income Tax Return for Estates and Trusts 2018

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