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

This document contains official instructions for Schedule A, Schedule B, Schedule G, Schedule J, and Schedule K-1 for IRS Form 1041. These documents are released and collected by the Internal Revenue Service (IRS), a subdivision of the U.S. Department of the Treasury. An up-to-date fillable IRS Form 1041 Schedule J is available for download through this link. An up-to-date fillable IRS Form 1041 Schedule K-1 is available for download through this link.

Instruction Details:

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  • Actual and applicable for filing 2020 taxes;
  • Complete, printable, and free.

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

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2019
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
have been updated to include new
Section references are to the Internal Revenue
Contents
Page
Code unless otherwise noted.
questions 11 through 14.
Schedule B—Income Distribution
Deduction . . . . . . . . . . . . . . .
28
Contents
Page
ESBT Worksheet. An
Electing Small
Schedule G—Tax Computation
Business Trust (ESBT) Tax Worksheet
What's New . . . . . . . . . . . . . . . . . .
1
and Payments . . . . . . . . . . . .
30
has been added to the instructions to
Reminders . . . . . . . . . . . . . . . . . . .
2
Net Investment Income Tax . . . . . . .
34
calculate the ESBT tax.
Photographs of Missing Children . . . .
2
Other Information . . . . . . . . . . . . .
35
Unresolved Tax Issues . . . . . . . . . . .
3
Qualified Opportunity Investment. If
Schedule J (Form 1041) —
How To Get Forms and
you held a qualified investment in a
Accumulation Distribution for
Publications . . . . . . . . . . . . . . .
3
Certain Complex Trusts . . . . . .
37
qualified opportunity fund (QOF) at any
General Instructions . . . . . . . . . . . . .
3
Schedule K-1 (Form 1041)—
time during the year, you must file your
Purpose of Form . . . . . . . . . . . . . . .
3
Beneficiary's Share of
return with Form 8997, Initial and
Income, Deductions, Credits,
Income Taxation of Trusts and
Annual Statement of Qualified
etc. . . . . . . . . . . . . . . . . . . .
39
Decedents' Estates . . . . . . . . . .
3
Opportunity Fund Investments, attached
Index . . . . . . . . . . . . . . . . . . . . .
50
Abusive Trust Arrangements . . . . . . .
3
to your return. For more information, see
Definitions . . . . . . . . . . . . . . . . . . .
4
Future Developments
Form 8997 and its instructions.
Who Must File . . . . . . . . . . . . . . . .
5
Capital gains and qualified divi-
Electronic Filing . . . . . . . . . . . . . . .
8
For the latest information about
dends. For tax year 2019, the 20%
When To File . . . . . . . . . . . . . . . . .
8
developments related to Form 1041 and
maximum capital gains rate applies to
Schedules A, B, G, J, K-1 and its
Period Covered
. . . . . . . . . . . . . . .
8
estates and trusts with income above
instructions, such as legislation enacted
Where To File . . . . . . . . . . . . . . . . .
9
$12,950. The 0% and 15% rates apply
after they were published, go to
Who Must Sign . . . . . . . . . . . . . . . .
8
to certain threshold amounts. The 0%
IRS.gov/Form1041.
Accounting Methods . . . . . . . . . . . .
9
rate applies to amounts up to $2,650.
Accounting Periods . . . . . . . . . . . . .
9
What's New
The 15% rate applies to amounts over
Rounding Off to Whole Dollars . . . . . .
9
$2,650 and up to $12,950.
Estimated Tax . . . . . . . . . . . . . . .
10
Line 20–Qualified Business Income
Interest and Penalties . . . . . . . . . . .
10
Bankruptcy estate filing threshold.
Deduction. Line 20, Qualified
Other Forms That May Be
For tax year 2019, the requirement to
Business Income Deduction, has been
Required . . . . . . . . . . . . . . . .
11
file a return for a bankruptcy estate
added to the Form 1041 to be used
Additional Information
. . . . . . . . . .
13
applies only if gross income is at least
when reporting the deduction
Assembly and Attachments . . . . . . .
13
$12,200.
attributable to the entity’s share of
Special Reporting Instructions . . . . .
13
qualified items. Schedule K-1, Box 14,
Qualified disability trust. For tax year
Specific Instructions . . . . . . . . . . . .
17
code I, related to the qualified business
2019, a qualified disability trust can
Name of Estate or Trust . . . . . . . . .
17
income deduction, has been changed.
claim an exemption of up to $4,200.
Name and Title of Fiduciary . . . . . . .
17
New pass-through entity reporting
This amount is not subject to phaseout.
Address . . . . . . . . . . . . . . . . . . .
17
statements have been included in these
A. Type of Entity . . . . . . . . . . . . . .
17
Extended tax provisions. Recent
instructions to assist the trust or estate
legislation extended certain tax benefits
B. Number of Schedules K-1
in reporting the proper qualified
Attached . . . . . . . . . . . . . . . .
18
that had expired at the end of 2017.
business income items and other
C. Employer Identification
These tax benefits include the following.
information to its beneficiaries. These
Number . . . . . . . . . . . . . . . . .
18
Deduction for mortgage insurance
statements, or substantially similar
D. Date Entity Created . . . . . . . . . .
18
premiums.
statements, must be attached to each
E. Nonexempt Charitable and
Biofuel producer credit.
beneficiary’s Schedule K-1 reporting
Split-Interest Trusts . . . . . . . . .
18
Biodiesel and renewable diesel fuels
their allocable share of each item and
F. Initial Return, Amended Return,
credit.
other information as applicable.
etc. . . . . . . . . . . . . . . . . . . .
19
If you are eligible for one or more of
G. Section 645 Election . . . . . . . . .
20
Schedule G. Schedule G of Form 1041
these benefits in 2019, you can claim
Income . . . . . . . . . . . . . . . . . . . .
20
has been revised. It now has two parts:
them on your 2019 return. If you are
Deductions . . . . . . . . . . . . . . . . .
21
Part I — Tax Computation and Part II —
eligible for one or more of these benefits
Limitations on Deductions . . . . . . . .
22
Payments.
for tax year 2018, you will need to file an
Tax and Payments . . . . . . . . . . . . .
27
amended Form 1041 return to claim
Other Information. The Other
Schedule A—Charitable
them.
Information questions on Form 1041
Deduction . . . . . . . . . . . . . . .
27
Jan 24, 2020
Cat. No. 11372D
2019
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
have been updated to include new
Section references are to the Internal Revenue
Contents
Page
Code unless otherwise noted.
questions 11 through 14.
Schedule B—Income Distribution
Deduction . . . . . . . . . . . . . . .
28
Contents
Page
ESBT Worksheet. An
Electing Small
Schedule G—Tax Computation
Business Trust (ESBT) Tax Worksheet
What's New . . . . . . . . . . . . . . . . . .
1
and Payments . . . . . . . . . . . .
30
has been added to the instructions to
Reminders . . . . . . . . . . . . . . . . . . .
2
Net Investment Income Tax . . . . . . .
34
calculate the ESBT tax.
Photographs of Missing Children . . . .
2
Other Information . . . . . . . . . . . . .
35
Unresolved Tax Issues . . . . . . . . . . .
3
Qualified Opportunity Investment. If
Schedule J (Form 1041) —
How To Get Forms and
you held a qualified investment in a
Accumulation Distribution for
Publications . . . . . . . . . . . . . . .
3
Certain Complex Trusts . . . . . .
37
qualified opportunity fund (QOF) at any
General Instructions . . . . . . . . . . . . .
3
Schedule K-1 (Form 1041)—
time during the year, you must file your
Purpose of Form . . . . . . . . . . . . . . .
3
Beneficiary's Share of
return with Form 8997, Initial and
Income, Deductions, Credits,
Income Taxation of Trusts and
Annual Statement of Qualified
etc. . . . . . . . . . . . . . . . . . . .
39
Decedents' Estates . . . . . . . . . .
3
Opportunity Fund Investments, attached
Index . . . . . . . . . . . . . . . . . . . . .
50
Abusive Trust Arrangements . . . . . . .
3
to your return. For more information, see
Definitions . . . . . . . . . . . . . . . . . . .
4
Future Developments
Form 8997 and its instructions.
Who Must File . . . . . . . . . . . . . . . .
5
Capital gains and qualified divi-
Electronic Filing . . . . . . . . . . . . . . .
8
For the latest information about
dends. For tax year 2019, the 20%
When To File . . . . . . . . . . . . . . . . .
8
developments related to Form 1041 and
maximum capital gains rate applies to
Schedules A, B, G, J, K-1 and its
Period Covered
. . . . . . . . . . . . . . .
8
estates and trusts with income above
instructions, such as legislation enacted
Where To File . . . . . . . . . . . . . . . . .
9
$12,950. The 0% and 15% rates apply
after they were published, go to
Who Must Sign . . . . . . . . . . . . . . . .
8
to certain threshold amounts. The 0%
IRS.gov/Form1041.
Accounting Methods . . . . . . . . . . . .
9
rate applies to amounts up to $2,650.
Accounting Periods . . . . . . . . . . . . .
9
What's New
The 15% rate applies to amounts over
Rounding Off to Whole Dollars . . . . . .
9
$2,650 and up to $12,950.
Estimated Tax . . . . . . . . . . . . . . .
10
Line 20–Qualified Business Income
Interest and Penalties . . . . . . . . . . .
10
Bankruptcy estate filing threshold.
Deduction. Line 20, Qualified
Other Forms That May Be
For tax year 2019, the requirement to
Business Income Deduction, has been
Required . . . . . . . . . . . . . . . .
11
file a return for a bankruptcy estate
added to the Form 1041 to be used
Additional Information
. . . . . . . . . .
13
applies only if gross income is at least
when reporting the deduction
Assembly and Attachments . . . . . . .
13
$12,200.
attributable to the entity’s share of
Special Reporting Instructions . . . . .
13
qualified items. Schedule K-1, Box 14,
Qualified disability trust. For tax year
Specific Instructions . . . . . . . . . . . .
17
code I, related to the qualified business
2019, a qualified disability trust can
Name of Estate or Trust . . . . . . . . .
17
income deduction, has been changed.
claim an exemption of up to $4,200.
Name and Title of Fiduciary . . . . . . .
17
New pass-through entity reporting
This amount is not subject to phaseout.
Address . . . . . . . . . . . . . . . . . . .
17
statements have been included in these
A. Type of Entity . . . . . . . . . . . . . .
17
Extended tax provisions. Recent
instructions to assist the trust or estate
legislation extended certain tax benefits
B. Number of Schedules K-1
in reporting the proper qualified
Attached . . . . . . . . . . . . . . . .
18
that had expired at the end of 2017.
business income items and other
C. Employer Identification
These tax benefits include the following.
information to its beneficiaries. These
Number . . . . . . . . . . . . . . . . .
18
Deduction for mortgage insurance
statements, or substantially similar
D. Date Entity Created . . . . . . . . . .
18
premiums.
statements, must be attached to each
E. Nonexempt Charitable and
Biofuel producer credit.
beneficiary’s Schedule K-1 reporting
Split-Interest Trusts . . . . . . . . .
18
Biodiesel and renewable diesel fuels
their allocable share of each item and
F. Initial Return, Amended Return,
credit.
other information as applicable.
etc. . . . . . . . . . . . . . . . . . . .
19
If you are eligible for one or more of
G. Section 645 Election . . . . . . . . .
20
Schedule G. Schedule G of Form 1041
these benefits in 2019, you can claim
Income . . . . . . . . . . . . . . . . . . . .
20
has been revised. It now has two parts:
them on your 2019 return. If you are
Deductions . . . . . . . . . . . . . . . . .
21
Part I — Tax Computation and Part II —
eligible for one or more of these benefits
Limitations on Deductions . . . . . . . .
22
Payments.
for tax year 2018, you will need to file an
Tax and Payments . . . . . . . . . . . . .
27
amended Form 1041 return to claim
Other Information. The Other
Schedule A—Charitable
them.
Information questions on Form 1041
Deduction . . . . . . . . . . . . . . .
27
Jan 24, 2020
Cat. No. 11372D
Reminders
business interest is required to file Form
Note. Form 8879-F can only be
8990, Limitation on Business Interest
associated with a single Form 1041.
Review a copy of the will or trust
Expense Under Section 163(j), unless
Form 8879-F can no longer be used
instrument, including any amendments
an exception for filing is met. For more
with multiple Forms 1041.
or codicils, before preparing an estate's
information, see Form 8990 and its
For more information about e-filing
or trust's return.
instructions.
returns through MeF, see Pub. 4164,
We encourage you to use Form
Modernized e-File (MeF) Guide for
1041-V, Payment Voucher, to
Inclusion of global intangible
Software Developers and Transmitters.
accompany your payment of a balance
low-taxed income (GILTI). P.L.
of tax due on Form 1041, particularly if
115-97 enacted section 951A, which
Form 8975. Certain United States
your payment is made by check or
requires U.S. shareholders of controlled
persons that are the ultimate parent
money order.
foreign corporations to determine and
entity of a United States multinational
include their GILTI in taxable income
enterprise group with annual revenue
Deductions allowable under section
every year. Section 951A is effective for
for the preceding reporting period of
67(e). Miscellaneous itemized
tax years of foreign corporations
$850 million or more are required to file
deductions subject to the 2% floor aren’t
beginning after 2017, and to tax years of
Form 8975. Form 8975 and its
deductible for tax years 2018 through
U.S. shareholders in which or with
Schedules A (Form 8975) must be filed
2025. However, deductions under
which such tax years of foreign
with the income tax return of the
section 67(e)(1) continue to be
corporations end. Use Form 8992 to
ultimate parent entity of a U.S.
deductible if they are costs that are
figure the U.S. shareholder's GILTI and
multinational enterprise group for the tax
incurred in connection with the
attach it to Form 1041. See section
year in or within which the reporting
administration of an estate or a
951A for more information.
period covered by Form 8975 ends. For
non-grantor trust that would not have
more information, see Form 8975,
been incurred if the property were not
Credit for paid family and medical
Schedule A (Form 8975) and the
held in such estate or trust. See
Notice
leave. Eligible employers may qualify
Instructions for Form 8975 and
2018-61
for more information. Also see
for a credit for wages paid in tax years
Schedule A (Form 8975).
Regulations section 1.67-4 for costs that
beginning after 2017 to qualifying
are commonly or customarily incurred
employees on family and medical leave.
Information reporting by specified
by an individual.
See section 45S. Also see Form 8994
domestic entities. Certain domestic
and its instructions.
trusts that hold specified foreign
Section 965 deferred foreign in-
financial assets ("specified domestic
come. If you own (directly or indirectly)
Extension of time to file. The
entities") must file Form 8938,
certain foreign corporations, you may
extension of time to file an estate (other
Statement of Specified Foreign
have to include on your return certain
than a bankruptcy estate) or trust return
Financial Assets, along with their Form
deferred foreign income. You may pay
is 5
/
months.
1
2
1041. See Other Information, Question
the entire amount of tax due with
Item A. Type of Entity. On page 1 of
10, later.
respect to this deferred foreign income
Form 1041, Item A, taxpayers should
this year or elect to make payment in
Form 8971. Form 8971, Information
select more than one box, when
eight installments or in the case of
Regarding Beneficiaries Acquiring
appropriate, to reflect the type of entity.
certain stock owned through an S
Property From a Decedent, along with
corporation, elect to defer payment until
Item F. Net operating loss (NOL) car-
Schedule A, is used to comply with the
occurrence of a triggering event. See
ryback. If an amended return is filed for
filing requirements regarding consistent
the instructions for Line 25 and
an NOL carryback, check the box in
basis reporting between an estate and a
Schedule G, Part II, line 15; Form 965;
Item F Net operating loss carryback.
person acquiring property from an
and Form 965-A.
See Amended Return, later, for
estate.
complete information.
Net operating loss. The Tax Cuts and
For more information, see the
Jobs Act of 2017 (P.L. 115-97)
Item G. Section 645 election. If the
Instructions for Form 8971 and
eliminated the option to carry back a net
estate has made a section 645 election
Schedule A
and Column (e)—Cost or
operating loss (NOL) for most
the executor must check Item G and
Other Basis in the
Instructions for Form
taxpayers. Generally, an NOL
provide the taxpayer identification
8949.
generated in a tax year ending after
number (TIN) of the electing trust with
Photographs of Missing
2017 can only be carried forward to
the highest total asset value in the box
subsequent years. The 2-year
provided.
Children
carryback rule no longer applies. See
The executor must also attach a
The Internal Revenue Service is a proud
Pub. 536, Net Operating Loss for
statement to Form 1041 providing the
partner with the
National Center for
Individuals, Estates, and Trusts, for
following information for each electing
Missing & Exploited Children®
additional information. Exceptions apply
trust (including the electing trust
(NCMEC). Photographs of missing
to certain farming losses. See Pub. 225,
provided in Item G): (a) the name of the
children selected by the Center may
Farmer's Tax Guide for more
electing trust, (b) the TIN of the electing
appear in instructions on pages that
information.
trust, and (c) the name and address of
would otherwise be blank. You can help
the trustee of the electing trust.
Deduction of taxes. The deduction for
bring these children home by looking at
state and local taxes is limited to
the photographs and calling
Form 1041 E-filing. When e-filing
$10,000. The deduction for foreign real
1-800-THE-LOST (1-800-843-5678) if
Form 1041 use either Form 8453-FE,
property taxes is no longer allowed. See
you recognize a child.
U.S. Estate or Trust Declaration for an
Line
11—Taxes, later.
IRS e-File Return, or Form 8879-F, IRS
e-file Signature Authorization for Form
Business interest expense limita-
1041.
tion. Every taxpayer who deducts
-2-
Instructions for Form 1041 (2019)
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, Part I, line 5, and the
(EIN).
reduction or elimination of income
Instructions 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 (2019)
-3-
Some of the abusive trust
4. The net operating loss deduction
Uncollected interest on U.S. savings
arrangements that have been identified
(NOLD) claimed on line 15b.
bonds,
include unincorporated business trusts
Proceeds from the completed sale of
Electing small business trust
(or organizations), equipment or service
farm produce, and
(ESBT). Compute the AGI of the S
trusts, family residence trusts, charitable
The portion of a lump-sum
portion of an ESBT in the same manner
trusts, and final trusts. In each of these
distribution to the beneficiary of a
as an individual taxpayer, except that
trusts, the original owner of the assets
decedent's IRA that equals the balance
administration costs allocable to the S
nominally subject to the trust effectively
in the IRA at the time of the owner's
portion (to the extent they are costs
retains the authority to cause financial
death. This includes unrealized
incurred in the administration of the trust
benefits of the trust to be directly or
appreciation and income accrued to that
that wouldn't have been incurred if the
indirectly returned or made available to
date, less the aggregate amount of the
property were not held by the estate or
the owner. For example, the trustee may
owner's nondeductible contributions to
trust) shall be deducted in arriving at
be the promoter, a relative, or a friend of
the IRA. Such amounts are included in
AGI.
the owner who simply carries out the
the beneficiary's gross income in the tax
directions of the owner whether or not
year that the distribution is received.
Beneficiary. A beneficiary includes an
permitted by the terms of the trust.
heir, a legatee, or a devisee.
The IRD has the same character it
would have had if the decedent had
Decedent's estate. The decedent's
When trusts are used for legitimate
lived and received such amount.
estate is an entity that is formed at the
business, family, or estate planning
time of an individual's death and
purposes, either the trust, the
Deductions and credits in respect
generally is charged with gathering the
beneficiary, or the transferor of assets to
of a decedent. The following
decedent's assets, paying the
the trust will pay the tax on income
deductions and credits, when paid by
decedent's debts and expenses, and
generated by the trust property. Trusts
the decedent's estate, are allowed on
distributing the remaining assets.
can't be used to transform a taxpayer's
Form 1041 even though they were not
Generally, the estate consists of all the
personal, living, or educational
allowable on the decedent's final
property, real or personal, tangible or
expenses into deductible items, and
income tax return.
intangible, wherever situated, that the
can't seek to avoid tax liability by
Business expenses deductible under
decedent owned an interest in at death.
ignoring either the true ownership of
section 162.
income and assets or the true
Interest deductible under section 163.
Distributable net income (DNI). The
substance of transactions. Therefore,
Taxes deductible under section 164.
income distribution deduction allowable
the tax results promised by the
Percentage depletion allowed under
to estates and trusts for amounts paid,
promoters of abusive trust
section 611.
credited, or required to be distributed to
arrangements are not allowable under
Foreign tax credit.
beneficiaries is limited to DNI. This
the law, and the participants in and
amount, which is figured on Schedule B,
For more information on IRD, see
promoters of these arrangements may
line 7, is also used to determine how
section 691 and Pub. 559, Survivors,
be subject to civil or criminal penalties in
much of an amount paid, credited, or
Executors, and Administrators.
appropriate cases.
required to be distributed to a
Income required to be distributed
beneficiary will be includible in his or her
For more details, including the legal
currently. Income required to be
gross income.
principles that control the proper tax
distributed currently is income that is
Income in respect of a decedent.
treatment of these abusive trust
required under the terms of the
When completing Form 1041, you must
arrangements, see Notice 97-24,
governing instrument and applicable
take into account any items that are
1997-1 C.B. 409.
local law to be distributed in the year it is
income in respect of a decedent (IRD).
received. The fiduciary must be under a
For additional information about
duty to distribute the income currently,
In general, IRD is income that a
abusive tax arrangements, visit the IRS
even if the actual distribution is not
decedent was entitled to receive but
website at
IRS.gov
and type “Abusive
made until after the close of the trust's
that was not properly includible in the
Trusts” in the search box.
tax year. See Regulations section
decedent's final income tax return under
1.651(a)-2.
the decedent's method of accounting.
Definitions
IRD includes:
Fiduciary. A fiduciary is a trustee of a
Adjusted gross income (AGI).
All accrued income of a decedent
trust, or an executor, executrix,
Compute the AGI of an estate or
who reported his or her income on the
administrator, administratrix, personal
non-grantor trust by subtracting the
cash method of accounting,
representative, or person in possession
following from total income on line 9 of
Income accrued solely because of
of property of a decedent's estate.
page 1:
the decedent's death in the case of a
Note. Any reference in these
decedent who reported his or her
1. The administration costs of the
instructions to “you” means the fiduciary
income on the accrual method of
estate or trust (the total of lines 12, 14,
of the estate or trust.
accounting, and
and 15a to the extent they are costs
Income to which the decedent had a
incurred in the administration of the
Trust. A trust is an arrangement
contingent claim at the time of his or her
estate or trust) that wouldn't have been
created either by a will or by an inter
death.
incurred if the property were not held by
vivos declaration by which trustees take
the estate or trust;
Some examples of IRD for a
title to property for the purpose of
decedent who kept his or her books on
protecting or conserving it for the
2. The income distribution
the cash method are:
beneficiaries under the ordinary rules
deduction (line 18);
Deferred salary payments that are
applied in chancery or probate courts.
3. The amount of the exemption
payable to the decedent's estate,
(line 21);
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Instructions for Form 1041 (2019)
4. If you held a qualified investment
Revocable living trust. A revocable
Qualified subchapter S trusts
in a qualified opportunity fund (QOF) at
living trust is an arrangement created by
(QSSTs). QSSTs must follow the
any time during the year, you must file
a written agreement or declaration
special reporting requirements for these
your return with Form 8997 attached.
during the life of an individual and can
trusts discussed later, under Special
See the Form 8997 instructions.
be changed or ended at any time during
Reporting Instructions.
the individual's life. A revocable living
Two or more trusts are treated as
trust is generally created to manage and
Special Rule for Certain Revocable
one trust if the trusts have substantially
distribute property. Many people use
the same grantor(s) and substantially
Trusts
this type of trust instead of (or in
the same primary beneficiary(ies) and a
Section 645 provides that if both the
addition to) a will.
principal purpose of such trusts is
executor (if any) of an estate (the
Because this type of trust is
avoidance of tax. This provision applies
related estate) and the trustee of a
revocable, it is treated as a grantor type
only to that portion of the trust that is
qualified revocable trust (QRT) elect the
trust for tax purposes. See Grantor Type
attributable to contributions to corpus
treatment in section 645, the trust must
Trusts under Special Reporting
made after March 1, 1984.
be treated and taxed as part of the
Instructions, later, for special filing
related estate during the election period.
A trust is a domestic trust if:
instructions that apply to grantor trusts.
This election may be made by a QRT
A U.S. court is able to exercise
Be sure to read Optional Filing
even if no executor is appointed for the
primary supervision over the
Methods for Certain Grantor
related estate.
administration of the trust (court test),
TIP
Type Trusts. Generally, most
and
people that have revocable living trusts
In general, Form 8855, Election To
One or more U.S. persons have the
will be able to use Optional Method 1.
Treat a Qualified Revocable Trust as
authority to control all substantial
This method is the easiest and least
Part of an Estate, must be filed by the
decisions of the trust (control test).
burdensome way to meet your
due date for Form 1041 for the first tax
obligations.
See Regulations section 301.7701-7
year of the related estate. This applies
for more information on the court and
even if the combined related estate and
control tests.
Who Must File
electing trust don't have sufficient
income to be required to file Form 1041.
Also treated as a domestic trust is a
Decedent's Estate
However, if the estate is granted an
trust (other than a trust treated as wholly
extension of time to file Form 1041 for
The fiduciary (or one of the joint
owned by the grantor) that:
its first tax year, the due date for Form
fiduciaries) must file Form 1041 for a
Was in existence on August 20, 1996,
8855 is the extended due date.
domestic estate that has:
Was treated as a domestic trust on
August 19, 1996, and
1. Gross income for the tax year of
Once made, the election is
Elected to continue to be treated as a
$600 or more, or
irrevocable.
domestic trust.
2. A beneficiary who is a
Qualified revocable trusts (QRT). In
nonresident alien.
A trust that isn't a domestic trust is
general, a QRT is any trust (or part of a
3. If you held a qualified investment
treated as a foreign trust. If you are the
trust) that, on the day the decedent
in a qualified opportunity fund (QOF) at
trustee of a foreign trust, file Form
died, was treated as owned by the
any time during the year, you must file
1040NR instead of Form 1041. Also, a
decedent because the decedent held
your return with Form 8997 attached.
foreign trust with a U.S. owner generally
the power to revoke the trust as
See the Form 8997 instructions.
must file Form 3520-A, Annual
described in section 676. An electing
Information Return of Foreign Trust With
trust is a QRT for which a section 645
An estate is a domestic estate if it
a U.S. Owner.
election has been made.
isn't a foreign estate. A foreign estate is
one the income of which is from sources
If a domestic trust becomes a foreign
Election period. The election period is
outside the United States that isn't
trust, it is treated under section 684 as
the period of time during which an
effectively connected with the conduct
having transferred all of its assets to a
electing trust is treated as part of its
of a U.S. trade or business and isn't
foreign trust, except to the extent a
related estate.
includible in gross income. If you are the
grantor or another person is treated as
The election period begins on the
fiduciary of a foreign estate, file Form
the owner of the trust when the trust
date of the decedent's death and
1040NR, U.S. Nonresident Alien
becomes a foreign trust.
terminates on the earlier of:
Income Tax Return, instead of Form
Grantor Type Trusts
The day on which the electing trust
1041.
and related estate, if any, distribute all of
If all or any portion of a trust is a grantor
Trust
their assets, or
type trust, then that trust or portion of a
The day before the applicable date.
The fiduciary (or one of the joint
trust must follow the special reporting
To determine the applicable date, first
fiduciaries) must file Form 1041 for a
requirements discussed later, under
determine whether a Form 706, United
domestic trust taxable under section
Special Reporting Instructions. See
States Estate (and Generation-Skipping
641 that has:
Grantor Type Trust under Specific
Transfer) Tax Return, is required to be
Instructions for more details on what
1. Any taxable income for the tax
filed as a result of the decedent's death.
makes a trust a grantor type trust.
year,
If no Form 706 is required to be filed, the
2. Gross income of $600 or more
applicable date is 2 years after the date
Note. A trust may be part grantor trust
(regardless of taxable income), or
of the decedent's death. If Form 706 is
and part “other” type of trust, for
3. A beneficiary who is a
required, the applicable date is the later
example, simple or complex, or electing
nonresident alien.
of 2 years after the date of the
small business trust (ESBT).
Instructions for Form 1041 (2019)
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