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Department of the Treasury 2020 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

Section references are to the Internal Revenue Contents Page tax year of the NOL. Taxpayers may Code unless otherwise noted. Schedule B—Income Distribution elect to waive the carryback period for Contents Page Deduction ...... 29 NOLs arising in those years. To elect to What's New ...... 1 Schedule G—Tax Computation waive the carryback period for an NOL and Payments ...... 30 arising in a tax year beginning in 2018 or Reminders ...... 2 Net Investment Income Tax ...... 35 2019, attach a statement electing the Photographs of Missing Children ....2 Other Information ...... 36 carryback waiver to your return for the Unresolved Tax Issues ...... 2 Schedule J (Form 1041) — first tax year ending after March 27, How To Get Forms and Accumulation Distribution for 2020. The attached statement must Publications ...... 3 Certain Complex Trusts ...... 37 General Instructions ...... 3 indicate each tax year that you are Schedule K-1 (Form 1041)— making a carryback waiver. For more Purpose of Form ...... 3 Beneficiary's Share of information see Rev. Proc. 2020-24. If Income Taxation of Trusts and Income, Deductions, Credits, Decedents' Estates ...... 3 etc...... 40 you incurred an NOL in a tax year Abusive Trust Arrangements ...... 3 Index ...... 51 beginning in 2018 or 2019, you can file Definitions ...... 3 an amended Form 1041 to carryback Who Must File ...... 4 Future Developments the NOL. See Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, Electronic Filing ...... 8 For the latest information about and Trusts, for more information. When To File ...... 8 developments related to Form 1041 and Period Covered ...... 8 Schedules A, B, G, J, K-1 and its Business interest deduction. The Where To File ...... 8 instructions, such as legislation enacted business interest expense limitation of Who Must Sign ...... 8 after they were published, go to section 163(j) increased from 30% to Accounting Methods ...... 9 IRS.gov/Form1041. 50% of adjustable taxable income for Accounting Periods ...... 9 tax year 2020, and retroactively for Rounding Off to Whole Dollars ...... 9 What's New 2019. Every taxpayer who deducts Estimated Tax ...... 9 business interest is required to file Form Excess deductions on termination. 8990, Limitation on Business Interest Interest and Penalties ...... 10 Under Final Regulations - TD9918, each Other Forms That May Be Expense Under Section 163(j), unless Required ...... 11 excess deduction on termination of an an exception for filing is met. For more estate or trust retains its separate Additional Information ...... 12 information, see Form 8990 and its character as an amount allowed in Assembly and Attachments ...... 12 instructions. arriving at adjusted gross income, a Special Reporting Instructions ..... 13 non-miscellaneous itemized deduction, Excess business loss limitation. The Specific Instructions ...... 17 or a miscellaneous itemized deduction. excess business loss limitation of Name of Estate or Trust ...... 17 Box 11, code A, was revised to read noncorporate taxpayers (Form 461) has Name and Title of Fiduciary ...... 17 Excess deductions–Section 67(e) been repealed for 2020, and Address ...... 17 expenses and a new Box 11, code B, retroactively for 2018 and 2019. If you A. Type of Entity ...... 17 Excess deductions–Non-miscellaneous filed a 2018 or 2019 return with the B. Number of Schedules K-1 itemized deductions was added. limitation, you can file an amended Attached ...... 18 Form 1041. C. Employer Identification See Box 11, Code A—Excess Number ...... 18 Deductions on Termination-Section Qualified sick and family leave cred- D. Date Entity Created ...... 18 67(e) Expenses and Box 11, Code its. Two new lines have been added to E. Nonexempt Charitable and B—Excess Deductions on Termination - Schedule G, Part II, of Form 1041 to Split-Interest Trusts ...... 18 Non-Miscellaneous Itemized report the qualified sick and family leave F. Initial Return, Amended Return, Deductions later, for more information. credits: line 17, Refundable credit for etc...... 19 qualified sick and family leave, and Net operating loss (NOL) carryback. G. Section 645 Election ...... 19 line 18, Deferral. The Coronavirus Aid, Relief, and Income ...... 19 Economic Security Act (CARES Act, New employee retention credit. The Deductions ...... 21 P.L. 116-136) amended section 172 to CARES Act allows a new employee Limitations on Deductions ...... 22 allow a carryback of any net operating retention credit for qualified wages. Any Tax and Payments ...... 27 loss (NOL) arising in a tax year qualified wages for which an eligible Schedule A—Charitable Deduction ...... 28 beginning after 2017 and before 2021 to employer claims against payroll taxes each of the 5 tax years preceding the for the new employee retention credit

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may not be taken into account for $10,000. The deduction for foreign real bring these children home by looking at purposes of determining certain other property taxes is no longer allowed. See the photographs and calling credits. Line 11—Taxes, later. 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Capital gains and qualified divi- Credit for paid family and medical dends. For tax year 2020, the 20% leave. Eligible employers may qualify maximum capital gains rate applies to for a credit for wages paid to qualifying Unresolved Tax Issues estates and trusts with income above employees on family and medical leave. If you have attempted to deal with an $13,150. The 0% and 15% rates apply See section 45S. Also see Form 8994 IRS problem unsuccessfully, you should to certain threshold amounts. The 0% and its instructions. contact the Taxpayer Advocate Service rate applies to amounts up to $2,650. (TAS). The Taxpayer Advocate Extension of time to file. The The 15% rate applies to amounts over independently represents the estate's or extension of time to file an estate (other $2,650 and up to $13,150. trust's interests and concerns within the than a bankruptcy estate) or trust return IRS by protecting its rights and resolving Bankruptcy estate filing threshold. is 51/2 months. problems that have not been fixed For tax year 2020, the requirement to Item A. Type of Entity. On page 1 of through normal channels. file a return for a bankruptcy estate Form 1041, Item A, taxpayers should applies only if gross income is at least While Taxpayer Advocates can't select more than one box, when $12,400. change the tax law or make a technical appropriate, to reflect the type of entity. tax decision, they can clear up problems Qualified disability trust. For tax year Item F. Net operating loss (NOL) car- that resulted from previous contacts and 2020, a qualified disability trust can ryback. If an amended return is filed for ensure that the estate's or trust's case is claim an exemption of up to $4,300. an NOL carryback, check the box in given a complete and impartial review. This amount is not subject to phaseout. Item F Net operating loss carryback. The estate's or trust's assigned Reminders See Amended Return, later, for personal advocate will listen to its point complete information. of view and will work with the estate or • Review a copy of the will or trust Item G. Section 645 election. If the trust to address its concerns. The estate instrument, including any amendments or trust can expect the advocate to or codicils, before preparing an estate's estate has made a section 645 election the executor must check Item G and provide: or trust's return. • An impartial and independent look at • We encourage you to use Form provide the taxpayer identification number (TIN) of the electing trust with your problem, 1041-V, Payment Voucher, to • Timely acknowledgment, accompany your payment of a balance the highest total asset value in the box provided. • The name and phone number of the of tax due on Form 1041, particularly if individual assigned to its case, your payment is made by check or The executor must also attach a • Updates on progress, money order. statement to Form 1041 providing the • Timeframes for action, following information for each electing Line 20–Qualified Business Income • Speedy resolution, and trust (including the electing trust Deduction. Line 20 is used to report • Courteous service. provided in Item G): (a) the name of the the qualified business income deduction electing trust, (b) the TIN of the electing When contacting the Taxpayer attributable to the entity’s share of trust, and (c) the name and address of Advocate, you should provide the qualified items. Pass-through entity the trustee of the electing trust. following information. reporting statements are included in • The estate's or trust's name, address, these instructions to assist the trust or Form 1041 E-filing. When e-filing and employer identification number estate in reporting the proper qualified Form 1041 use either Form 8453-FE, (EIN). business income items and other U.S. Estate or Trust Declaration for an • The name and telephone number of information to its beneficiaries. These IRS e-File Return, or Form 8879-F, IRS an authorized contact person and the statements, or substantially similar e-file Signature Authorization for Form hours he or she can be reached. statements, must be attached to each 1041. • The type of tax return and year(s) beneficiary’s Schedule K-1 reporting Note. Form 8879-F can only be involved. their allocable share of each item and associated with a single Form 1041. • A detailed description of the problem. other information as applicable. Form 8879-F can no longer be used • Previous attempts to solve the ESBT Worksheet. An Electing Small with multiple Forms 1041. problem and the office that had been Business Trust (ESBT) Tax Worksheet For more information about e-filing contacted. is in the instructions to calculate the returns through MeF, see Pub. 4164, • A description of the hardship the ESBT tax. Modernized e-File (MeF) Guide for estate or trust is facing and supporting documentation (if applicable). Qualified Opportunity Investment. If Software Developers and Transmitters. you held a qualified investment in a You can contact a Taxpayer qualified opportunity fund (QOF) at any Photographs of Missing Advocate as follows. time during the year, you must file your Children • Call the Taxpayer Advocate's toll-free return with Form 8997, Initial and The Internal Revenue Service is a proud number: 877-777-4778. Annual Statement of Qualified partner with the National Center for • Call, write, or fax the Taxpayer Opportunity Fund Investments, attached Missing & Exploited Children® Advocate office in its area (see Pub. to your return. For more information, see (NCMEC). Photographs of missing 1546, Taxpayer Advocate Service, Your Form 8997 and its instructions. children selected by the Center may Voice At The IRS, for addresses and phone numbers). Deduction of taxes. The deduction for appear in instructions on pages that would otherwise be blank. You can help • TTY/TDD help is available by calling state and local taxes is limited to 800-829-4059.

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• Visit the website at IRS.gov/ and trusts. However, there is one major agreements, fees for services, purchase advocate. distinction. A trust or decedent's estate agreements, and distributions. is allowed an income distribution How To Get Forms and deduction for distributions to Some of the abusive trust arrangements that have been identified Publications beneficiaries. To figure this deduction, the fiduciary must complete Schedule B. include unincorporated business trusts Internet. You can access the The income distribution deduction (or organizations), equipment or service IRS website 24 hours a day, 7 determines the amount of any trusts, family residence trusts, charitable days a week, at IRS.gov to: distributions taxed to the beneficiaries. trusts, and final trusts. In each of these trusts, the original owner of the assets • Download forms, including talking tax For this reason, a trust or decedent's nominally subject to the trust effectively forms, instructions, and publications; estate sometimes is referred to as a retains the authority to cause financial • Order IRS products; “pass-through” entity. The beneficiary, benefits of the trust to be directly or • Use the online Internal Revenue and not the trust or decedent's estate, indirectly returned or made available to Code, regulations, and other official pays income tax on his or her the owner. For example, the trustee may guidance; distributive share of income. be the promoter, a relative, or a friend of • Research your tax questions; Schedule K-1 (Form 1041) is used to the owner who simply carries out the • Search publications by topic or notify the beneficiaries of the amounts directions of the owner whether or not keyword; to be included on their income tax permitted by the terms of the trust. • Apply for an Employer Identification returns. Number (EIN); and When trusts are used for legitimate Before preparing Form 1041, the Sign up to receive local and national business, family, or estate planning • fiduciary must figure the accounting tax news by email. purposes, either the trust, the income of the estate or trust under the beneficiary, or the transferor of assets to will or trust instrument and applicable the trust will pay the tax on income local law to determine the amount, if generated by the trust property. Trusts General Instructions any, of income that is required to be can't be used to transform a taxpayer's distributed, because the income personal, living, or educational Purpose of Form distribution deduction is based, in part, expenses into deductible items, and The fiduciary of a domestic decedent's on that amount. estate, trust, or bankruptcy estate uses can't seek to avoid tax liability by Form 1041 to report: Abusive Trust ignoring either the true ownership of • The income, deductions, gains, income and assets or the true losses, etc. of the estate or trust; Arrangements substance of transactions. Therefore, • The income that is either Certain trust arrangements claim to the tax results promised by the accumulated or held for future reduce or eliminate federal taxes in promoters of abusive trust distribution or distributed currently to the ways that are not permitted under the arrangements are not allowable under beneficiaries; law. Abusive trust arrangements the law, and the participants in and • Any income tax liability of the estate typically are promoted by the promise of promoters of these arrangements may or trust; tax benefits with no meaningful change be subject to civil or criminal penalties in • Employment taxes on wages paid to in the taxpayer's control over or benefit appropriate cases. from the taxpayer's income or assets. household employees; and For more details, including the legal • Net Investment Income Tax. See The promised benefits may include reduction or elimination of income principles that control the proper tax Schedule G, Part I, line 5, and the treatment of these abusive trust Instructions for Form 8960. subject to tax; deductions for personal expenses paid by the trust; depreciation arrangements, see Notice 97-24, 1997-1 C.B. 409. Income Taxation of Trusts deductions of an owner's personal and Decedents' Estates residence and furnishings; a stepped-up For additional information about basis for property transferred to the abusive tax arrangements, visit the IRS A trust or a decedent's estate is a trust; the reduction or elimination of website at IRS.gov and type “Abusive separate legal entity for federal tax self-employment taxes; and the Trusts” in the search box. purposes. A decedent's estate comes reduction or elimination of gift and into existence at the time of death of an estate taxes. These promised benefits Definitions individual. A trust may be created during are inconsistent with the tax rules an individual's life (inter vivos) or at the applicable to trust arrangements. Adjusted gross income (AGI). time of his or her death under a will Compute the AGI of an estate or (testamentary). If the trust instrument Abusive trust arrangements often use non-grantor trust by subtracting the contains certain provisions, then the trusts to hide the true ownership of following from total income on line 9 of person creating the trust (the grantor) is assets and income or to disguise the page 1: substance of transactions. These treated as the owner of the trust's 1. The administration costs of the assets. Such a trust is a grantor type arrangements frequently involve more than one trust, each holding different estate or trust (the total of lines 12, 14, trust. See Grantor Type Trusts, later, and 15a to the extent they are costs under Special Reporting Instructions. assets of the taxpayer (for example, the taxpayer's business, business incurred in the administration of the A trust or decedent's estate figures equipment, home, automobile, etc.). estate or trust) that wouldn't have been its gross income in much the same Some trusts may hold interests in other incurred if the property were not held by manner as an individual. Most trusts, purport to involve charities, or are the estate or trust; deductions and credits allowed to foreign trusts. Funds may flow from one 2. The income distribution individuals are also allowed to estates trust to another trust by way of rental deduction (line 18);

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3. The amount of the exemption • Deferred salary payments that are beneficiaries under the ordinary rules (line 21); payable to the decedent's estate, applied in chancery or probate courts. Uncollected interest on U.S. savings 4. The net operating loss deduction • Revocable living trust. A revocable bonds, (NOLD) claimed on line 15b. living trust is an arrangement created by Proceeds from the completed sale of • a written agreement or declaration Electing small business trust farm produce, and during the life of an individual and can (ESBT). Compute the AGI of the S The portion of a lump-sum • be changed or ended at any time during portion of an ESBT in the same manner distribution to the beneficiary of a the individual's life. A revocable living as an individual taxpayer, except that decedent's IRA that equals the balance trust is generally created to manage and administration costs allocable to the S in the IRA at the time of the owner's distribute property. Many people use portion (to the extent they are costs death. This includes unrealized this type of trust instead of (or in incurred in the administration of the trust appreciation and income accrued to that addition to) a will. that wouldn't have been incurred if the date, less the aggregate amount of the property were not held by the estate or owner's nondeductible contributions to Because this type of trust is trust) shall be deducted in arriving at the IRA. Such amounts are included in revocable, it is treated as a grantor type AGI. the beneficiary's gross income in the tax trust for tax purposes. See Grantor Type year that the distribution is received. Trusts under Special Reporting Beneficiary. A beneficiary includes an Instructions, later, for special filing The IRD has the same character it heir, a legatee, or a devisee. instructions that apply to grantor trusts. would have had if the decedent had Decedent's estate. The decedent's lived and received such amount. Be sure to read Optional Filing estate is an entity that is formed at the TIP Methods for Certain Grantor time of an individual's death and Deductions and credits in respect Type Trusts. Generally, most generally is charged with gathering the of a decedent. The following people that have revocable living trusts decedent's assets, paying the deductions and credits, when paid by will be able to use Optional Method 1. decedent's debts and expenses, and the decedent's estate, are allowed on This method is the easiest and least distributing the remaining assets. Form 1041 even though they were not burdensome way to meet your Generally, the estate consists of all the allowable on the decedent's final obligations. property, real or personal, tangible or income tax return. intangible, wherever situated, that the • Business expenses deductible under decedent owned an interest in at death. section 162. Who Must File Interest deductible under section 163. Distributable net income (DNI). The • Decedent's Estate • Taxes deductible under section 164. income distribution deduction allowable The fiduciary (or one of the joint to estates and trusts for amounts paid, • Percentage depletion allowed under section 611. fiduciaries) must file Form 1041 for a credited, or required to be distributed to domestic estate that has: beneficiaries is limited to DNI. This • Foreign tax credit. amount, which is figured on Schedule B, For more information on IRD, see 1. Gross income for the tax year of line 7, is also used to determine how section 691 and Pub. 559, Survivors, $600 or more, or much of an amount paid, credited, or Executors, and Administrators. 2. A beneficiary who is a required to be distributed to a Income required to be distributed nonresident alien. beneficiary will be includible in his or her currently. Income required to be 3. If you held a qualified investment gross income. distributed currently is income that is in a qualified opportunity fund (QOF) at Income in respect of a decedent. required under the terms of the any time during the year, you must file When completing Form 1041, you must governing instrument and applicable your return with Form 8997 attached. take into account any items that are local law to be distributed in the year it is See the Form 8997 instructions. received. The fiduciary must be under a income in respect of a decedent (IRD). An estate is a domestic estate if it duty to distribute the income currently, In general, IRD is income that a isn't a foreign estate. A foreign estate is even if the actual distribution is not decedent was entitled to receive but one the income of which is from sources made until after the close of the trust's that was not properly includible in the outside the United States that isn't tax year. See Regulations section decedent's final income tax return under effectively connected with the conduct 1.651(a)-2. the decedent's method of accounting. of a U.S. trade or business and isn't IRD includes: Fiduciary. A fiduciary is a trustee of a includible in gross income. If you are the • All accrued income of a decedent trust, or an executor, executrix, fiduciary of a foreign estate, file Form who reported his or her income on the administrator, administratrix, personal 1040-NR, U.S. Nonresident Alien cash method of accounting, representative, or person in possession Income Tax Return, instead of Form • Income accrued solely because of of property of a decedent's estate. 1041. the decedent's death in the case of a Trust decedent who reported his or her Note. Any reference in these income on the accrual method of instructions to “you” means the fiduciary The fiduciary (or one of the joint accounting, and of the estate or trust. fiduciaries) must file Form 1041 for a domestic trust taxable under section • Income to which the decedent had a Trust. A trust is an arrangement 641 that has: contingent claim at the time of his or her created either by a will or by an inter death. vivos declaration by which trustees take 1. Any taxable income for the tax Some examples of IRD for a title to property for the purpose of year, decedent who kept his or her books on protecting or conserving it for the 2. Gross income of $600 or more the cash method are: (regardless of taxable income), or

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3. A beneficiary who is a example, simple or complex, or electing required, the applicable date is the later nonresident alien. small business trust (ESBT). of 2 years after the date of the decedent's death or 6 months after the 4. If you held a qualified investment Qualified subchapter S trusts final determination of liability for estate in a qualified opportunity fund (QOF) at (QSSTs). QSSTs must follow the tax. For additional information, see any time during the year, you must file special reporting requirements for these Regulations section 1.645-1(f). your return with Form 8997 attached. trusts discussed later, under Special See the Form 8997 instructions. Reporting Instructions. Taxpayer identification number Two or more trusts are treated as (TIN). All QRTs must obtain a new TIN one trust if the trusts have substantially Special Rule for Certain Revocable following the death of the decedent the same grantor(s) and substantially Trusts whether or not a section 645 election is the same primary beneficiary(ies) and a made. (Use Form W-9, Request for Section 645 provides that if both the principal purpose of such trusts is Taxpayer Identification Number and executor (if any) of an estate (the avoidance of tax. This provision applies Certification, to notify payers of the new related estate) and the trustee of a only to that portion of the trust that is TIN.) qualified revocable trust (QRT) elect the attributable to contributions to corpus An electing trust that continues after treatment in section 645, the trust must made after March 1, 1984. the termination of the election period be treated and taxed as part of the doesn't need to obtain a new TIN related estate during the election period. A trust is a domestic trust if: following the termination unless: This election may be made by a QRT • A U.S. court is able to exercise • An executor was appointed and even if no executor is appointed for the primary supervision over the agreed to the election after the electing related estate. administration of the trust (court test), trust made a valid section 645 election, and and the electing trust filed a return as an • One or more U.S. persons have the In general, Form 8855, Election To estate under the trust's TIN, or authority to control all substantial Treat a Qualified Revocable Trust as • No executor was appointed and the decisions of the trust (control test). Part of an Estate, must be filed by the QRT was the filing trust (as explained due date for Form 1041 for the first tax later). 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 A related estate that continues after control tests. electing trust don't have sufficient the termination of the election period doesn't need to obtain a new TIN. Also treated as a domestic trust is a income to be required to file Form 1041. For more information about TINs, trust (other than a trust treated as wholly However, if the estate is granted an including trusts with multiple owners, owned by the grantor) that: extension of time to file Form 1041 for see Regulations sections 1.645-1 and Was in existence on August 20, 1996, its first tax year, the due date for Form • 301.6109-1(a). • Was treated as a domestic trust on 8855 is the extended due date. August 19, 1996, and General procedures for completing • Elected to continue to be treated as a Once made, the election is Form 1041 during the election peri- domestic trust. irrevocable. od. Qualified revocable trusts (QRT). In A trust that isn't a domestic trust is If there is an executor. The general, a QRT is any trust (or part of a treated as a foreign trust. If you are the following rules apply to filing Form 1041 trust) that, on the day the decedent trustee of a foreign trust, file Form while the election is in effect. died, was treated as owned by the 1040-NR instead of Form 1041. Also, a • The executor of the related estate is decedent because the decedent held foreign trust with a U.S. owner generally responsible for filing Form 1041 for the the power to revoke the trust as must file Form 3520-A, Annual estate and all electing trusts. The return described in section 676. An electing Information Return of Foreign Trust With is filed under the name and TIN of the trust is a QRT for which a section 645 a U.S. Owner. related estate. Be sure to check the election has been made. Decedent's estate box at the top of If a domestic trust becomes a foreign Election period. The election period is Form 1041 and Item G if the estate has trust, it is treated under section 684 as the period of time during which an made a section 645 election. The having transferred all of its assets to a electing trust is treated as part of its executor continues to file Form 1041 foreign trust, except to the extent a related estate. during the election period even if the grantor or another person is treated as estate distributes all of its assets before the owner of the trust when the trust The election period begins on the the end of the election period. becomes a foreign trust. date of the decedent's death and • The Form 1041 includes all items of terminates on the earlier of: income, deduction, and credit for the Grantor Type Trusts • The day on which the electing trust estate and all electing trusts. If all or any portion of a trust is a grantor and related estate, if any, distribute all of • For Item G, the executor must provide type trust, then that trust or portion of a their assets, or the TIN of the electing trust with the trust must follow the special reporting • The day before the applicable date. highest total asset value. requirements discussed later, under To determine the applicable date, first • The executor must attach a statement Special Reporting Instructions. See determine whether a Form 706, United to Form 1041 providing the following Grantor Type Trust under Specific States Estate (and Generation-Skipping information for each electing trust Instructions for more details on what Transfer) Tax Return, is required to be (including the electing trust provided in makes a trust a grantor type trust. filed as a result of the decedent's death. Item G): (a) the name of the electing If no Form 706 is required to be filed, the trust, (b) the TIN of the electing trust, Note. A trust may be part grantor trust applicable date is 2 years after the date and part “other” type of trust, for of the decedent's death. If Form 706 is

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and (c) the name and address of the an executor (or there isn't an executor tax year includes all items of income, trustee of the electing trust. and the trustee isn't the filing trustee), deduction, and credit for the electing • The related estate and the electing the trustee of an electing trust is trust for the period beginning with the trust are treated as separate shares for responsible for the following during the first day of the tax year and ending with purposes of computing DNI and election period. the last day of the election period. applying distribution provisions. Also, • To timely provide the executor with all • The deemed distribution rules each of those shares can contain two or the trust information necessary to allow discussed above apply. more separate shares. For more the executor to file a complete, • Check the box to indicate that this information, see Separate share rule, accurate, and timely Form 1041. Form 1041 is a final return. later, and Regulations section • To ensure that the electing trust's • If the filing trust continues after the 1.645-1(e)(2)(iii). share of the combined tax liability is termination of the election period, the • The executor is responsible for paid. trustee must obtain a new TIN. If the insuring that the estate's share of the The trustee does not file a Form 1041 trust meets the filing requirements, the combined tax obligation is paid. during the election period (except for a trustee must file a Form 1041 under the For additional information, including final return if the trust terminates during new TIN for the period beginning with treatment of transfers between shares the election period as explained later). the day after the close of the election and charitable contribution deductions, period and, in general, ending Procedure for completing Form 1041 see Regulations section 1.645-1(e). December 31 of that year. for the year in which the election ter- minates. Responsibilities of the trustee If there isn't an executor. If no when there is an executor (or there If there is an executor. If there is an executor has been appointed for the isn't an executor and the trustee executor, the Form 1041 filed under the related estate, the trustee of the electing isn't the filing trustee). In addition to name and TIN of the related estate for trust files Form 1041 as if it was an the requirements listed above under this the tax year in which the election estate. File using the TIN that the QRT same heading, the trustee is terminates includes (a) the items of obtained after the death of the responsible for the following. income, deduction, and credit for the decedent. The trustee can choose a If the trust will not continue after the related estate for its entire tax year, and • fiscal year as the trust's tax year during close of the election period, the trustee (b) the income, deductions, and credits the election period. Be sure to check the must file a Form 1041 under the name for the electing trust for the period that Decedent's estate box at the top of and TIN of the trust. Complete the entity ends with the last day of the election Form 1041 and Item G if the filing trust information and items A, C, D, and F. period. If the estate won't continue after has made a section 645 election. For Indicate in item F that this is a final the close of the tax year, indicate that Item G, the filing trustee must provide return. Don't report any items of income, this Form 1041 is a final return. the TIN of the electing trust with the deduction, or credit. highest total asset value. The electing At the end of the last day of the • If the trust will continue after the close trust is entitled to a single $600 personal election period, the combined entity is of the election period, the trustee must exemption on returns filed for the deemed to distribute the share file a Form 1041 for the trust for the tax election period. comprising the electing trust to a new year beginning the day after the close of If there is more than one electing trust. All items of income, including net the election period and, in general, trust, the trusts must appoint one trustee capital gains, that are attributable to the ending December 31 of that year. Use as the filing trustee. Form 1041 is filed share comprising the electing trust are the TIN obtained after the decedent's under the name and TIN of the filing included in the calculation of DNI of the death. Follow the general rules for trustee's trust. A statement providing the electing trust and treated as distributed. completing the return. same information about the electing The distribution rules of sections 661 trusts (except the filing trust) that is and 662 apply to this deemed Special filing instructions. listed under, If there is an executor, distribution. The combined entity is When the election isn't made by above must be attached to these Forms entitled to an income distribution the due date of the QRT's Form 1041. All electing trusts must choose deduction for this deemed distribution, 1041. If the section 645 election hasn't the same tax year. and the "new" trust must include its been made by the time the QRT's first If there is more than one electing share of the distribution in its income. income tax return would be due for the trust, the filing trustee is responsible for See Regulations sections 1.645-1(e)(2) tax year beginning with the decedent's ensuring that the filing trust's share of (iii) and 1.645-1(h) for more information. death, but the trustee and executor (if the combined tax liability is paid. If the electing trust continues in any) have decided to make a section For additional information on filing existence after the termination of the 645 election, then the QRT isn't required requirements when there is no executor, election period, the trustee must file to file a Form 1041 for the short tax year including application of the separate Form 1041 under the name and TIN of beginning with the decedent's death share rule, see Regulations section the trust, using the calendar year as its and ending on December 31 of that 1.645-1(e). For information on the accounting period, if it is otherwise year. However, if a valid election isn't requirements when an executor is required to file. subsequently made, the QRT may be appointed after an election is made and subject to penalties and interest for If there isn't an executor. If there failure to file and failure to pay. the executor doesn't agree to the isn't an executor, the following rules election, see below. apply to filing Form 1041 for the tax year If the QRT files a Form 1041 for this in which the election period ends. short period, and a valid section 645 Responsibilities of the trustee election is subsequently made, then the when there is an executor (or there • The tax year of the electing trust closes on the last day of the election trustee must file an amended Form isn't an executor and the trustee 1041 for the electing trust, excluding all isn't the filing trustee). When there is period, and the Form 1041 filed for that

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items of income, deduction, and credit These items are reported on the related Qualified Funeral Trusts of the electing trust. These amounts are estate's return. Trustees of pre-need funeral trusts who then included on the first Form 1041 elect treatment under section 685 file filed by the executor for the related Alaska Native Settlement Trusts Form 1041-QFT, U.S. Income Tax estate (or the filing trustee for the Return for Qualified Funeral Trusts. All electing trust filing as an estate). The trustee of an Alaska Native other pre-need funeral trusts, see Settlement Trust may elect the special Later appointed executor. If an Grantor Type Trusts, later, for Form tax treatment for the trust and its executor for the related estate isn't 1041 reporting requirements. beneficiaries provided for in section appointed until after the trustee has 646. The election must be made by the Qualified Settlement Funds made a valid section 645 election, the due date (including extensions) for filing executor must agree to the trustee's The trustee of a designated or qualified the trust's tax return for its first tax year election and they must file a revised settlement fund (QSF) generally must ending after June 7, 2001. Don't use Form 8855 within 90 days of the file Form 1120-SF, U.S. Income Tax Form 1041. Use Form 1041-N, U.S. appointment of the executor. If the Return for Settlement Funds, instead of Income Tax Return for Electing Alaska executor doesn't agree to the election, Form 1041. Native Settlement Trusts, to make the the election terminates as of the date of election. Additionally, Form 1041-N is Special election. If a QSF has only appointment of the executor. the trust's income tax return and one transferor, the transferor may elect If the executor agrees to the election, satisfies the section 6039H information to treat the QSF as a grantor type trust. the trustee must amend any Form 1041 reporting requirement for the trust. To make the grantor trust election, filed under the name and TIN of the the transferor must attach an election electing trust for the period beginning Bankruptcy Estate statement to a timely filed Form 1041, with the decedent's death. The The bankruptcy trustee or debtor-in- including extensions, that the amended returns are still filed under the possession must file Form 1041 for the administrator files for the QSF for the name and TIN of the electing trust, and estate of an individual involved in tax year in which the settlement fund is they must include the items of income, bankruptcy proceedings under established. If Form 1041 isn't filed deduction, and credit for the related chapter 7 or 11 of title 11 of the United because Optional Method 1 or 2 estate for the periods covered by the States Code if the estate has gross (described later) was chosen, attach the returns. Also, attach a statement to the income for the tax year of $12,400 or election statement to a timely filed amended Forms 1041 identifying the more. See Bankruptcy Estates, later, for income tax return, including extensions, name and TIN of the related estate, and details. of the transferor for the tax year in which the name and address of the executor. the settlement fund is established. Check the Final return box on the Charitable Remainder Trusts amended return for the tax year that A section 664 charitable remainder trust Election statement. The election ends with the appointment of the (CRT) doesn’t file Form 1041. Instead, a statement may be made separately or, if executor. Except for this amended CRT files Form 5227, Split-Interest Trust filed with Form 1041, on the attachment return, all returns filed for the combined Information Return. If the CRT has any described under Grantor Type Trusts, entity after the appointment of the unrelated business taxable income, it later. At the top of the election executor must be filed under the name also must file Form 4720, Return of statement, write “Section 1.468B-1(k) and TIN of the related estate. Certain Excise Taxes Under Chapters Election” and include the transferor's: • Name, If the election terminates as the result 41 and 42 of the Internal Revenue Code. • Address, of a later appointed executor, the • TIN, and executor of the related estate must file Common Trust Funds • A statement that he or she will treat Forms 1041 under the name and TIN of Don't file Form 1041 for a common trust the qualified settlement fund as a the related estate for all tax years of the fund maintained by a bank. Instead, the grantor type trust. related estate beginning with the fund may use Form 1065, U.S. Return decedent's death. The electing trust's of Partnership Income, for its return. For Widely Held Fixed Investment election period and tax year terminate more details, see section 584 and Trust (WHFITs) the day before the appointment of the Regulations section 1.6032-1. Trustees and middlemen of WHFITs executor. The trustee isn't required to don't file Form 1041. Instead, they amend any of the returns filed by the Electing Small Business Trusts report all items of gross income and electing trust for the period prior to the Electing small business trusts file Form proceeds on the appropriate Form appointment of the executor. The trust 1041. However, see Electing Small 1099. For the definition of a WHFIT, see must file a final Form 1041 following the Business Trusts (ESBTs), later, for a Regulations section 1.671-5(b)(22). A instructions above for completing Form discussion of the special reporting tax information statement that includes 1041 in the year in which the election requirements for these trusts. the information given to the IRS on terminates and there is no executor. Pooled Income Funds Forms 1099, as well as additional Termination of the trust during information identified in Regulations the election period. If an electing Pooled income funds file Form 1041. section 1.671-5(e) must be given to trust trust terminates during the election See Pooled Income Funds, later, for the interest holders. See the General period, the trustee of that trust must file special reporting requirements for these Instructions for Certain Information a final Form 1041 by completing the trusts. Additionally, pooled income Returns for more information. entity information (using the trust's EIN), funds must file Form 5227, Split-Interest checking the Final return box, and Trust Information Return. signing and dating the form. Don't report items of income, deduction, and credit.

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For the IRS mailing address to use if Where To File you’re using PDS, go to IRS.gov/ For all estates and trusts, including charitable and split-interest trusts (other than PDSstreetAddresses. Charitable Remainder Trusts). Private delivery services can't deliver items to P.O. boxes. You THEN use this address if you: must use the U.S. Postal IF you are located in ... Are not enclosing a check or Are enclosing a check or money Service to mail any item to an IRS P.O. money order ... order ... box address. Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, When To File Kentucky, Maine, For calendar year estates and trusts, file Maryland, Massachusetts, Form 1041 and Schedule(s) K-1 by Michigan, New Hampshire, Department of the Treasury Department of the Treasury New Jersey, New York, Internal Revenue Service Internal Revenue Service April 15, 2021. North Carolina, Ohio, Kansas City, MO 64999–0048 Kansas City, MO 64999–0148 For fiscal year estates and trusts, file Pennsylvania, Rhode Island, South Carolina, Form 1041 by the 15th day of the 4th Tennessee, Vermont, month following the close of the tax Virginia, West Virginia, year. For example, an estate that has a Wisconsin tax year that ends on June 30, 2021, Alabama, Alaska, Arizona, must file Form 1041 by October 15, Arkansas, California, 2021. If the due date falls on a Saturday, Colorado, Florida, Hawaii, Sunday, or legal holiday, file on the next Idaho, Iowa, Kansas, business day. Louisiana, Minnesota, Department of the Treasury Department of the Treasury Mississippi, Missouri, Internal Revenue Service Internal Revenue Service Extension of Time To File Montana, Nebraska, Ogden, Utah 84201-0048 Ogden, Utah 84201-0148 Nevada, New Mexico, If more time is needed to file the estate North Dakota, Oklahoma, or trust return, use Form 7004, Oregon, South Dakota, Application for Automatic Extension of Texas, Utah, Washington, Time To File Certain Business Income Wyoming Tax, Information, and Other Returns, to A foreign country or United Internal Revenue Service Internal Revenue Service apply for an automatic 51/2-month States possession P.O. Box 409101 P.O. Box 409101 extension of time to file. Ogden, Utah 84409 Ogden, Utah 84409 Period Covered (PIN). See Form 8879-F, IRS e-file File the 2020 return for calendar year Electronic Filing 2020 and fiscal years beginning in 2020 Qualified fiduciaries or transmitters may Signature Authorization for Form 1041, for details. and ending in 2021. If the return is for a be able to file Form 1041 and related fiscal year or a short tax year (less than schedules electronically. To become an Form 8879-F can only be 12 months), fill in the tax year space at e-file provider complete the following ! associated with a single Form the top of the form. steps. CAUTION 1041. Form 8879-F can't be The 2020 Form 1041 may also be 1. Create an IRS e-Services used with multiple Forms 1041. used for a tax year beginning in 2021 if: account. Form 1041 may also be e-Filed using 1. The estate or trust has a tax year 2. Submit your e-file provider Form 8453-FE, U.S. Estate or Trust of less than 12 months that begins and application online. Declaration for an IRS e-file return. ends in 2021, and 3. Pass a suitability check. For more information about e-filing 2. The 2021 Form 1041 isn't The online application process takes returns through MeF, see Publication available by the time the estate or trust 4-6 weeks to complete. 4164, Modernized e-File (MeF) Guide is required to file its tax return. However, for Software Developers and the estate or trust must show its 2021 Note. Existing e-file providers must Transmitters. tax year on the 2020 Form 1041 and now use e-Services to make account incorporate any tax law changes that updates. If Form 1041 is e-filed and there is a are effective for tax years beginning balance due, the fiduciary may Help is available online at e-services after 2020. authorize an electronic funds withdrawal or through the e-Help Desk at with the return. 866-255-0654 (512-416-7750 for Who Must Sign international calls), Monday through Private Delivery Services Friday, 6:30 a.m.- 6:00 p.m. (Central You can use certain private delivery Fiduciary time). Frequently asked questions and services (PDS) designated by the IRS to The fiduciary, or an authorized On-line Tutorials are available to answer meet the “timely mailing as timely filing/ representative, must sign Form 1041. If questions or to guide users through the paying” rule for tax returns and there are joint fiduciaries, only one is application process. payments. Go to IRS.gov/PDS for the required to sign the return. current list of designated services. If you file Form 1041 electronically, A financial institution that submitted you may sign the return electronically by The PDS can tell you how to get estimated tax payments for trusts for using a personal identification number written proof of the mailing date. which it is the trustee must enter its EIN

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in the space provided for the EIN of the anything (including any additional tax and schedules. If you do round to whole fiduciary. Don't enter the EIN of the liability), or otherwise represent the dollars, you must round all amounts. To trust. For this purpose, a financial estate or trust before the IRS. round, drop amounts under 50 cents institution is one that maintains a and increase amounts from 50 to 99 The authorization will automatically Treasury Tax and Loan (TT&L) account. cents to the next dollar. For example, end no later than the due date (without If you are an attorney or other individual $1.39 becomes $1 and $2.50 becomes regard to extensions) for filing the functioning in a fiduciary capacity, leave $3. estate's or trust's 2021 tax return. If the this space blank. Don't enter your fiduciary wants to expand the paid individual social security number (SSN). If you have to add two or more preparer's authorization or revoke the amounts to figure the amount to enter Paid Preparer authorization before it ends, see Pub. on a line, include cents when adding the Generally, anyone who is paid to 947, Practice Before the IRS and Power amounts and round off only the total. of Attorney. prepare a tax return must sign the return If you are entering amounts that and fill in the other blanks in the “Paid Accounting Methods include cents, make sure to include the Preparer Use Only” area of the return. decimal point. There is no cents column Figure taxable income using the method on the form. The person required to sign the of accounting regularly used in keeping return must: the estate's or trust's books and • Complete the required preparer records. Generally, permissible Estimated Tax information, methods include the cash method, the Generally, an estate or trust must pay • Sign it in the space provided for the accrual method, or any other method estimated income tax for 2021 if it preparer's signature (a facsimile authorized by the Internal Revenue expects to owe, after subtracting any signature is acceptable), and Code. In all cases, the method used withholding and credits, at least $1,000 • Give you a copy of the return for your must clearly reflect income. in tax, and it expects the withholding records. and credits to be less than the smaller Generally, the estate or trust may of: If you, as fiduciary, fill in Form 1041, change its accounting method (for leave the “Paid Preparer Use Only” income as a whole or for any material 1. 90% of the tax shown on the space blank. item) only by getting consent on Form 2021 tax return, or 3115, Application for Change in 2. 100% of the tax shown on the If someone prepares this return and Accounting Method. For more 2020 tax return (110% of that amount if doesn't charge you, that person should information, see Pub. 538, Accounting the estate's or trust's adjusted gross not sign the return. Periods and Methods. income on that return is more than Paid Preparer Authorization $150,000, and less than 2/3 of gross Accounting Periods income for 2020 or 2021 is from farming If the fiduciary wants to allow the IRS to or fishing). discuss the estate's or trust's 2020 tax For a decedent's estate, the moment of return with the paid preparer who signed death determines the end of the However, if a return was not filed for it, check the “Yes,” box in the signature decedent's tax year and the beginning 2020 or that return didn't cover a full 12 area of the return. This authorization of the estate's tax year. As executor or months, item 2 doesn't apply. applies only to the individual whose administrator, you choose the estate's signature appears in the Paid Preparer tax period when you file its first income For this purpose, include household Use Only area of the estate's or trust's tax return. The estate's first tax year employment taxes in the tax shown on return. It doesn't apply to the firm, if any, may be any period of 12 months or less the tax return, but only if either of the shown in that section. that ends on the last day of a month. If following is true: you select the last day of any month • The estate or trust will have federal If the “Yes,” box is checked, the other than December, you are adopting income tax withheld for 2021 (see the fiduciary is authorizing the IRS to call a fiscal tax year. instructions for Schedule G, Part II, the paid preparer to answer any line 14), or questions that may arise during the To change the accounting period of • The estate or trust would be required processing of the estate's or trust's an estate, use Form 1128, Application to make estimated tax payments for return. The fiduciary is also authorizing To Adopt, Change, or Retain a Tax 2021 even if it didn't include household the paid preparer to: Year. employment taxes when figuring • Give the IRS any information that is Generally, a trust must adopt a estimated tax. missing from the estate's or trust's calendar year. The following trusts are Exceptions return, exempt from this requirement. • Call the IRS for information about the • A trust that is exempt from tax under Estimated tax payments aren't required processing of the estate's or trust's section 501(a). from: return or the status of its refund or • A charitable trust described in section 1. An estate of a domestic decedent payment(s), and 4947(a)(1). or a domestic trust that had no tax • Respond to certain IRS notices that • A trust that is treated as wholly owned liability for the full 12-month 2020 tax the fiduciary has shared with the by a grantor under the rules of sections year; preparer about math errors, offsets, and 671 through 679. 2. A decedent's estate for any tax return preparation. The notices won't be year ending before the date that is 2 sent to the preparer. Rounding Off to Whole years after the decedent's death; or The fiduciary isn't authorizing the Dollars 3. A trust that was treated as owned paid preparer to receive any refund You may round off cents to whole by the decedent if the trust will receive check, bind the estate or trust to dollars on the estate's or trust's return the residue of the decedent's estate

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under the will (or if no will is admitted to being transferred to the beneficiary(ies) required to file Form 1041, to each probate, the trust primarily responsible even if you entered the amount on beneficiary who receives a distribution for paying debts, taxes, and expenses Schedule K-1. of property or an allocation of an item of of administration) for any tax year See the instructions for line the estate. ending before the date that is 2 years Schedule G, Part II, line 11 for more after the decedent's death. For each failure to provide details. Schedule K-1 to a beneficiary when due For more information, see Form and each failure to include on 1041-ES, Estimated Income Tax for Interest and Penalties Schedule K-1 all the information Estates and Trusts. required to be shown (or the inclusion of Interest incorrect information), a $280 penalty Electronic Deposits Interest is charged on taxes not paid by may be imposed with regard to each A financial institution that has been the due date, even if an extension of Schedule K-1 for which a failure occurs. designated as an authorized federal tax time to file is granted. The maximum penalty is $3,392,000 for depository, and acts as a fiduciary for at Interest is also charged on penalties all such failures during a calendar year. least 200 taxable trusts that are required imposed for failure to file, negligence, If the requirement to report information to pay estimated tax, is required to fraud, substantial valuation is intentionally disregarded, each $280 deposit the estimated tax payments misstatements, substantial penalty is increased to $560 or, if electronically using the Electronic understatements of tax, and reportable greater, 10% of the aggregate amount Federal Tax Payment System (EFTPS). transaction understatements. Interest is of items required to be reported, and the $3,392,000 maximum doesn't apply. A fiduciary that isn't required to make charged on the penalty from the due electronic deposits of estimated tax on date of the return (including extensions). The penalty won't be imposed if the behalf of a trust or an estate may The interest charge is figured at a rate fiduciary can show that not providing voluntarily participate in EFTPS. To determined under section 6621. information timely was due to enroll in or get more information about Late Filing of Return reasonable cause and not due to willful EFTPS, visit the EFTPS website at neglect. eftps.gov or call 1-800-555-4477. Also, The law provides a penalty of 5% of the see Pub. 966, Electronic Federal Tax tax due for each month, or part of a Underpaid Estimated Tax Payment System: A Guide to Getting month, for which a return isn't filed up to If the fiduciary underpaid estimated tax, Started. a maximum of 25% of the tax due (15% use Form 2210, Underpayment of for each month, or part of a month, up to Estimated Tax by Individuals, Estates, Depositing on time. For a deposit a maximum of 75% if the failure to file is and Trusts, to figure any penalty. Enter using EFTPS to be on time, the deposit fraudulent). If the return is more than 60 the amount of any penalty on Form must be submitted by 8:00 p.m. Eastern days late, the minimum penalty is the 1041, line 27. time the day before the due date of the smaller of $435 or the tax due. deposit. The penalty won't be imposed if you Trust Fund Recovery Penalty Section 643(g) Election can show that the failure to file on time This penalty may apply if certain excise, income, social security, and Medicare Fiduciaries of trusts that pay estimated was due to reasonable cause. If you taxes that must be collected or withheld tax may elect under section 643(g) to receive a notice about penalty and aren't collected or withheld, or these have any portion of their estimated tax interest after you file this return, send us taxes aren't paid. These taxes are payments allocated to any of the an explanation and we will determine if generally reported on Forms 720, 941, beneficiaries. you meet reasonable-cause criteria. Don't attach an explanation when you 943, 944, or 945. The trust fund The fiduciary of a decedent's estate file Form 1041. recovery penalty may be imposed on all may make a section 643(g) election only persons who are determined by the IRS for the final year of the estate. Late Payment of Tax to have been responsible for collecting, Generally, the penalty for not paying tax accounting for, or paying over these Make the election by filing Form when due is 1/2 of 1% of the unpaid taxes, and who acted willfully in not 1041-T, Allocation of Estimated Tax amount for each month or part of a doing so. The penalty is equal to the Payments to Beneficiaries, by the 65th month it remains unpaid. The maximum unpaid trust fund tax. See the day after the close of the estate's or penalty is 25% of the unpaid amount. Instructions for Form 720, Pub. 15 trust's tax year. Then, include that The penalty applies to any unpaid tax on (Circular E), Employer's Tax Guide, or amount on Schedule K-1 (Form 1041), the return. Any penalty is in addition to Pub. 51 (Circular A), Agricultural box 13, code A, for any beneficiaries for interest charges on late payments. Employer's Tax Guide, for more details, whom it was elected. including the definition of responsible If you include interest on either persons. If Form 1041-T was timely filed, the TIP of these penalties with your payments are treated as paid or payment, identify and enter Other Penalties credited to the beneficiary on the last these amounts in the bottom margin of Other penalties can be imposed for day of the tax year and must be Form 1041, page 1. Don't include the negligence, substantial understatement included as an other amount paid, interest or penalty amount in the of tax, and fraud. See Pub. 17, Your credited, or required to be distributed on balance of tax due on line 28. Federal Income Tax, for details on these Form 1041, Schedule B, line 10. See penalties. the instructions for Schedule B, line 10, Failure To Provide Information later. Timely Failure to make a timely election will You must provide Schedule K-1 (Form result in the estimated tax payments not 1041), on or before the day you are

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Other Forms That May Be withheld on wages and employer and and barter exchange transactions; employee social security and Medicare interest payments; payments of Required taxes. Certain small employers must file long-term care and accelerated death Form W-2, Wage and Tax Statement, Form 944, Employer's ANNUAL Federal benefits; nonemployee compensation; and Form W-3, Transmittal of Wage and Tax Return, instead of Form 941. For miscellaneous income payments; Tax Statements. more information, see the Instructions original issue discount; distributions Form 56, Notice Concerning for Form 944. Agricultural employers from Coverdell ESAs; distributions from Fiduciary Relationship. You must notify must file Form 943, Employer's Annual pensions, annuities, retirement or the IRS of the creation or termination of Federal Tax Return for Agricultural profit-sharing plans, IRAs (including a fiduciary relationship. You may use Employees, instead of Form 941, to SEPs, SIMPLEs, Roth IRAs, Roth Form 56 to provide this notice to the report income tax withheld and Conversions, and IRA IRS. employer and employee social security recharacterizations), insurance and Medicare taxes on farmworkers. contracts, etc.; proceeds from real Form 706, United States Estate (and estate transactions; and distributions Generation-Skipping Transfer) Tax Caution. See Trust Fund Recovery from an HSA, Archer MSA, or Medicare Return, or Form 706-NA, United States Penalty earlier. Advantage MSA. Estate (and Generation-Skipping Transfer) Tax Return, Estate of Form 945, Annual Return of Withheld Also, use certain of these returns to nonresident not a citizen of the United Federal Income Tax. Use this form to report amounts received as a nominee States. report income tax withheld from on behalf of another person, except nonpayroll payments, including amounts reported to beneficiaries on Form 706-GS(D), pensions, annuities, IRAs, gambling Schedule K-1 (Form 1041). Generation-Skipping Transfer Tax winnings, and backup withholding. Return for Distributions. Form 8275, Disclosure Statement. Caution. See Trust Fund Recovery File Form 8275 to disclose items or Form 706-GS(D-1), Notification of Penalty earlier. positions, except those contrary to a Distribution From a Generation-Skipping regulation, that are not otherwise Trust. Form 965, Inclusion of Deferred adequately disclosed on a tax return. Foreign Income Upon Transition to Form 706-GS(T), The disclosure is made to avoid parts of Participation Exemption System. Generation-Skipping Transfer Tax the accuracy-related penalty imposed for disregard of rules or substantial Return for Terminations. Form 965-A, Individual Report of Net understatement of tax. Form 8275 is 965 Tax Liability. Form 709, United States Gift (and also used for disclosures relating to Generation-Skipping Transfer) Tax Form 1040, U.S. Individual Income preparer penalties for understatements Return. Tax Return. due to unrealistic positions or disregard of rules. Form 720, Quarterly Federal Excise Form 1040-NR, U.S. Nonresident Tax Return. Use Form 720 to report Alien Income Tax Return. Form 8275-R, Regulation Disclosure environmental excise taxes, Statement, is used to disclose any item communications and air transportation Form 1040-SR, U.S. Tax Return for on a tax return for which a position has taxes, fuel taxes, luxury tax on Seniors. been taken that is contrary to Treasury passenger vehicles, manufacturers' Form 1041-A, U.S. Information regulations. taxes, ship passenger tax, and certain Return Trust Accumulation of Charitable Form 8288, U.S. Withholding Tax other excise taxes. Amounts. Return for Dispositions by Foreign Caution. See Trust Fund Recovery Form 1042, Annual Withholding Tax Persons of U.S. Real Property Interests, Penalty earlier. Return for U.S. Source Income of and Form 8288-A, Statement of Foreign Persons, and Form 1042-S, Withholding on Dispositions by Foreign Form 926, Return by a U.S. Foreign Person's U.S. Source Income Persons of U.S. Real Property Interests. Transferor of Property to a Foreign Subject to Withholding. Use these forms Use these forms to report and transmit Corporation. Use this form to report to report and transmit withheld tax on withheld tax on the sale of U.S. real certain information required under payments or distributions made to property by a foreign person. Also, use section 6038B. nonresident alien individuals, foreign these forms to report and transmit tax Form 940, Employer's Annual partnerships, or foreign corporations to withheld from amounts distributed to a Federal Unemployment (FUTA) Tax the extent such payments or foreign beneficiary from a “U.S. real Return. The estate or trust may be liable distributions constitute gross income property interest account” that a for FUTA tax and may have to file Form from sources within the United States domestic estate or trust is required to 940 if it paid wages of $1,500 or more in that isn't effectively connected with a establish under Regulations section any calendar quarter during the U.S. trade or business. For more 1.1445-5(c)(1)(iii). calendar year (or the preceding information, see sections 1441 and Form 8300, Report of Cash calendar year) or one or more 1442, and Pub. 515, Withholding of Tax Payments Over $10,000 Received in a employees worked for the estate or trust on Nonresident Aliens and Foreign Trade or Business. Generally, this form for some part of a day in any 20 different Entities. is used to report the receipt of more weeks during the calendar year (or the than $10,000 in cash or foreign currency Forms 1099-A, B, INT, LTC, MISC, preceding calendar year). in one transaction (or a series of related NEC, OID, Q, R, S, and SA. You may transactions). Form 941, Employer's QUARTERLY have to file these information returns to Federal Tax Return. Employers must file report acquisitions or abandonments of Form 8855, Election To Treat a this form quarterly to report income tax secured property; proceeds from broker Qualified Revocable Trust as Part of an

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Estate. This election allows a qualified • Any transaction that is the same as or Form 8992, U.S. Shareholder revocable trust to be treated and taxed substantially similar to tax avoidance Calculation of Global Intangible (for income tax purposes) as part of its transactions identified by the IRS as Low-Taxed Income (GILTI). related estate during the election period. listed transactions. • Any transaction offered under Form 8995, Qualified Business Form 8865, Return of U.S. Persons conditions of confidentiality and for Income Deduction - Simplified With Respect to Certain Foreign which the estate or trust paid a minimum Computation. Partnerships. The estate or trust may fee (confidential transaction). have to file Form 8865 if it: • Any transaction for which the estate Form 8995-A, Qualified Business 1. Controlled a foreign partnership or trust or a related party has Income Deduction. (that is, owned more than a 50% direct contractual protection against Form 8997, Initial Annual Statement or indirect interest in a foreign disallowance of the tax benefits of Qualified Opportunity Fund (QOF) partnership); (transaction with contractual protection). Investments. 2. Owned at least a 10% direct or • Any transaction resulting in a loss of indirect interest in a foreign partnership at least $2 million in any single year or Additional Information while U.S. persons controlled that $4 million in any combination of years partnership; ($50,000 in any single year if the loss is The following publications may assist you in preparing Form 1041: 3. Had an acquisition, disposition, or generated by a section 988 transaction) (loss transactions). • Pub. 550, Investment Income and change in proportional interest in a Expenses, foreign partnership that: • Any transaction substantially similar to one of the types of transactions • Pub. 559, Survivors, Executors, and a. Increased its direct interest to at identified by the IRS as a transaction of Administrators, least 10%; interest. • Pub. 590-A, Contributions to b. Reduced its direct interest of at Individual Retirement Arrangements least 10% to less than 10%; or See the Instructions for Form 8886 (IRAs), for more details and exceptions. Pub. 590-B, Distributions from c. Changed its direct interest by at • Individual Retirement Arrangements least a 10% interest. Form 8918, Material Advisor (IRAs), and 4. Contributed property to a foreign Disclosure Statement. Material advisors who provide material aid, assistance, or • Pub 4895, Tax Treatment of Property partnership in exchange for a Acquired From a Decedent Dying in partnership interest if: advice on organizing, managing, promoting, selling, implementing, 2010. a. Immediately after the insuring, or carrying out any reportable contribution, the estate or trust owned, transaction, and who directly or Assembly and directly or indirectly, at least a 10% indirectly receive or expect to receive a Attachments interest in the foreign partnership or minimum fee, must use Form 8918 to Assemble any schedules, forms, and b. The fair market value (FMV) of disclose any reportable transaction attachments behind Form 1041 in the the property the estate or trust under Regulations section 301.6111-3. following order: contributed to the foreign partnership, For more information, see Form 8918 1. Schedule I (Form 1041); for a partnership interest, when added and its instructions. to other contributions of property made 2. Schedule D (Form 1041); to the foreign partnership during the Form 8938, Statement of Specified 3. Form 4952; Foreign Financial Assets. preceding 12-month period, exceeds 4. Schedule H (Form 1040); $100,000. Form 8939, Allocation of Increase in 5. Form 3800; Basis for Property Acquired From a Also, the estate or trust may have to 6. Form 4136; file Form 8865 to report certain Decedent. This form is used to allocate dispositions by a foreign partnership of any additional basis when an executor 7. Form 8855; property it previously contributed to that makes the special section 1022 election 8. Form 8960; for property acquired from a decedent foreign partnership if it was a partner at 9. All other schedules and who died in 2010. the time of the disposition. forms; and For more details, including penalties Form 8960, Net Investment Income 10. All attachments. for failing to file Form 8865, see Form Tax—Individuals, Estates, and Trusts. Attachments 8865 and its separate instructions. Form 8971, Information Regarding If you need more space on the forms or Form 8886, Reportable Transaction Beneficiaries Acquiring Property From a Decedent. schedules, attach separate sheets. Use Disclosure Statement. Use Form 8886 the same size and format as on the to disclose information for each Form 8975, Country-by-Country printed forms. But show the totals on the reportable transaction in which the trust Report. printed forms. participated, directly or indirectly. Form 8886 must be filed for each tax year that Schedule A (Form 8975), Tax Attach these separate sheets after all the federal income tax liability of the Jurisdiction and Constituent Entity the schedules and forms. Enter the estate or trust is affected by its Information. estate's or trust's EIN on each sheet. participation in the transaction. The Form 8978, Partner's Additional Don't file a copy of the decedent's will estate or trust may have to pay a Reporting Year Tax. penalty if it has a requirement to file or the trust instrument unless the IRS Form 8886 but you fail to file it. The Form 8990, Limitation on Business requests it. following are reportable transactions. Interest Expense Under Section 163(j).

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from the portion of the trust that isn't any gain or loss recognized on the sale Special Reporting taxable directly to the grantor or owner. will be that of the trust. For more Instructions The fiduciary must give the grantor information on QSSTs, see Regulations (owner) of the trust a copy of the section 1.1361-1(j). Grantor type trusts, the S portion of attachment. electing small business trusts (ESBTs), Optional Filing Methods for Certain and bankruptcy estates all have Attachment. On the attachment, reporting requirements that are show: Grantor Type Trusts significantly different than other • The name, identifying number, and Generally, if a trust is treated as owned Subchapter J trusts and decedent's address of the person(s) to whom the by one grantor or other person, the estates. Additionally, grantor type trusts income is taxable; trustee may choose Optional Method 1 have optional filing methods available. • The income of the trust that is taxable or Optional Method 2 as the trust's Pooled income funds have many similar to the grantor or another person under method of reporting instead of filing reporting requirements that other sections 671 through 678. Report the Form 1041. A husband and wife will be Subchapter J trusts (other than grantor income in the same detail as it would be treated as one grantor for purposes of type trusts and electing small business reported on the grantor's return had it these two optional methods if: trusts) have but there are some very been received directly by the grantor; • All of the trust is treated as owned by important differences. These reporting and the husband and wife, and differences and optional filing methods • Any deductions or credits that apply • The husband and wife file their are discussed below by entity. to this income. Report these deductions income tax return jointly for that tax and credits in the same detail as they year. Grantor Type Trusts would be reported on the grantor's A trust is a grantor trust if the grantor return had they been received directly Generally, if a trust is treated as retains certain powers or ownership by the grantor. owned by two or more grantors or other benefits. This can also apply to only a The income taxable to the grantor or persons, the trustee may choose portion of a trust. See Grantor Type another person under sections 671 Optional Method 3 as the trust's method Trust, later, for details on what makes a through 678 and the deductions and of reporting instead of filing Form 1041. trust a grantor trust. credits that apply to that income must In general, a grantor trust is ignored be reported by that person on their own Once you choose the trust's filing for income tax purposes and all of the income tax return. method, you must follow the rules under income, deductions, etc., are treated as Changing filing methods if you want to Example. The John Doe Trust is a change to another method. belonging directly to the grantor. This grantor type trust. During the year, the also applies to any portion of a trust that trust sold 100 shares of ABC stock for Exceptions. The following trusts can't is treated as a grantor trust. $1,010 in which it had a basis of $10 report using the optional filing methods. and 200 shares of XYZ stock for $10 in • A common trust fund (as defined in Note. If only a portion of the trust is a which it had a $1,020 basis. section 584(a)). grantor type trust, indicate both grantor The trust doesn't report these • A foreign trust or a trust that has any trust and the other type of trust, for of its assets located outside the United example, simple or complex trust, as the transactions on Form 1041. Instead, a schedule is attached to the Form 1041 States. type of entities checked in Section A on • A qualified subchapter S trust (as page 1 of Form 1041. showing each stock transaction separately and in the same detail as defined in section 1361(d)(3)). The following instructions apply John Doe (grantor and owner) will need • A trust all of which is treated as ! only to grantor type trusts that to report these transactions on his Form owned by one grantor or one other CAUTION are not using an optional filing 8949, Sales and Other Dispositions of person whose tax year is other than a method. Capital Assets and Schedule D (Form calendar year. 1040). The trust doesn't net the capital • A trust all of which is treated as How to report. If the entire trust is a gains and losses, nor does it issue John owned by one or more grantors or other grantor trust, fill in only the entity Doe a Schedule K-1 (Form 1041) persons, one of which isn't a U.S. information of Form 1041. Don't show showing a $10 long-term capital loss. person. any dollar amounts on the form itself; • A trust all of which is treated as show dollar amounts only on an QSSTs. Income allocated to S owned by one or more grantors or other attachment to the form. Don't use corporation stock held by the trust is persons if at least one grantor or other Schedule K-1 (Form 1041) as the treated as owned by the income person is an exempt recipient for attachment. beneficiary of the portion of the trust that information reporting purposes, unless owns the stock. Report this income If only part of the trust is a grantor at least one grantor or other person isn't following the rules discussed above for type trust, the portion of the income, an exempt recipient and the trustee grantor type trusts. A QSST can't elect deductions, etc., that is allocable to the reports without treating any of the any of the optional filing methods non-grantor part of the trust is reported grantors or other persons as exempt discussed below. on Form 1041, under normal reporting recipients. rules. The amounts that are allocable However, the trust, and not the Optional Method 1. For a trust treated directly to the grantor are shown only on income beneficiary, is treated as the as owned by one grantor or by one an attachment to the form. Don't use owner of the S corporation stock for other person, the trustee must give all Schedule K-1 (Form 1041) as the figuring and attributing the tax results of payers of income during the tax year the attachment. However, Schedule K-1 is a disposition of the stock. For example, name and TIN of the grantor or other used to reflect any income distributed if the disposition is a sale, the QSST person treated as the owner of the trust election ends as to the stock sold and and the address of the trust. This

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method may be used only if the owner figuring taxable income and credits on Backup withholding. The following of the trust provides the trustee with a his or her income tax return. This grantor trusts are treated as payors for signed Form W-9, Request for Taxpayer statement satisfies the requirement to purposes of backup withholding. Identification Number and Certification. give the recipient copies of the Forms In addition, unless the grantor or other 1099 filed by the trustee. 1. A trust established after 1995, all person treated as owner of the trust is of which is owned by two or more Optional Method 3. For a trust treated the trustee or a co-trustee of the trust, grantors (treating spouses filing a joint as owned by two or more grantors or the trustee must give the grantor or return as one grantor). other persons, the trustee must give all other person treated as owner of the 2. A trust with 10 or more grantors payers of income during the tax year the trust a statement that: established after 1983 but before 1996. name, address, and TIN of the trust. Shows all items of income, deduction, • The trustee also must file with the IRS The trustee must withhold a certain and credit of the trust; the appropriate Forms 1099 to report percentage of reportable payments Identifies the payer of each item of • the income or gross proceeds paid to made to any grantor who is subject to income; the trust by all payers during the tax backup withholding. Explains how the grantor or other • year attributable to the part of the trust person treated as owner of the trust For more information, see section treated as owned by each grantor, or takes those items into account when 3406 and its regulations. other person, showing the trust as the figuring the grantor's or other person's payer and each grantor, or other person Pooled Income Funds taxable income or tax; and treated as owner of the trust, as the If you are filing for a pooled income Informs the grantor or other person • payee. The trustee must report each fund, attach a statement to support the treated as the owner of the trust that type of income in the aggregate and following: those items must be included when each item of gross proceeds separately. The calculation of the yearly rate of figuring taxable income and credits on • The due date for any Forms 1099 return, his or her income tax return. required to be filed with the IRS by a • The computation of the deduction for Grantor trusts that haven't trustee under this method is March 1, distributions to the beneficiaries, and TIP applied for an EIN and are going 2021 (March 31, 2021, if filed • The computation of any charitable to file under Optional Method 1 electronically). deduction. don't need an EIN for the trust as long In addition, the trustee must give See section 642 and the regulations as they continue to report under that each grantor or other person treated as thereunder for more information. method. owner of the trust a statement that: You don't have to complete • Shows all items of income, deduction, Schedules A or B of Form 1041. Optional Method 2. For a trust treated and credit of the trust attributable to the as owned by one grantor or by one Also, you must file Form 5227, part of the trust treated as owned by the Split-Interest Trust Information Return, other person, the trustee must give all grantor or other person; payers of income during the tax year the for the pooled income fund. However, if • Explains how the grantor or other all amounts were transferred in trust name, address, and TIN of the trust. person treated as owner of the trust The trustee also must file with the IRS before May 27, 1969, or if an amount takes those items into account when was transferred to the trust after May the appropriate Forms 1099 to report figuring the grantor's or other person's the income or gross proceeds paid to 26, 1969, for which no deduction was taxable income or tax; and allowed under any of the sections listed the trust during the tax year that shows • Informs the grantor or other person the trust as the payer and the grantor, or under section 4947(a)(2), then Form treated as the owner of the trust that 5227 does not have to be filed. other person treated as owner, as the those items must be included when payee. The trustee must report each figuring taxable income and credits on type of income in the aggregate and Note. Form 1041-A is no longer filed by his or her income tax return. This pooled income funds. each item of gross proceeds separately. statement satisfies the requirement to The due date for any Forms 1099 give the recipient copies of the Forms Electing Small Business Trusts required to be filed with the IRS by a 1099 filed by the trustee. (ESBTs) trustee under this method is March 1, 2021 (March 31, 2021, if filed Changing filing methods. A trustee Special rules apply when figuring the tax electronically). who previously had filed Form 1041 can on the S portion of an ESBT. The S change to one of the optional methods portion of an ESBT is the portion of the In addition, unless the grantor, or trust that consists of stock in one or other person treated as owner of the by filing a final Form 1041 for the tax year that immediately precedes the first more S corporations and isn't treated as trust, is the trustee or a co-trustee of the a grantor type trust. The tax on the S trust, the trustee must give the grantor tax year for which the trustee elects to report under one of the optional portion: or other person treated as owner of the • Must be figured separately from the trust a statement that: methods. On the front of the final Form 1041, the trustee must write “Pursuant tax on the remainder of the ESBT (if • Shows all items of income, deduction, to section 1.671-4(g), this is the final any) and attached to the return, and and credit of the trust; Form 1041 for this grantor trust,” and • Is entered on Schedule G, Part I, • Explains how the grantor or other check the Final return box in item F. line 4. person treated as owner of the trust takes those items into account when For more details on changing The tax on the remainder (non-S figuring the grantor's or other person's reporting methods, including changes portion) of the ESBT is figured in the taxable income or tax; and from one optional method to another, normal manner on Form 1041. • Informs the grantor or other person see Regulations section 1.671-4(g). Tax computation attachment. Attach treated as the owner of the trust that to the return the tax computation for the those items must be included when S portion of the ESBT.

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If you need to complete and attach a • Follow the instructions above for When To File tax form or worksheet for the S portion figuring the tax on the S corporation File Form 1041 on or before the 15th of the trust, write “ESBT” in the top items; day of the 4th month following the close margin of the tax form, worksheet, or Enter the ESBT tax on Schedule G, • of the tax year. Use Form 7004 to apply attachment. Part I, line 4; for an automatic 6-month extension of Carry the Total tax from line 9 of To compute the tax on the S portion: • time to file. • Treat that portion of the ESBT as if it Schedule G, Part I, to line 24 on page 1; and were a separate trust; Disclosure of Return Information • Include only the income, losses, • Complete the rest of the return. deductions, and credits allocated to the The grantor portion (if any) of an Under section 6103(e)(5), tax returns of ESBT as an S corporation shareholder ESBT will follow the rules discussed individual debtors who have filed for and gain or loss from the disposition of under Grantor Type Trusts, earlier. bankruptcy under chapters 7 or 11 of S corporation stock; title 11 are, upon written request, open • Aggregate items of income, losses, Bankruptcy Estates to inspection by or disclosure to the deductions, and credits allocated to the The bankruptcy estate that is created trustee. ESBT as an S corporation shareholder if when an individual debtor files a petition the S portion of the ESBT has stock in under either chapter 7 or 11 of title 11 of The returns subject to disclosure to more than one S corporation; the U.S. Code is treated as a separate the trustee are those for the year the • Deduct state and local income taxes taxable entity. The bankruptcy estate is bankruptcy begins and prior years. Use directly related to the S portion or administered by a trustee or a Form 4506, Request for Copy of Tax allocated to the S portion if the debtor-in-possession. If the case is later Return, to request copies of the allocation is reasonable in light of all the dismissed by the bankruptcy court, the individual debtor's tax returns. circumstances and administrative individual debtor is treated as if the If the bankruptcy case wasn't expenses that wouldn't have been bankruptcy petition had never been voluntary, disclosure can't be made incurred if the S corporation shares filed. before the bankruptcy court has entered were not held by the trust; an order for relief, unless the court rules Deduct interest expense paid or A separate taxable entity isn't • that the disclosure is needed for accrued on indebtedness incurred to created if a partnership or corporation determining whether relief should be acquire stock in an S corporation; files a petition under any chapter of title ordered. • Deduct charitable contributions 11 of the U.S. Code. attributable to the S portion. See Pub. For additional information about 526 to figure the amount of the Transfer of Tax Attributes From bankruptcy estates, see Pub. 908, deduction if either of the following apply. the Individual Debtor to the Bankruptcy Tax Guide. 1. Cash contributions or Bankruptcy Estate contributions of ordinary income Who Must File The bankruptcy estate succeeds to the property are more than 30% of the AGI Every trustee (or debtor-in-possession) following tax attributes of the individual of the S portion. for an individual's bankruptcy estate debtor: under chapter 7 or 11 of title 11 of the 2. Gifts of capital gain property are 1. Net operating loss (NOL) U.S. Code must file a return if the more than 20% of the AGI of the S carryovers; portion. bankruptcy estate has gross income of • Don't claim a deduction for capital $12,400 or more for tax years beginning 2. Charitable contribution losses in excess of capital gains; in 2020. carryovers; • Don't claim an income distribution 3. Recovery of tax benefit items; Failure to do so may result in an deduction or an exemption amount; 4. Credit carryovers; estimated Request for Administrative • Don't claim an exemption amount in 5. Capital loss carryovers; figuring the AMT; and Expenses being filed by the IRS in the • Don't use the tax rate schedule to bankruptcy proceeding or a motion to 6. Basis, holding period, and figure the tax. The tax is 37% of the S compel filing of the return. character of assets; portion's taxable income except in The filing of a tax return for the 7. Method of accounting; figuring the maximum tax on qualified ! bankruptcy estate doesn't 8. Unused passive activity losses; dividends and capital gains. CAUTION relieve the individual debtor(s) 9. Unused passive activity credits; of his, her, or their individual tax For additional information, see and Regulations section 1.641(c)-1. obligations. 10. Unused section 465 losses. Other information. When figuring the EIN tax and DNI on the remaining (non-S) Income, Deductions, and Credits portion of the trust, disregard the S Every bankruptcy estate of an individual corporation items. required to file a return must have its Under section 1398(c), the taxable own EIN. The SSN of the individual income of the bankruptcy estate Don't apportion to the beneficiaries debtor can't be used as the EIN for the generally is figured in the same manner any of the S corporation items. bankruptcy estate. as that of an individual. The gross If the ESBT consists entirely of stock income of the bankruptcy estate in one or more S corporations, don't Accounting Period includes any income included in make any entries on lines 1–23 property of the estate as defined in U.S. of page 1. Instead: A bankruptcy estate is allowed to have a Code, title 11, sections 541 and 1115. • Complete the entity portion; fiscal year. However, this period can't be longer than 12 months.

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Under section 1115 of title 11, tax years and forward to each of the 7 Tax Rate Schedule property of the bankruptcy estate succeeding tax years of the bankruptcy Figure the tax for the bankruptcy estate includes (a) earnings from services estate. The amount of an administrative using the tax rate schedule below. Enter performed by the debtor after the expense loss that may be carried to any the tax on Form 1040 or 1040-SR, beginning of the case (both wages and tax year is determined after the NOL line 16. self-employment income) and before deductions allowed for that year. An the case is closed, dismissed, or administrative expense loss is allowed If taxable income is: converted to a case under a different only to the bankruptcy estate and can't Of the But not chapter and (b) property described in be carried to any tax year of the Over— The tax is: amount over— section 541 of title 11 and income individual debtor. over— earned therefrom that the debtor $0 $9,875 10% $0 Carryback of NOLs and credits. acquires after the beginning of the case 9,875 40,125 $987.50 + 12% 9,875 Net operating losses (NOLs) 40,125 85,525 4,617.50 + 22% 40,125 and before the case is closed, 85,525 163,300 14,605.50 + 24% 85,525 dismissed, or converted. If section 1115 ! arising under section 172 in tax 163,300 207,350 33,271.50 + 32% 163,300 of title 11 applies, the bankruptcy CAUTION years beginning after 2017 and 207,350 311,025 47,367.50 + 35% 207,350 estate's gross income includes, as before 2021 can be carried back to 311,025 ...... 83,653.75 + 37% 311,025 described above, (a) the debtor's each of 5 tax years preceding the tax earnings from services performed after year of the NOL. The carryback period the beginning of the case and (b) the for NOLs can be waived. To elect to income from property acquired after the waive the carryback period for an NOL Prompt Determination of Tax beginning of the case. arising in a tax year beginning in 2018 or Liability 2019, attach a statement electing the To request a prompt determination of The income from property owned by carryback waiver to your return for the the tax liability of the bankruptcy estate, the debtor when the case began is also first tax year ending after March 27, the trustee or debtor-in-possession included in the bankruptcy estate's 2020. The attached statement must must file a written request for the gross income. However, if this property indicate each tax year that you are determination with the IRS. The request is exempted from the bankruptcy estate making a carryback waiver. For more must be submitted in duplicate and or is abandoned by the trustee or information see Rev. Proc. 2020-24. If executed under penalties of perjury. debtor-in-possession, the income from you incurred an NOL in a tax year The request must include a statement the property isn't included in the beginning in 2018 or 2019, you can file indicating that it is a request for prompt bankruptcy estate's gross income. Also an amended Form 1041 to carryback determination of tax liability and: (a) the included in income is gain from the sale the NOL. See Pub. 536 for more return type, and all the tax periods for of the bankruptcy estate's property. To information. which prompt determination is sought; figure gain, the trustee or If the bankruptcy estate itself incurs (b) the name and location of the office debtor-in-possession must determine where the return was filed; (c) the the correct basis of the property. an NOL (apart from losses carried forward to the estate from the individual debtor's name; (d) the debtor's SSN, TIN, or EIN; (e) the type of bankruptcy To determine whether any amount debtor), it can carry back its NOLs not only to previous tax years of the estate; (f) the bankruptcy case number; paid or incurred by the bankruptcy and (g) the court where the bankruptcy estate is allowable as a deduction or bankruptcy estate, but also to tax years of the individual debtor prior to the year is pending. Send the request to the credit, or is treated as wages for Centralized Insolvency Operation, P.O. employment tax purposes, treat the in which the bankruptcy proceedings began. Box 7346, Philadelphia, PA 19101-7346 amount as if it were paid or incurred by (marked “Request for Prompt the individual debtor in the same trade Excess credits, such as the foreign Determination”). or business or other activity the debtor tax credit, also may be carried back to engaged in before the bankruptcy pre-bankruptcy years of the individual The IRS will notify the trustee or proceedings began. debtor. debtor-in-possession within 60 days Administrative expenses. The Standard deduction. A bankruptcy from receipt of the request if the return bankruptcy estate is allowed a estate that doesn't itemize deductions is filed by the trustee or deduction for any administrative allowed a standard deduction of debtor-in-possession has been selected expense allowed under section 503 of $12,400 for tax year 2020. for examination or has been accepted title 11 of the U.S. Code, and any fee or as filed. If the return is selected for Discharge of indebtedness. In a title charge assessed under chapter 123 of examination, it will be examined as soon 11 case, gross income doesn't include title 28 of the U.S. Code, to the extent as possible. The IRS will notify the amounts that normally would be not disallowed under an Internal trustee or debtor-in-possession of any included in gross income resulting from Revenue Code provision (for example, tax due within 180 days from receipt of the discharge of indebtedness. section 263, 265, or 275). the request or within any additional time However, any amounts excluded from permitted by the bankruptcy court. Administrative expense loss. When gross income must be applied to reduce figuring an NOL, nonbusiness certain tax attributes in a certain order. See Rev. Proc. 2006-24, 2006-22 deductions (including administrative Attach Form 982, Reduction of Tax I.R.B. 943, available at IRS.gov/irb/ expenses) are limited under section Attributes Due to Discharge of 2006-22_IRB/ar12.html, modified by 172(d)(4) to the bankruptcy estate's Indebtedness (and Section 1082 Basis Announcement 2011–77, available at nonbusiness income. The excess Adjustment), to show the reduction of IRS.gov/irb/2011-51_IRB/ar13. nonbusiness deductions are an tax attributes. administrative expense loss that may be carried back to each of the 3 preceding

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Special Filing Instructions for I.R.B. 596, available at IRS.gov/irb/ of a trust is a grantor type trust or if only Bankruptcy Estates 2006-40_IRB/ar12.html. a portion of an electing small business trust is the S portion, then more than Use Form 1041 only as a transmittal for one box is checked. Form 1040 or 1040-SR. In the top Specific Instructions margin of Form 1040 or 1040-SR write Note. Determination of entity status is “Attachment to Form 1041. DO NOT Name of Estate or Trust made on an annual basis. DETACH.” Attach Form 1040 or Copy the exact name of the estate or There are special reporting 1040-SR to Form 1041. Complete only trust from the Form SS-4, Application for requirements for grantor type the identification area at the top of Form Employer Identification Number, that ! CAUTION trusts, pooled income funds, 1041. Enter the name of the individual you used to apply for the EIN. If the electing small business trusts, and debtor in the following format: “John Q. name of the trust was changed during bankruptcy estates. See Special Public Bankruptcy Estate.” Beneath, the tax year for which you are filing, Reporting Instructions, earlier. enter the name of the trustee in the enter the trust's new name and check following format: “Avery Snow, Trustee.” the Change in trust's name box in item Decedent's Estate In item D, enter the date the petition was F. filed or the date of conversion to a An estate of a deceased person is a chapter 7 or 11 case. If a grantor type trust (discussed taxable entity separate from the later), write the name, identification decedent. It generally continues to exist Enter on Form 1041, line 24, the total number, and address of the grantor(s) until the final distribution of the assets of tax from line 24 of Form 1040 or or other owner(s) in parentheses after the estate is made to the heirs and other 1040-SR. Complete lines 25 through 30 the name of the trust. beneficiaries. The income earned from of Form 1041, and sign and date it. the property of the estate during the Name and Title of period of administration or settlement In a chapter 11 case filed after Fiduciary must be accounted for and reported by October 16, 2005, the bankruptcy Enter the name and title of the fiduciary. the estate. estate's gross income may be affected If the name entered is different than the Simple Trust by section 1115 of title 11 of the U.S. name on the prior year's return, see A trust may qualify as a simple trust if: Code. See Income, Deductions, and Change in Fiduciary's Name and Credits earlier. The debtor may receive Change in Fiduciary, later. 1. The trust instrument requires that a Form W-2, 1099-INT, 1099-DIV, all income must be distributed currently; 1099-MISC, or 1099-NEC or other Address 2. The trust instrument doesn't information return reporting wages or Include the suite, room, or other unit provide that any amounts are to be paid, other income to the debtor for the entire number after the street address. If the permanently set aside, or used for year, even though some or all of this post office doesn't deliver mail to the charitable purposes; and income is includible in the bankruptcy street address and the fiduciary has a 3. The trust doesn't distribute estate's gross income under section P.O. box, show the box number instead. amounts allocated to the corpus of the 1115 of title 11 of the U.S. Code. If this trust. happens, the income reported to the If you want a third party (such as an debtor on the Form W-2 or 1099, or accountant or an attorney) to receive Complex Trust other information return (and the mail for the estate or trust, enter on the A complex trust is any trust that doesn't withheld income tax shown on these street address line “C/O” followed by the qualify as a simple trust as explained forms) must be reasonably allocated third party's name and street address or above. between the debtor and the bankruptcy P.O. box. estate. The debtor-in-possession (or the Qualified Disability Trust chapter 11 trustee, if one was If the estate or trust has had a change of address (including a change A qualified disability trust is any appointed) must attach a schedule that nongrantor trust: shows (a) all the income reported on the to an “in care of” name and address) 1. Described in 42 U.S.C. 1396p(c) Form W-2, Form 1099, or other and did not file Form 8822-B, Change of (2)(B)(iv) and established solely for the information return, (b) the portion of this Address or Responsible Party — benefit of an individual under 65 years income includible in the bankruptcy Business, check the Change in of age who is disabled, and estate's gross income, and (c) all the fiduciary's address box in item F. withheld income tax, if any, and the If the estate or trust has a change of 2. All the beneficiaries of which are portion of withheld tax reasonably mailing address (including a new "in determined by the Commissioner of allocated to the bankruptcy estate. Also, care of" name and address) or Social Security to have been disabled the debtor-in-possesion (or the responsible party after filing its return, for some part of the tax year within the chapter 11 trustee, if one was file Form 8822-B to notify the IRS of the meaning of 42 U.S.C. 1382c(a)(3). appointed) must attach a copy of the change. A trust will not fail to meet item 2 Form W-2, if any, issued to the debtor above just because the trust's corpus for the tax year if the Form W-2 reports A. Type of Entity may revert to a person who isn't wages to the debtor and some or all of Check the appropriate box(es) that disabled after the trust ceases to have the wages are includible in the describes the entity for which you are any disabled beneficiaries. bankruptcy estate's gross income filing the return. because of section 1115 of title 11 of ESBT (S Portion Only) the U.S. Code. For more details, In some cases, more than one box is The S portion of an ESBT is the portion including acceptable allocation checked. Check all boxes that apply to of the trust that consists of S corporation methods, see Notice 2006-83, 2006-40 your trust. For example, if only a portion

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stock and that isn't treated as owned by the individual debtor for federal income • In which all of the unexpired interests the grantor or another person. See tax purposes. See Bankruptcy Estates, are devoted to one or more charitable Electing Small Business Trusts earlier. purposes described in section 170(c)(2) (ESBTs), earlier, for more information (B); and about an ESBT. For more information, see section • For which a deduction was allowed 1398 and Pub. 908, Bankruptcy Tax under section 170 (for individual Grantor Type Trust Guide. taxpayers) or similar Code section for A grantor type trust is a legal trust under Pooled Income Fund personal holding companies, foreign applicable state law that isn't personal holding companies, or estates recognized as a separate taxable entity A pooled income fund is a split-interest or trusts (including a deduction for for income tax purposes because the trust with a remainder interest for a estate or gift tax purposes). grantor or other substantial owners have public charity and a life income interest not relinquished complete dominion and retained by the donor or for another Nonexempt charitable trust treated control over the trust. person. The property is held in a pool as a private foundation. If a with other pooled income fund property nonexempt charitable trust is treated as Generally, for transfers made in trust and doesn't include any tax-exempt though it were a private foundation after March 1, 1986, the grantor is securities. The income for a retained life under section 509, then the fiduciary treated as the owner of any portion of a interest is figured using the yearly rate must file Form 990-PF, Return of Private trust in which he or she has a of return earned by the trust. See Foundation, in addition to Form 1041. reversionary interest in either the section 642(c) and the related If a nonexempt charitable trust is income or corpus therefrom, if, as of the regulations for more information. treated as though it were a private inception of that portion of the trust, the foundation, and it has no taxable value of the reversionary interest is B. Number of Schedules income under Subtitle A, it may check more than 5% of the value of that K-1 Attached the box on Form 990-PF, Part VII-A, portion. Also, the grantor is treated as line 15 and enter the tax-exempt interest holding any power or interest that was Every trust or decedent's estate claiming an income distribution received or accrued during the year on held by either the grantor's spouse at that line, instead of filing Form 1041 to the time that the power or interest was deduction on page 1, line 18, must enter the number of Schedules K-1 (Form meet its section 6012 filing requirement created or who became the grantor's for that tax year. spouse after the creation of that power 1041) that are attached to Form 1041. or interest. See Grantor Type Trusts, Excise taxes. If a nonexempt earlier, for more information. C. Employer Identification charitable trust is treated as a private foundation, then it is subject to the same Pre-need funeral trusts. The Number Every estate or trust that is required to excise taxes under chapters 41 and 42 purchasers of pre-need funeral services that a private foundation is subject to. If are the grantors and the owners of file Form 1041 must have an EIN. An EIN may be applied for: the nonexempt charitable trust is liable pre-need funeral trusts established for any of these taxes (except the under state laws. See Rev. Rul. 87-127, • Online at IRS.gov/EIN. The EIN is issued immediately once the application section 4940 tax), then it reports these 1987-2 C.B. 156. However, the trustees taxes on Form 4720, Return of Certain of pre-need funeral trusts can elect to information is validated. • By mailing or faxing Form SS-4, Excise Taxes Under Chapters 41 and file the return and pay the tax for 42 of the Internal Revenue Code. Taxes qualified funeral trusts. For more Application for Employer Identification Number. paid by the trust on Form 4720 or on information, see Form 1041-QFT, U.S. Form 990-PF (the section 4940 tax) Income Tax Return for Qualified Funeral If the estate or trust hasn't received can't be taken as a deduction on Form Trusts. its EIN by the time the return is due, 1041. Nonqualified deferred compensation write “Applied for” and the date you Not a Private Foundation plans. Taxpayers may adopt and applied in the space for the EIN. For maintain grantor trusts in connection more details, see Pub. 583, Starting a Check this box if the nonexempt with nonqualified deferred Business and Keeping Records. charitable trust (section 4947(a)(1)) isn't compensation plans (sometimes treated as a private foundation under referred to as “rabbi trusts”). Rev. Proc. D. Date Entity Created section 509. For more information, see Regulations section 53.4947-1. 92-64, 1992-2 C.B. 422, provides a Enter the date the trust was created, or, “model grantor trust” for use in rabbi if a decedent's estate, the date of the Other returns that must be filed. If a trust arrangements. The procedure also decedent's death. nonexempt charitable trust isn't treated provides guidance for requesting rulings as though it were a private foundation, on the plans that use these trusts. E. Nonexempt Charitable the fiduciary must file Form 990, Return QSSTs. The beneficiary of a qualified and Split-Interest Trusts of Organization Exempt From Income subchapter S trust is treated as the Tax, or Form 990-EZ, Short Form substantial owner of that portion of the Section 4947(a)(1) Trust Return of Organization Exempt From trust which consists of stock in an S Check this box if the trust is a Income Tax, in addition to Form 1041, if corporation for which an election under nonexempt charitable trust within the the trust meets the filing requirements section 1361(d)(2) has been made. See meaning of section 4947(a)(1). for either of those forms. QSSTs, earlier. If a nonexempt charitable trust isn't A nonexempt charitable trust is a treated as though it were a private Bankruptcy Estate trust: foundation, and it has no taxable A chapter 7 or 11 bankruptcy estate is a • That isn't exempt from tax under income under Subtitle A, it may answer separate and distinct taxable entity from section 501(a);

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“Yes” on Form 990, Part V, line 12a and identifies the lines and amounts being return is filed, use Form 8822-B to notify enter the tax-exempt interest received changed on the amended return. the IRS. or accrued during the year on Form 990, Amended Schedule H (Form 1040). Part V, line 12b instead of filing Form Change in Fiduciary's Name If you discover an error on a Schedule H 1041 to meet its section 6012 filing If the fiduciary changed his or her name that you previously filed with Form 1041, requirement for that tax year (or if Form from the name that he or she entered on file an “Amended” Form 1041 and 990-EZ is filed instead of Form 990, you the prior year's return (or Form SS-4 if attach a corrected Schedule H. may check the box on Form 990-EZ, this is the first return being filed), be line 43 and enter the tax-exempt interest In the top margin of your corrected sure to check this box. Schedule H, write “CORRECTED” and received or accrued during the year on Change in Fiduciary's Address that line). the date you discovered the error. Also, on an attachment explain the reason for If the same fiduciary who filed the prior Section 4947(a)(2) Trust your correction. If you owe tax, pay the year's return (or Form SS-4 if this is the Check this box if the trust is a tax in full with your amended Form first return being filed) files the current split-interest trust described in section 1041. If you overpaid tax on a previously year's return and changed the address 4947(a)(2). filed Schedule H, depending on whether on the return (including a change to an "in care of" name and address), and A split-interest trust is a trust that: you choose the adjustment or claim for didn't report the change on Form • Isn't exempt from tax under section refund process to correct the error, you 8822-B, check this box. 501(a); must either repay or reimburse the employee's share of social security and • Has some unexpired interests that If the address shown on Form 1041 are devoted to purposes other than Medicare tax or get the employee's consent to the filing of a refund claim for changes after you file the form religious, charitable, or similar purposes (including a change to an "in care of" described in section 170(c)(2)(B); and their share. See Pub. 926, Household Employer's Tax Guide, for more name and address), file Form 8822-B to • Has amounts transferred in trust after notify the IRS of the change. May 26, 1969, for which a deduction information. was allowed under section 170 (for Amended Schedule K-1 (Form 1041). G. Section 645 Election individual taxpayers) or similar Code If the amended return results in a If a section 645 election was made by sections for personal holding change to income, or a change in filing Form 8855, check the box in item companies, foreign personal holding distribution of any income or other G. See Special Rule for Certain companies, or estates or trusts information provided to a beneficiary, an Revocable Trusts under Who Must File (including a deduction for estate or gift amended Schedule K-1 (Form 1041) and Form 8855 for more information tax purposes). must also be filed with the amended about this election. Other returns that must be filed. The Form 1041 and given to each fiduciary of a split-interest trust must file beneficiary. Check the “Amended K-1” Income Form 5227. However, see the box at the top of the amended Instructions for Form 5227 for the Schedule K-1. Determining Qualified Business exception that applies to split-interest Final Return Income trusts other than section 664 charitable Check this box if this is a final return The estate's or trust's qualified business remainder trusts. because the estate or trust has income includes items of income, gain, terminated. Also, check the “Final K-1” deduction, and loss that are effectively F. Initial Return, Amended box at the top of Schedule K-1. connected with the conduct of a trade or Return, etc. business within the United States and If, on the final return, there are included or allowed in determining Amended Return excess deductions, an unused capital taxable income for the year. This If you are filing an amended Form 1041: loss carryover, or an NOL carryover, includes the estate's or trust's share of • Check the “Amended return” box in see the instructions for Schedule K-1, items of income, gain, deduction, and Item F, box 11, later. loss from trades or business conducted • Complete the entire return, Change in Trust's Name by partnerships (other than PTPs), S • Correct the appropriate lines with the corporations, and other estates or If the name of the trust has changed new information, and trusts. For more information see section from the name shown on the prior year's • Refigure the estate's or trust's tax 199A, Form 8995 Instructions, and return (or Form SS-4 if this is the first liability. Form 8995-A Instructions. return being filed), be sure to check this Note. If you are amending the return box. Special Rule for Blind Trust for an NOL carryback, also check the If you are reporting income from a “Net operating loss carryback” box in Change in Fiduciary qualified blind trust (under the Ethics in Item F. If a different fiduciary enters his or her Government Act of 1978), don't identify name on the line for Name and title of If the total tax on line 24 is larger on the payer of any income to the trust but fiduciary than was shown on the prior the amended return than on the original complete the rest of the return as year's return (or Form SS-4 if this is the return, you generally should pay the provided in the instructions. Also write first return being filed) and you didn't file difference with the amended return. “Blind Trust” at the top of page 1. However, you should adjust this amount a Form 8822-B, be sure to check this if there is any increase or decrease in box. If there is a change in the fiduciary Extraterritorial Income the total payments shown on line 26. whose address is used as the mailing Exclusion address for the estate or trust after the Attach a sheet that explains the The extraterritorial income exclusion reason for the amendments and isn't allowed for transactions after 2006.

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However, income from certain long-term return of the decedent's estate. When diminished. See Pub. 550 for more sales and leases may still qualify for the preparing the decedent's final income details. exclusion. For details and to figure the tax return, report on Schedule B (Form • Dividends attributable to periods amount of the exclusion, see Form 1040), line 5 the ordinary dividends totaling more than 366 days that the 8873, Extraterritorial Income Exclusion, shown on Form 1099-DIV. Under the estate or trust received on any share of and its separate instructions. The estate last entry on line 5, subtotal all the preferred stock held for less than 91 or trust must report the extraterritorial dividends reported on line 5. Below the days during the 181-day period that income exclusion on line 15a of Form subtotal, write “Form 1041” and the began 90 days before the ex-dividend 1041, page 1. name and address shown on Form date. When counting the number of 1041 for the decedent's estate. Also, days the stock was held, include the day Although the extraterritorial income show the part of the ordinary dividends the estate or trust disposed of the stock exclusion is entered on line 15a, it is an reported on Form 1041 and subtract it but not the day it acquired the stock. exclusion from income and should be from the subtotal. However, you can't count certain days treated as tax-exempt income when during which the estate's or trust's risk completing other parts of the return. Report capital gain distributions of loss was diminished. See Pub. 550 TIP on Schedule D (Form 1041), for more details. Preferred dividends Line 1—Interest Income Line 13. Report the estate's or trust's share of all attributable to periods totaling less than taxable interest income that was Line 2b—Qualified Dividends 367 days are subject to the 61-day received during the tax year. Examples holding period rule above. Enter the beneficiary's allocable share • Dividends on any share of stock to of taxable interest include interest from: of qualified dividends on line 2b(1) and • Accounts (including certificates of the extent that the estate or trust is enter the estate's or trust's allocable under an obligation (including a short deposit and money market accounts) share on line 2b(2). with banks, credit unions, and thrift sale) to make related payments with institutions; If the estate or trust received qualified respect to positions in substantially • Notes, loans, and mortgages; dividends that were derived from IRD, similar or related property. • U.S. Treasury bills, notes, and bonds; you must reduce the amount on • Payments in lieu of dividends, but • U.S. savings bonds; line 2b(2) by the portion of the estate tax only if you know or have reason to know • Original issue discount; and deduction claimed on Form 1041, that the payments are not qualified • Income received as a regular interest page 1, line 19, that is attributable to dividends. holder of a real estate mortgage those qualified dividends. Don't reduce If you have an entry on investment conduit (REMIC). the amounts on line 2b by any other line 2b(2), be sure you use allocable expenses. For taxable bonds acquired after Schedule D (Form 1041), the Schedule D Tax Worksheet, or the 1987, amortizable bond premium is Note. The beneficiary's share (as treated as an offset to the interest Qualified Dividends Tax Worksheet, figured above) may differ from the whichever applies, to figure the estate's income instead of as a separate interest amount entered on line 2b of deduction. See Pub. 550. or trust's tax. Figuring the estate's or Schedule K-1 (Form 1041). trust's tax liability in this manner will For the year of the decedent's death, Qualified dividends. Qualified usually result in a lower tax. Forms 1099-INT issued in the dividends are eligible for a lower tax rate decedent's name may include interest than other ordinary income. Generally, Line 3—Business Income or income earned after the date of death these dividends are reported to the (Loss) that should be reported on the income estate or trust in box 1b of Form(s) tax return of the decedent's estate. If the estate operated a business, report 1099-DIV. See Pub. 550 for the the income and expenses on When preparing the decedent's final definition of qualified dividends if the income tax return, report on Schedule B Schedule C (Form 1040), Profit or Loss estate or trust received dividends not From Business. Enter the net profit or (Form 1040), line 1 the total interest reported on Form 1099-DIV. shown on Form 1099-INT. Under the (loss) from Schedule C on line 3. last entry on line 1, subtotal all the Exception. Some dividends may be Line 4—Capital Gain or (Loss) interest reported on line 1. Below the reported to the estate or trust as in Enter the gain from Schedule D (Form subtotal, write “Form 1041” and the box 1b of Form 1099-DIV but aren't 1041), Part III, line 19, column (3) or the name and address shown on Form qualified dividends. These include: loss from Part IV, line 20. 1041 for the decedent's estate. Also, • Dividends received on any share of show the part of the interest reported on stock that the estate or trust held for If you deferred a capital gain in to a Form 1041 and subtract it from the less than 61 days during the 121-day qualified opportunity fund (QOF), you subtotal. period that began 60 days before the must file your return with Schedule D, ex-dividend date. The ex-dividend date Line 2a—Total Ordinary Form 8949 and Form 8997 attached. is the first date following the declaration You will need to file Form 8997 annually Dividends of a dividend on which the purchaser of until you dispose of the investment. See Report the estate's or trust's share of all a stock isn't entitled to receive the next the Form 8997 instructions. ordinary dividends received during the dividend payment. When counting the Don't substitute Schedule D tax year. number of days the stock was held, include the day the estate or trust ! (Form 1040) for Schedule D For the year of the decedent's death, disposed of the stock but not the day it CAUTION (Form 1041). Forms 1099-DIV issued in the acquired the stock. However, you can't decedent's name may include dividends count certain days during which the earned after the date of death that estate's or trust's risk of loss was should be reported on the income tax

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Line 5—Rents, Royalties, Profit-Sharing Plans, IRAs, Insurance accounting income. See Regulations Partnerships, Other Estates Contracts, etc., that is treated as section 1.167(h)-1(b). ordinary income. For more information, Depletion. For mineral or timber and Trusts, etc. see Form 4972, Tax on Lump-Sum property held by a decedent's estate, Use Schedule E (Form 1040), Distributions, and its instructions. the depletion deduction is apportioned Supplemental Income and Loss, to Taxable contributions received during • between the estate and the heirs, report the estate's or trust's share of the tax year by an Alaska Native legatees, and devisees on the basis of income or (losses) from rents, royalties, Settlement Trust from an Alaska Native the estate's income from such property partnerships, S corporations, other Corporation. Report gain from taxable allocable to each. estates and trusts, and REMICs. Also contributions of non-cash property on use Schedule E (Form 1040) to report Schedule D (Form 1041). For mineral or timber property held in farm rental income and expenses based • Net section 965(a) inclusion. If you trust, the depletion deduction is on crops or livestock produced by a have a net section 965(a) inclusion for apportioned between the income tenant. Enter the net profit or (loss) from 2020, write “SEC 965” in the entry beneficiaries and the trust based on the Schedule E on line 5. See the space and enter the net inclusion trust income from such property Instructions for Schedule E (Form 1040) amount on line 8. The net 965(a) allocable to each, unless the governing for reporting requirements. inclusion is figured by subtracting the instrument (or local law) requires or 965(c) deduction (Form 965, Part II, permits the trustee to maintain a reserve If the estate or trust received a line 17) from the 965(a) inclusion (Form for depletion. If the trustee is required to Schedule K-1 from a partnership, S 965, Part I, line 3). You must also maintain a reserve, the deduction is first corporation, or other flow-through entity, complete and attach Form 965 and allocated to the trust, up to the amount use the corresponding lines on Form Form 965-A to your return. See the of the reserve. Any excess is allocated 1041 to report the interest, dividends, Instructions for Form 965 for more among the beneficiaries and the trust in capital gains, etc., from the flow-through information. the same manner as the trust's entity. accounting income. See Regulations Line 6—Farm Income or (Loss) Deductions section 1.611-1(c)(4). If the estate or trust operated a farm, Depreciation, Depletion, and Amortization. The deduction for amortization is apportioned between an use Schedule F (Form 1040), Profit or Amortization Loss From Farming, to report farm estate or trust and its beneficiaries income and expenses. Enter the net A trust or decedent's estate is allowed a under the same principles used to profit or (loss) from Schedule F on deduction for depreciation, depletion, apportion the deductions for line 6. and amortization only to the extent the depreciation and depletion. deductions aren't apportioned to the The deduction for the amortization of If an estate or trust has farm beneficiaries. An estate or trust isn't rental income and expenses reforestation expenditures under ! allowed to make an election under section 194 is allowed only to an estate. CAUTION based on crops or livestock section 179 to expense depreciable produced by a tenant, report the income business assets. Allocable share from a pass-through and expenses on Schedule E (Form entity. Depreciation, depletion, and 1040). Don't use Form 4835, Farm The estate's or trust's share of amortization received from a Rental Income and Expenses, or depreciation, depletion, and pass-through entity on a Schedule K-1 Schedule F (Form 1040) to report such amortization is generally reported on the is apportioned and reported in the same income and expenses and don't include appropriate lines of Schedule C, E, or F manner as discussed above. A section the net profit or (loss) from such income (Form 1040), the net income or loss 179 expense received from a and expenses on line 6. from which is shown on lines 3, 5, or 6 pass-through entity on a Schedule K-1 of Form 1041. If the deduction isn't isn't deductible by the estate or trust. Line 7—Ordinary Gain or (Loss) related to a specific business or activity, Allocation of Deductions for Enter from line 17, Form 4797, Sales of then report it on line 15a. Tax-Exempt Income Business Property, the ordinary gain or Depreciation. For a decedent's estate, Generally, no deduction that would loss from the sale or exchange of the depreciation deduction is otherwise be allowable is allowed for property other than capital assets and apportioned between the estate and the any expense (whether for business or also from involuntary conversions (other heirs, legatees, and devisees on the for the production of income) that is than casualty or theft). basis of the estate's income allocable to allocable to tax-exempt income. each. Line 8—Other Income Examples of tax-exempt income Enter other items of income not included For a trust, the depreciation include: on lines 1, 2a, and 3 through 7. List the deduction is apportioned between the • Certain death benefits (section 101), type and amount on an attached income beneficiaries and the trust on • Interest on state or local bonds schedule if the estate or trust has more the basis of the trust income allocable to (section 103), than one item. each, unless the governing instrument • Compensation for injuries or sickness (or local law) requires or permits the (section 104), and Items to be reported on line 8 include trustee to maintain a depreciation • Income from discharge of the following. reserve. If the trustee is required to indebtedness in a title 11 case (section • Unpaid compensation received by maintain a reserve, the deduction is first 108). the decedent's estate that is IRD. allocated to the trust, up to the amount • Any part of a total distribution shown of the reserve. Any excess is allocated Exception. State income taxes and on Form 1099-R, Distributions From among the income beneficiaries and the business expenses that are allocable to Pensions, Annuities, Retirement or trust in the same manner as the trust's tax-exempt interest are deductible.

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Expenses that are directly allocable working interests in oil and gas interest, see section 163(j) and to tax-exempt income are allocated only properties. See section 469(c)(3). Line 10-Interest, later. to tax-exempt income. A reasonable proportion of expenses indirectly Note. Material participation standards Transactions Between Related allocable to both tax-exempt income for estates and trusts haven't been Taxpayers and other income must be allocated to established by regulations. Under section 267, a trust that uses the each class of income. For a grantor trust, material accrual method of accounting may only Deductions That May Be participation is determined at the deduct business expenses and interest grantor level. owed to a related party in the year the Allowable for Estate Tax If the estate or trust distributes an payment is included in the income of the Purposes interest in a passive activity, the basis of related party. For this purpose, a related Administration expenses and casualty the property immediately before the party includes: and theft losses deductible on Form 706 distribution is increased by the passive 1. A grantor and a fiduciary of any may be deducted, to the extent activity losses allocable to the interest, trust; otherwise deductible for income tax and such losses can't be deducted. See 2. A fiduciary of a trust and a purposes, on Form 1041 if the fiduciary section 469(j)(12). fiduciary of another trust, if the same files a statement waiving the right to person is a grantor of both trusts; deduct the expenses and losses on Losses from passive activities Form 706. The statement must be filed TIP are first subject to the at-risk 3. A fiduciary of a trust and a before the expiration of the statutory rules. When the losses are beneficiary of such trust; period of limitations for the tax year the deductible under the at-risk rules, the 4. A fiduciary of a trust and a deduction is claimed. See Pub. 559 for passive activity rules then apply. beneficiary of another trust, if the same more information. person is a grantor of both trusts; Rental activities. Generally, rental Accrued Expenses activities are passive activities, whether 5. A fiduciary of a trust and a corporation more than 50% in value of Generally, an accrual basis taxpayer or not the taxpayer materially participates. However, certain taxpayers the outstanding stock of which is can deduct accrued expenses in the tax owned, directly or indirectly, by or for year that: (a) all events have occurred who materially participate in real property trades or businesses aren't the trust or by or for a person who is a that determine the liability; and (b) the grantor of the trust; and amount of the liability can be figured subject to the passive activity limitations with reasonable accuracy. However, all on losses from rental real estate 6. An executor of an estate and a the events that establish liability are activities in which they materially beneficiary of that estate, except for a treated as occurring only when participate. For more details, see sale or exchange to satisfy a pecuniary economic performance takes place. section 469(c)(7). bequest (that is, a bequest of a sum of There are exceptions for recurring For tax years of an estate ending less money). items. See section 461(h). than 2 years after the decedent's date of Line 10—Interest death, up to $25,000 of deductions and Limitations on Deductions deduction equivalents of credits from Enter the amount of interest (subject to rental real estate activities in which the limitations) paid or incurred by the At-Risk Loss Limitations decedent actively participated are estate or trust on amounts borrowed by Generally, the amount the estate or trust allowed. Any excess losses or credits the estate or trust, or on debt acquired has “at-risk” limits the loss it can deduct are suspended for the year and carried by the estate or trust (for example, for any tax year. Use Form 6198, forward. outstanding obligations from the At-Risk Limitations, to figure the decedent) that isn't claimed elsewhere Portfolio income. Portfolio income on the return. deductible loss for the year and file it isn't treated as income from a passive If the proceeds of a loan were used with Form 1041. For more information, activity, and passive losses and credits for more than one purpose (for example, see Pub. 925, Passive Activity and generally may not be applied to offset it. to purchase a portfolio investment and At-Risk Rules. Portfolio income generally includes to acquire an interest in a passive interest, dividends, royalties, and Passive Activity Loss and activity), the fiduciary must make an income from annuities. Portfolio income Credit Limitations interest allocation according to the rules of an estate or trust must be accounted in Temporary Regulations section In general. Section 469 and the for separately. regulations thereunder generally limit 1.163-8T. Forms to file. See Form 8582, Passive losses from passive activities to the Don't include interest paid on Activity Loss Limitations, to figure the amount of income derived from all indebtedness incurred or continued to amount of losses allowed from passive passive activities. Similarly, credits from purchase or carry obligations on which activities. See Form 8582-CR, Passive passive activities are generally limited to the interest is wholly exempt from Activity Credit Limitations, to figure the the tax attributable to such activities. income tax. amount of credit allowed for the current These limitations are first applied at the year. Personal interest isn't deductible. estate or trust level. Examples of personal interest include Generally, an activity is a passive Business Interest interest paid on: activity if it involves the conduct of any Business interest expense could be • Revolving charge accounts used to trade or business, and the taxpayer limited. For more information about purchase personal use property; does not materially participate in the limitations on deductions for business • Personal notes for money borrowed activity. Passive activities don't include from a bank, credit union, or other person;

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• Installment loans on personal use Generally, net investment income is Mortgage insurance provided by the property; and the excess of investment income over Department of Veterans Affairs and the • Underpayments of federal, state, or investment expenses. Investment Rural Housing Service is commonly local income taxes. expenses (other than interest) are known as a funding fee and guarantee deductible only to the extent they are fee, respectively. These fees can be Interest that is paid or incurred on allowable under section 67(e). deducted fully in 2020 if the mortgage indebtedness allocable to a trade or The amount of the investment insurance contract was issued in 2020. business (including a rental activity) interest deduction may be limited. Use Contact the mortgage insurance issuer should be deducted on the appropriate Form 4952, Investment Interest to determine the deductible amount if it line of Schedule C, E, or F (Form 1040), Expense Deduction, to figure the is not included in box 5 of Form 1098. the net income or loss from which is allowable investment interest deduction. shown on line 3, 5, or 6 of Form 1041. Prepaid mortgage insurance. If If you must complete Form 4952, the estate or trust paid mortgage Types of interest to include on line 10 check the box on line 10 of Form 1041 insurance premiums allocable to are: and attach Form 4952. Then, add the periods after 2020, such premiums must 1. Any investment interest (subject deductible investment interest to the be allocated over the shorter of: to limitations—see below); other types of deductible interest and • The stated term of the mortgage, or enter the total on line 10. • 84 months, beginning with the month 2. Any qualified residence interest the insurance was obtained. (see later); and Qualified residence interest. Interest paid or incurred by an estate or trust on The premiums are treated as paid in 3. Any interest payable under indebtedness secured by a qualified the year to which they are allocated. If section 6601 on any unpaid portion of residence of a beneficiary of an estate the mortgage is satisfied before its term, the estate tax attributable to the value of or trust is treated as qualified residence no deduction is allowed for the a reversionary or remainder interest in interest if the residence would be a unamortized balance. See Pub. 936 for property for the period during which an qualified residence (that is, the principal details. These allocation rules do not extension of time for payment of such residence or the secondary residence apply to qualified mortgage insurance tax is in effect. selected by the beneficiary) if owned by provided by the Department of Veterans Affairs or the Rural Housing Service (or Limitation on deduction of business the beneficiary. The beneficiary must their successor organizations). interest. Business interest expense is have a present interest in the estate or limited to the sum of business interest trust or an interest in the residuary of the Limit on the amount that is income, 50% of the adjusted taxable estate or trust. See Pub. 936, Home deductible. The estate or trust cannot income and floor plan financing interest. Mortgage Interest Deduction, for an deduct mortgage insurance premiums if Business interest expense includes any explanation of the general rules for the estate's or trust's AGI is more than interest paid or accrued on deducting home mortgage interest. $109,000. If the estate's or trust's AGI is indebtedness properly allocable to a See section 163(h)(3) for a definition more than $100,000, its deduction is trade or business. A taxpayer, other of qualified residence interest and for limited and you must use the Qualified than a tax shelter, that meets the gross limitations on indebtedness. Mortgage Insurance Premiums receipts test is not required to limit Qualified mortgage insurance premi- Deduction Worksheet, later, to figure business interest expense under section ums. Enter (on the worksheet later) the the deduction. See Adjusted gross 163(j). A taxpayer meets the gross qualified mortgage insurance premiums income (AGI), earlier, for information on receipts test if the taxpayer has average paid under a mortgage insurance figuring AGI. annual gross receipts of $26 million or contract issued after December 31, Line 11—Taxes less for the 3 prior tax years. Gross 2006, in connection with qualified receipts include the aggregate gross residence acquisition debt that was The deduction for state and receipts from all persons treated as a secured by a principal or secondary ! local taxes is limited to $10,000. single employer such as a controlled residence. See Prepaid mortgage CAUTION The limitation applies to the total group of corporations, commonly insurance later if the estate or trust paid of your state and local income taxes (or controlled partnerships or any premiums allocable after 2020. If at general sales taxes, if elected instead of proprietorships, and affiliated service least one other person was liable for income taxes), real estate taxes, and groups. If the taxpayer fails to meet the and paid the premiums in connection personal property taxes. The limitation gross receipts test, Form 8990, with the loan, and the premiums were does not apply to foreign income taxes, Limitation on Business Interest Expense reported on Form 1098, Mortgage and state and local taxes paid or Under Section 163(j), is generally Interest Statement, include the estate's accrued in carrying on a trade or required. or trust's share of the 2020 premiums on business or for the production of Investment interest. Generally, the worksheet later. income. investment interest is interest (including Qualified mortgage insurance is Enter any deductible taxes paid or amortizable bond premium on taxable mortgage insurance provided by the incurred during the tax year that aren't bonds acquired after October 22, 1986, Department of Veterans Affairs, the deductible elsewhere on Form 1041. but before January 1, 1988) that is paid Federal Housing Administration, or the Deductible taxes include the following: or incurred on indebtedness that is Rural Housing Service (or their • State and local income taxes. You properly allocable to property held for successor organizations), and private can deduct state and local income taxes investment. Investment interest doesn't mortgage insurance (as defined in unless you elect to deduct state and include any qualified residence interest, section 2 of the Homeowners Protection local general sales taxes. You can't or interest that is taken into account Act of 1998 as in effect on December deduct both. under section 469 in figuring income or 20, 2006). loss from a passive activity.

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Qualified Mortgage Insurance Premiums Deduction Worksheet Keep for Your Records

1. Enter the total premiums the estate or trust paid in 2020 for qualified mortgage insurance for a contract issued after December 31, 2006 ...... 1. 2. Enter the estate's or trust's AGI ...... 2. 3. Enter $100,000 ...... 3. 4. Is the amount on line 2 more than the amount on line 3? No. The deduction is not limited. Include the amount from line 1 above on Form 1041, line 10. Don’t complete the rest of this worksheet. Yes. Subtract line 3 from line 2. If the result is not a multiple of $1,000, increase it to the next multiple of $1,000. For example, increase $425 to $1,000, increase $2,025 to $3,000, etc...... 4. 5. Divide line 4 by $10,000. Enter the result as a decimal. If the result is 1.0 or more, enter 1.0 ...... 5. . 6. Multiply line 1 by line 5 ...... 6. 7. Qualified mortgage insurance premiums deduction. Subtract line 6 from line 1. Enter the result here and include the amount on Form 1041, line 10 ...... 7.

• State and local general sales taxes. instructions for Schedule G, Part I, local tax paid in the year the credit is You can elect to deduct state and local line 2a, later, for more details. applied. For more information about this general sales taxes instead of state and • The generation-skipping transfer safe harbor and examples, see Notice local income taxes. Generally, you can (GST) tax imposed on income 2019-12. elect to deduct the actual state and local distributions. general sales taxes (including Line 12—Fiduciary Fees compensating use taxes) you paid in Don't deduct: Enter the deductible fees paid or 2020 if the tax rate was the same as the • Federal income taxes; incurred to the fiduciary for general sales tax rate. However, sales • Estate, inheritance, legacy, administering the estate or trust during taxes on food, clothing, medical succession, and gift taxes; the tax year. supplies, and motor vehicles are • Federal duties and excise taxes; or • Foreign real property taxes. Fiduciary expenses include probate deductible as a general sales tax even if court fees and costs, fiduciary bond the tax rate was less than the general Safe harbor for certain charitable premiums, legal publication costs of sales tax rate. Sales taxes on motor contributions made in exchange for notices to creditors or heirs, the cost of vehicles are also deductible as a a state or local tax credit. If you certified copies of the decedent's death general sales tax if the tax rate was made a charitable contribution in certificate, and costs related to fiduciary more than the general sales tax rate, but exchange for a state or local tax credit accounts. the tax is deductible only up to the and your charitable contribution amount of tax that would have been deduction must be reduced as a result Fiduciary fees deducted on imposed at the general sales tax rate. of receiving or expecting to receive the TIP Form 706 can't be deducted on Motor vehicles include cars, tax credit, you may qualify for a safe Form 1041. motorcycles, motor homes, recreational harbor that allows you to treat some or vehicles, sport utility vehicles, trucks, all of the disallowed charitable Note. Fiduciary fees are allowable vans, and off-road vehicles. Also contribution as a payment of state and under section 67(e) if they are costs that include any state and local general local taxes. The safe harbor applies if are paid or incurred in connection with sales taxes paid for a leased motor you meet the following conditions. the administration of an estate or a vehicle. non-grantor trust that would not have 1. You made a cash contribution to been incurred if the property were not Do not include sales taxes paid on an entity described in section 170(c). held in such estate or trust. See Final items used in a trade or business. An 2. In return for the cash contribution, Regulation - TD9918 and Regulations estate or trust cannot use the Optional you received a state or local tax credit. section 1.67-4 for more information. Sales Tax Tables for individuals in the Instructions for Schedule A (Form 3. You must reduce your charitable Line 14—Attorney, Accountant, contribution deduction by the amount of 1040), Itemized Deductions, to figure its and Return Preparer Fees deduction. the state or local tax credit you receive. • State and local real property taxes. Expenses for preparation of fiduciary If you meet these conditions, and to the income tax returns, the decedent's final extent you apply the state or local tax individual income tax returns, and all Note. The deduction for foreign real credit to this or a prior year's state or property taxes is no longer allowed. estate and generation-skipping transfer local tax liability, you may include this tax returns, are fully deductible. • State and local personal property amount on line 11. To the extent you taxes. However, expenses for preparing all apply a portion of the credit to offset other tax returns, including gift tax • Foreign or U.S. possession income your state or local tax liability in a taxes. You may want to take a credit for returns, are considered costs commonly subsequent year (as permitted by law), and customarily incurred by individuals the tax instead of a deduction. See the you may treat this amount as state or

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and are not deductible. For more of the estate or trust. These amounts Bundled fees. If an estate or information, see Final Regulations - are not allowable deductions. non-grantor trust pays a single fee, TD9918 and Regulations section Ownership costs. Ownership costs commission, or other expense, such as 1.67-4. are costs that are chargeable to or a fiduciary's commission, attorney's fee, Line 15a—Other Deductions incurred by an owner of property simply or accountant's fee for both costs that by reason of being the owner of the are incurred commonly or customarily Attach your own statement, listing by by individuals and costs (other than a de type and amount all allowable property. These costs are commonly or customarily incurred by a hypothetical minimis amount) that are not incurred deductions that aren't deductible commonly or customarily by individuals, elsewhere on Form 1041. individual owner of such property and are not deductible by an estate or then (except to the extent provided Allowable deductions include all non-grantor trust. Under section 67(b), otherwise by guidance published in the deductions listed in section 67(b) they include, but are not limited to, Internal Revenue Bulletin) the single (including estate taxes attributable to condominium fees, insurance fee, commission, or other expense IRD under section 691(c)), and other premiums, maintenance and lawn (bundled fee) must be allocated, costs allowable under section 67(e) services, automobile registration and between the costs that are incurred paid or incurred in connection with the insurance costs, and partnership costs commonly or customarily by individuals, administration of the estate or trust that deemed to be passed through to and such costs not being deductible, and would not have been incurred if the reportable by a partner. Other expenses costs that are not incurred commonly or property were not held in the estate or incurred merely by reason of the customarily by individuals, such costs trust. ownership of property may be fully being deductible. deductible under other provisions of the Don't include any losses on There is an exception to the Code. worthless bonds and similar obligations allocation rule if a bundled fee is not and nonbusiness bad debts. Report Appraisal fees. Appraisal fees computed on an hourly basis. In this these losses as applicable on Form incurred to determine the fair market situation, only the portion of that fee that 8949, Sales and Other Dispositions of value of assets as of the decedent's is attributable to investment advice is Capital Assets. date of death (or the alternate valuation not deductible. The remaining portion is date), to determine value for purposes deductible. Don't deduct medical or funeral of making distributions, or as otherwise Out-of-pocket expenses billed to the expenses on Form 1041. Medical required to properly prepare the estate's estate or non-grantor trust are treated expenses of the decedent paid by the or trust's tax returns, or a as separate from the bundled fee and estate may be deductible on the generation-skipping transfer tax return, are not subject to allocation. decedent's income tax return for the are not incurred commonly or year incurred. See section 213(c). Estates and non-grantor trusts customarily by an individual and are cannot deduct payments made from the Funeral expenses are deductible only deductible. The cost of appraisals for on Form 706. bundled fee to third parties if such other purposes (for example, insurance) payments would not have been Other costs paid or incurred by es- is commonly or customarily incurred by deductible if they had been paid directly tates and non-grantor trusts. Under individuals and is not an allowable by the estate or non-grantor trust. deduction. section 67(e), deductions are allowable Any reasonable method may be used for costs which are paid or incurred by Investment advisory fees. Fees for to allocate a bundled fee, including an estate or non-grantor trust in investment advice, including any related without limitation the allocation of a connection with the administration of the services that would be provided to any portion of a fiduciary commission that is estate or trust and would not have been individual investor as part of an a bundled fee to investment advice. For incurred if the property were not held in investment advisory fee, are incurred more information, see Regulations such trust or estate. commonly or customarily by a section 1.67-4(c)(4). In determining whether a cost is hypothetical individual investor and are Note. The reasonable method deductible by an estate or non-grantor not deductible. However, certain standard does not apply to determine trust it must be determined whether the incremental costs of investment advice the portion of the bundled fee cost would be “commonly or beyond the amount that normally would attributable to payments made to third customarily” incurred by a hypothetical be charged to an individual investor are parties for commonly or customarily individual owning the same property. If deductible. incurred by an individual or to any other the cost would be deductible by a An incremental cost is a special, separately assessed expense hypothetical individual, it is not additional charge that is added solely commonly or customarily incurred by an deductible by the estate or non-grantor because the investment advice is individual, because those payments and trust. rendered to a trust or estate rather than expenses are readily identifiable without It is the type of product or service to an individual, including balancing any discretion on the part of the rendered to the estate or non-grantor beyond the usual varying interests of fiduciary or return preparer. trust in exchange for the cost, rather current beneficiaries and For more information, see than the description of the cost of that remaindermen. The deductible portion Regulations 1.67-4. product or service that is determinative. of the investment advisory fees is limited to the amount of those fees, if Costs that are incurred commonly or Other deductions reported on customarily by individuals include costs any, that exceeds the fees normally incurred in defense of a claim against charged to an individual investor. See line 15a. the estate, the decedent, or the Regulations section 1.67-4(b)(4). Bond premium(s). For taxable bonds non-grantor trust that are unrelated to acquired before October 23, 1986, if the the existence, validity, or administration

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fiduciary elected to amortize the trust's income distribution deduction. Also, a deduction is allowed for the premium, report the amortization on this However, if you are filing for a pooled GST tax imposed as a result of a line. If you made the election to amortize income fund, don't complete taxable termination or a direct skip the premium, the basis in the taxable Schedule B. Instead, attach a statement occurring as a result of the death of the bond must be reduced by the amount of to support the computation of the transferor. See section 691(c)(3). Enter amortization. income distribution deduction. For more the estate's or trust's share of these For tax-exempt bonds, you can't information, see Pooled Income Funds, deductions on line 19. earlier. deduct the premium that is amortized. Line 20—Qualified Business Although the premium can't be If the estate or trust claims an income Income Deduction deducted, you must amortize the distribution deduction, complete and To figure your Qualified Business tax-exempt bond by the amount of attach: Income Deduction, use Form 8995, premium amortized. Part I (through line 24) and Part II of • Qualified Business Income Deduction For more information, see section Schedule I (Form 1041) to refigure the Simplified Computation, or Form 171 and Pub. 550. deduction on a minimum tax basis, and 8995-A, Qualified Business Income Schedule K-1 (Form 1041) for each If you claim a bond premium • Deduction, as applicable. beneficiary to which a distribution was deduction for the estate or trust, figure made or required to be made. the deduction on a separate sheet and Use Form 8995 if: attach it to Form 1041. Cemetery perpetual care fund. On • You have qualified business income Casualty and theft losses. Use Form line 18, deduct the amount, not more (loss), REIT dividends, or PTP income 4684, Casualties and Thefts, to figure than $5 per gravesite, paid for (loss), any deductible casualty and theft maintenance of cemetery property. To • Your 2020 taxable income before the losses. the right of the entry space for line 18, qualified business income deduction is enter the number of gravesites. Also less than or equal to $163,300, and Estate's or trust's share of amortiza- write “Section 642(i) trust” in • You aren’t a patron in a specified tion, depreciation, and depletion not parentheses after the trust's name at the agricultural or horticultural cooperative. claimed elsewhere. If you can't top of Form 1041. You don't have to deduct the estate's or trust's complete Schedules B of Form 1041 If you don’t meet these requirements, apportioned share of amortization, and K-1 (Form 1041). use Form 8995-A. Attach whichever depreciation, and depletion as rent or Don't enter less than zero on line 18. form you use (Form 8995 or 8995-A) to royalty expenses on Schedule E (Form your return. Also attach Schedules C, E, 1040), or as business or farm expenses Line 19—Estate Tax Deduction or F (Form 1040), whichever form you on Schedule C, or F (Form 1040), (Including Certain use to report information about your itemize the estate's or trust's qualified business income. See the apportioned share of the deductions on Generation-Skipping Transfer Taxes) instructions for Forms 8995 and 8995-A an attached sheet and include them on for more information for figuring and line 15a. If the estate or trust includes IRD in its reporting your QBI deduction. gross income, and such amount was Note. Don't report the beneficiary's included in the decedent's gross estate Note. Report the beneficiary’s apportioned share of depreciation, for estate tax purposes, the estate or apportioned share of items of qualified depletion, and amortization on line 15a. trust is allowed to deduct in the same business income (loss) subject to Report the beneficiary's apportioned tax year that the income is included that beneficiary specific determinations, W-2 share of deductions on Schedule K-1 portion of the estate tax imposed on the wages, unadjusted basis immediately (Form 1041), box 9. decedent's estate that is attributable to after acquisition (UBIA) of qualified Itemize each beneficiary's the inclusion of the IRD in the property, qualified REIT dividends, and apportioned share of the deductions decedent's estate. For an example of qualified publicly traded partnership and report them in the appropriate box the computation, see Regulations income on a statement attached to of Schedule K-1 (Form 1041). section 1.691(c)-1 and Pub. 559. Schedule K-1 (Form 1041). See the Instructions for Schedule K-1 (Form If any amount properly paid, credited, Line 15b—Net Operating Loss 1041), box 14, code I, later. Deduction or required to be distributed by an estate or trust to a beneficiary consists Line 21—Exemption An estate or trust is allowed a net of IRD received by the estate or trust, operating loss deduction (NOLD) under don't include such amounts in Decedents' estates. A decedent's section 172. determining the estate tax deduction for estate is allowed a $600 exemption. If you claim a NOLD for the estate or the estate or trust. Figure the deduction Trusts required to distribute all in- trust, figure the deduction on a separate on a separate sheet. Attach the sheet to come currently. A trust whose sheet and attach it to the return. your return. governing instrument requires that all income be distributed currently is Line 18—Income Distribution If you claim a deduction for ! estate tax attributable to allowed a $300 exemption, even if it Deduction CAUTION qualified dividends or capital distributed amounts other than income If the estate or trust was required to gains, you may have to adjust the during the tax year. distribute income currently or if it paid, amount on Form 1041, page 1, Qualified disability trusts. A qualified credited, or was required to distribute line 2b(2), or Schedule D (Form 1041), disability trust is allowed a $4,300 any other amounts to beneficiaries line 22. exemption. This amount is not subject to during the tax year, complete phaseout. Schedule B to determine the estate's or

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A qualified disability trust is any trust: Complete Schedule A of Form 1045 attributable to the S portion of an ESBT. 1. Described in 42 U.S.C. 1396p(c) to figure the amount of the NOL that is See Schedule G, Part I, Line 4 -Tax on (2)(B)(iv) and established solely for the available for carryback or carryover. ESBTs, later, for more information. Use Form 1045 or file an amended benefit of an individual under 65 years Line 27—Estimated Tax Penalty of age who is disabled, and return to apply for a refund based on an NOL carryback. For more information, If line 28 is at least $1,000 and more 2. All of the beneficiaries of which see the Instructions for Form 1045, than 10% of the tax shown on Form are determined by the Commissioner of Application for Tentative Refund. 1041, or the estate or trust underpaid its Social Security to have been disabled On the termination of the estate or 2020 estimated tax liability for any for some part of the tax year within the payment period, it may owe a penalty. meaning of 42 U.S.C. 1382c(a)(3). trust, any unused NOL carryover that would be allowable to the estate or trust See Form 2210 to determine whether A trust will not fail to meet item 2 in a later tax year, but for the the estate or trust owes a penalty and to above just because the trust's corpus termination, is allowed to the figure the amount of the penalty. may revert to a person who isn't beneficiaries succeeding to the property Note. The penalty may be waived or disabled after the trust ceases to have of the estate or trust. See the any disabled beneficiaries. reduced under certain conditions. See instructions for Schedule K-1 (Form Pub. 505, Tax Withholding and All other trusts. A trust not described 1041), box 11, codes E and F, later. Estimated Tax, and the Instructions for above is allowed a $100 exemption. If you carry back an NOL to a Form 2210 for details. ! section 965 year, you are Line 28—Tax Due Tax and Payments CAUTION deemed to have made an election under section 965(n). See You must pay the tax in full when the Line 23—Taxable Income section 172(b)(1)(D)(iv) and Rev.Proc. return is filed. You may pay by EFTPS. Minimum taxable income. Line 23 2020-24. Also, see Frequently asked For more information about EFTPS, see can't be less than the larger of: questions about carrybacks of NOLs for Electronic Deposits, earlier. Also, you • The inversion gain of the estate or taxpayers who have had Section 965 may pay by check or money order or by trust, as figured under section 7874, if inclusions for additional information credit or debit card. the estate or trust is an expatriated regarding the consequences of carrying To pay by check or money order. entity or a partner in an expatriated back an NOL to a section 965 year, If you pay by check or money order: entity, or including limitations on refunds for • Make it payable to “United States • The sum of the excess inclusions of taxpayers that carry back NOLs to such Treasury”, the estate or trust from Schedule Q years. • Make sure the name of the estate or (Form 1066), Quarterly Notice to trust appears on the payment, Residual Interest Holder of REMIC Excess deductions on termination. If • Write the estate’s or trust’s EIN and Taxable Income or Net Loss Allocation, the estate or trust has for its final year “2020 Form 1041” on the payment, line 2c. deductions (excluding the charitable • Consider completing the 2020 Form deduction and personal exemption) in Net operating loss (NOL). If line 23 1041-V, and excess of its gross income, the excess • Enclose, but don't attach, the (figured without regard to the minimum deductions are allowed to the taxable income rule stated above) is a payment (and Form 1041-V, if beneficiaries succeeding to the property completed) with Form 1041. loss, the estate or trust may have an of the estate or trust and retain their NOL. Don't include the deductions separate character as an amount Note. The IRS can't accept a single claimed on lines 13, 18, and 21 when allowed in arriving at adjusted gross check (including a cashier's check) for figuring the amount of the NOL. income, a non-miscellaneous itemized amounts of $100,000,000 ($100 million) Generally, you are required to carry deduction, or a miscellaneous itemized or more. If you're sending $100 million back any NOL arising in a tax year deduction. In general, an unused NOL or more by check, you'll need to spread beginning in 2018, 2019, or 2020, to carryover that is allowed to beneficiaries the payments over two or more checks each of the 5 tax years preceding the (as explained above) can't also be with each check made out for an tax year in which the loss arises. treated as an excess deduction. amount less than $100 million. The However, you may file an election to However, if the final year of the estate or $100 million or more amount limit either waive the entire 5-year carryback trust is also the last year of the NOL doesn't apply to other methods of period or to exclude all of your section carryover period, the NOL carryover not payment (such as electronic payments), 965 years from the carryback period. absorbed in that tax year by the estate so please consider paying by means The election statement must indicate or trust is included as an excess other than checks. which election(s) you are making and to deduction. See the instructions for To pay by credit or debit card. which tax year(s) the election(s) apply. Schedule K-1 (Form 1041), box 11, For information on paying your taxes Guidance regarding when and how to codes A and B, later. electronically, including by credit or file these elections is provided in section debit card, go to IRS.gov/E-pay. 4.01 of Rev. Proc. 2020-24. For more Line 25—2020 Net 965 Tax information, see Pub. 536, Net Liability Paid Line 30a—Credited to 2021 Operating Losses (NOLs) for If you made a payment with respect to a Estimated Tax Individuals, Estates, and Trusts, and 2020 net 965 tax liability, enter the Enter the amount from line 29 that you Frequently asked questions about amount of the payment from Form want applied to the estate's or trust's carrybacks of NOLs for taxpayers who 965-A, Part II, column (k), line 4. 2021 estimated tax. have had Section 965 inclusions. Note. Include on line 25 amounts paid related to the net 965 tax liability

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5. The amount of each contribution mental disability to change the terms of Schedule A—Charitable and date of actual payment or, if the trust. Deduction applicable, the total amount of contributions paid to each organization Also, certain testamentary trusts that General Instructions during the next tax year, to be treated as were established by a will that was Generally, any part of the gross income paid in the prior tax year. executed on or before October 9, 1969, of an estate or trust (other than a simple may qualify. See Regulations section The election must be filed by the due 1.642(c)-2(b). trust) that, under the terms of the will or date (including extensions) for Form governing instrument, is paid (or treated 1041 for the next tax year. If the original Don't include any capital gains for the as paid) during the tax year for a return was filed on time, you may make charitable purpose specified in section tax year allocated to corpus and paid or the election on an amended return filed permanently set aside for charitable 170(c) is allowed as a deduction to the no later than 6 months after the due estate or trust. It isn't necessary that the purposes. Instead, enter these amounts date of the return (excluding on line 4. charitable organization be created or extensions). Write “Filed pursuant to organized in the United States. section 301.9100-2” at the top of the Line 2—Tax-Exempt Income A pooled income fund or a section amended return and file it at the same address you used for your original Allocable to Charitable 4947(a)(1) nonexempt charitable trust Contributions treated as a private foundation must return. attach a separate sheet to Form 1041 For more information about the Any estate or trust that pays or sets instead of using Schedule A of Form charitable deduction, see section 642(c) aside any part of its income for a 1041 to figure the charitable deduction. and related regulations. charitable purpose must reduce the deduction by the portion allocable to Additional return to be filed by Specific Instructions any tax-exempt income. If the governing trusts. Trusts, other than split-interest Line 1—Amounts Paid or instrument specifically provides as to trusts or nonexempt charitable trusts, Permanently Set Aside for the source from which amounts are that claim a charitable deduction also paid, permanently set aside, or to be file Form 1041-A unless the trust is Charitable Purposes From Gross used for charitable purposes, the required to distribute currently to the Income specific provisions control. In all other beneficiaries all the income for the year Enter amounts that were paid for a cases, determine the amount of determined under section 643(b) and charitable purpose out of the estate's or tax-exempt income allocable to related regulations. trust's gross income, including any charitable contributions by multiplying Pooled income funds and charitable capital gains that are attributable to line 1 by a fraction, the numerator of lead trusts also file Form 5227. See income under the governing instrument which is the total tax-exempt income of Form 5227 for information about any or local law. Include amounts paid the estate or trust, and the denominator exceptions. during the tax year from gross income of which is the gross income of the Election to treat contributions as received in a prior tax year, but only if no estate or trust. Don't include in the paid in the prior tax year. The deduction was allowed for any prior tax denominator any losses allocated to fiduciary of an estate or trust may elect year for these amounts. corpus. to treat as paid during the tax year any amount of gross income received during Estates, and certain trusts, may claim Line 4—Capital Gains for the Tax that tax year or any prior tax year that a deduction for amounts permanently Year Allocated to Corpus and Paid set aside for a charitable purpose from was paid in the next tax year for a or Permanently Set Aside for charitable purpose. gross income. Such amounts must be permanently set aside during the tax Charitable Purposes For example, if a calendar year year to be used exclusively for religious, estate or trust makes a qualified Enter the total of all capital gains for the charitable, scientific, literary, or charitable contribution on February 7, tax year that are: educational purposes, or for the 2021, from income earned in 2020 or • Allocated to corpus, and prevention of cruelty to children or prior, then the fiduciary can elect to treat • Paid or permanently set aside for animals, or for the establishment, the contribution as paid in 2020. charitable purposes. acquisition, maintenance, or operation To make the election, the fiduciary of a public cemetery not operated for Line 6—Section 1202 Exclusion must file a statement with Form 1041 for profit. the tax year in which the contribution is Allocable to Capital Gains Paid or treated as paid. This statement must For a trust to qualify, the trust may Permanently Set Aside for include: not be a simple trust, and the set aside Charitable Purposes 1. The name and address of the amounts must be required by the terms If the exclusion of gain from the sale or fiduciary; of a trust instrument that was created on exchange of qualified small business 2. The name of the estate or trust; or before October 9, 1969. (QSB) stock was claimed, enter the part of the gain included on Schedule A, 3. An indication that the fiduciary is Further, the trust instrument must making an election under section 642(c) lines 1 and 4, that was excluded under provide for an irrevocable remainder section 1202. (1) for contributions treated as paid interest to be transferred to or for the during such tax year; use of an organization described in 4. The name and address of each section 170(c); or the trust must have organization to which any such been created by a grantor who was at contribution is paid; and all times after October 9, 1969, under a

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extraordinary dividends or taxable stock specific provisions of the governing Schedule B—Income dividends included on page 1, line 2, instrument control if the instrument Distribution Deduction and determined under the governing specifically provides as to the source instrument and applicable local law to from which amounts are paid, General Instructions be allocable to corpus. permanently set aside, or to be used for If the estate or trust was required to charitable purposes. distribute income currently or if it paid, Line 2—Adjusted Tax-Exempt credited, or was required to distribute Interest In all other cases, determine the any other amounts to beneficiaries amount to enter by multiplying line 1 of during the tax year, complete To figure the adjusted tax-exempt Schedule A by a fraction, the numerator Schedule B to determine the estate's or interest: of which is the amount of net capital trust's income distribution deduction. gains that are included in the accounting Step 1. Add tax-exempt interest income of the estate or trust (that is, not Note. Use Schedule I (Form 1041) to income on line 2 of Schedule A, any allocated to corpus) and are distributed compute the DNI and income expenses allowable under section 212 to charities, and the denominator of distribution deduction on a minimum tax allocable to tax-exempt interest, and which is all items of income (including basis. any interest expense allocable to the amount of such net capital gains) tax-exempt interest. Pooled income funds. Don't complete included in the DNI. Schedule B for these funds. Instead, Step 2. Subtract the Step 1 total from Reduce the amount on line 5 by any attach a separate statement to support the amount of tax-exempt interest allocable section 1202 exclusion. the computation of the income (including exempt-interest dividends) distribution deduction. See Pooled received. Income Funds, earlier, for more Line 8—Accounting Income information. Section 212 expenses that are If you are filing for a decedent's estate Separate share rule. If a single trust or directly allocable to tax-exempt interest or a simple trust, skip this line. If you are an estate has more than one are allocated only to tax-exempt filing for a complex trust, enter the beneficiary, and if different beneficiaries interest. A reasonable proportion of income for the tax year determined have substantially separate and section 212 expenses that are indirectly under the terms of the governing independent shares, their shares are allocable to both tax-exempt interest instrument and applicable local law. treated as separate trusts or estates for and other income must be allocated to Don't include extraordinary dividends or the sole purpose of determining the DNI each class of income. taxable stock dividends determined allocable to the respective beneficiaries. under the governing instrument and Figure the interest expense allocable If the separate share rule applies, applicable local law to be allocable to to tax-exempt interest according to the figure the DNI allocable to each corpus. guidelines in Rev. Proc. 72-18, 1972-1 beneficiary on a separate sheet and C.B. 740. attach the sheet to this return. Any Lines 9 and 10 deduction or loss that is applicable See Regulations sections 1.643(a)-5 Don't include any: solely to one separate share of the trust and 1.265-1 for more information. • Amount that was deducted on the or estate isn't available to any other prior year's return that was required to share of the same trust or estate. Line 3 be distributed in the prior year; For more information, see section • Amount that is paid or permanently 663(c) and related regulations. Include all capital gains, whether or not set aside for charitable purposes or distributed, that are attributable to otherwise qualifying for the charitable Withholding of tax on foreign per- income under the governing instrument deduction; or sons. The fiduciary may be liable for or local law. For example, if the trustee Amount that is properly paid or withholding tax on distributions to • distributed 50% of the current year's credited as a gift or bequest of a specific beneficiaries who are foreign persons. capital gains to the income beneficiaries amount of money or specific property. For more information, see Pub. 515, (and reflects this amount in column (1), Withholding of Tax on Nonresident line 19 of Schedule D (Form 1041)), but Note. An amount that can be paid or Aliens and Foreign Entities, and Forms under the governing instrument all 1042 and 1042-S. credited only from income isn't capital gains are attributable to income, considered a gift or bequest. Also, to Specific Instructions then include 100% of the capital gains qualify as a gift or bequest, the amount on line 3. If the amount on Schedule D must be paid in three or fewer Line 1—Adjusted Total Income (Form 1041), line 19, column (1), is a installments. Generally, enter on line 1, Schedule B, net loss, enter zero. the amount from line 17 on page 1 of Line 9—Income Required To Be Form 1041. However, if both line 4 and If the exclusion of gain from the sale line 17 on page 1 of Form 1041 are or exchange of QSB stock was claimed, Distributed Currently losses, enter on line 1, Schedule B, the don't reduce the gain on line 3 by any Line 9 is to be completed by all simple smaller of those losses. If line 4 is zero amount excluded under section 1202. trusts as well as complex trusts and or a gain and line 17 is a loss, enter zero decedent's estates that are required to on line 1, Schedule B. Line 5 distribute income currently, whether it is distributed or not. The determination of In figuring the amount of long-term and If you are filing for a simple trust, whether trust income is required to be short-term capital gain for the tax year subtract from adjusted total income any distributed currently depends on the included on Schedule A, line 1, the

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terms of the governing instrument and accumulation distribution. See the the applicable local law. line 11 instructions below. Schedule G—Tax Computation and The line 9 distributions are referred to Line 11—Total Distributions Payments as first tier distributions and are deductible by the estate or trust to the If line 11 is more than line 8, and you are Part I – Tax Computation extent of the DNI. The beneficiary filing for a complex trust that has includes such amounts in his or her previously accumulated income, see the Line 1a instructions for Schedule J, later, to see income to the extent of his or her 2020 tax rate schedule. For tax years proportionate share of the DNI. if you must complete Schedule J (Form 1041). beginning in 2020, figure the tax using the following Tax Rate Schedule and Line 10—Other Amounts Paid, enter the tax on line 1a. However, see Line 12—Adjustment for Credited, or Otherwise Required the Instructions for Schedule D (Form Tax-Exempt Income To Be Distributed 1041) and the Qualified Dividends Tax In figuring the income distribution Worksheet, later. Line 10 is to be completed only by a deduction, the estate or trust isn't decedent's estate or complex trust. allowed a deduction for any item of the 2020 Tax Rate Schedule These distributions consist of any other DNI that isn't included in the gross If taxable amounts paid, credited, or required to income of the estate or trust. Thus, for income be distributed and are referred to as purposes of figuring the allowable is: second tier distributions. Such amounts Of the income distribution deduction, the DNI But not Over— Its tax is: amount include annuities to the extent not paid (line 7) is figured without regard to any over— out of income, mandatory and over— tax-exempt interest. $0 $2,600 10% $0 discretionary distributions of corpus, 2,600 9,450 $260 + 24% 2,600 and distributions of property in kind. If tax-exempt interest is the only 9,450 12,950 $1,904 + 35% 9,450 tax-exempt income included in the total 12,950 ----- $3,129 + 37% 12,950 If Form 1041-T was timely filed to distributions (line 11), and the DNI elect to treat estimated tax payments as (line 7) is less than or equal to line 11, made by a beneficiary, the payments then enter on line 12 the amount from Schedule D (Form 1041) and Sched- are treated as paid or credited to the line 2. ule D Tax Worksheet. Use Part V of beneficiary on the last day of the tax Schedule D (Form 1041) or the year and must be included on line 10. If tax-exempt interest is the only Schedule D Tax Worksheet, whichever tax-exempt income included in the total is applicable, to figure the estate's or Unless a section 643(e)(3) election is distributions (line 11), and the DNI is trust's tax if the estate or trust files made, the value of all noncash property more than line 11 (that is, the estate or Schedule D (Form 1041) and has: actually paid, credited, or required to be trust made a distribution that is less than • A net capital gain and any taxable distributed to any beneficiaries is the the DNI), then figure the adjustment by income, or smaller of: multiplying line 2 by a fraction, the • Qualified dividends on line 2b(2) of 1. The estate's or trust's adjusted numerator of which is the total Form 1041 and any taxable income. distributions (line 11), and the basis in the property immediately before Qualified Dividends Tax Worksheet. distribution, plus any gain or minus any denominator of which is the DNI (line 7). Enter the result on line 12. If you don't have to complete Part I or loss recognized by the estate or trust on Part II of Schedule D and the estate or the distribution (basis of beneficiary), or If line 11 includes tax-exempt income trust has an amount entered on 2. The FMV of such property. other than tax-exempt interest, figure line 2b(2) of Form 1041 and any taxable If a section 643(e)(3) election is made line 12 by subtracting the total of the income (line 23), then figure the estate's by the fiduciary, then the amount following from tax-exempt income or trust's tax using the worksheet, later, entered on line 10 will be the FMV of the included on line 11: and enter the tax on line 1a. 1. The charitable contribution property. Note. You must reduce the amount you deduction allocable to such tax-exempt enter on line 2b(2) of Form 1041 by the income, and A fiduciary of a complex trust or a portion of the section 691(c) deduction decedent's estate may elect to treat any 2. Expenses allocable to tax-exempt claimed on line 19 of Form 1041 if the amount paid or credited to a beneficiary income. estate or trust received qualified within 65 days following the close of the dividends that were IRD. tax year as being paid or credited on the Expenses that are directly allocable last day of that tax year. To make this to tax-exempt income are allocated only Line 1c—AMT. Attach Schedule I election, see the instructions for Other to tax-exempt income. A reasonable (Form 1041) if any of the following Information, Question 6, later. proportion of expenses indirectly apply. allocable to both tax-exempt income • The estate or trust must complete The beneficiary includes the amounts and other income must be allocated to Schedule B. on line 10 in his or her income only to each class of income. • The estate or trust claims a credit on the extent of his or her proportionate line 2b, 2c, or 2d of Schedule G. share of the DNI. • The estate's or trust's share of alternative minimum taxable income Complex trusts. If the second tier (line 27 of Schedule I (Form 1041)) distributions exceed the DNI allocable to exceeds $25,400. the second tier, the trust may have an

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Qualified Dividends Tax Worksheet—Schedule G, Part I, line 1a Keep for Your Records Caution: Don’t use this worksheet if the estate or trust must complete Schedule D (Form 1041).

1. Enter the amount from Form 1041, line 23 ...... 1. 2. Enter the amount from Form 1041, line 2b(2) ...... 2. 3. If you are claiming investment interest expense on Form 4952, enter the amount from line 4g; otherwise enter -0- ...... 3. 4. Subtract line 3 from line 2. If zero or less, enter -0- ...... 4. 5. Subtract line 4 from line 1. If zero or less, enter -0- ...... 5. 6. Enter the smaller of the amount on line 1 or $2,650 ...... 6. 7. Enter the smaller of the amount on line 5 or line 6 ...... 7. 8. Subtract line 7 from line 6. If zero or less, enter -0-. This amount is taxed at 0% ...... 8. 9. Enter the smaller of line 1 or line 4 ...... 9. 10. Subtract line 8 from line 4 ...... 10. 11. Enter the smaller of line 1 or $13,150 ...... 11. 12. Add lines 5 and 8 ...... 12. 13. Subtract line 12 from line 11. If zero or less, enter -0- ...... 13. 14. Enter the smaller of line 10 or line 13 ...... 14. 15. Multiply line 14 by 15% (.15) ...... 15. 16. Enter the amount from line 9 ...... 16. 17. Add lines 8 and 14 ...... 17. 18. Subtract line 17 from line 16. If zero or less, enter -0- ...... 18. 19. Multiply line 18 by 20% (.20) ...... 19. 20. Figure the tax on the amount on line 5. Use the 2020 Tax Rate Schedule ...... 20. 21. Add lines 15, 19 and 20 ...... 21. 22. Figure the tax on the amount on line 1. Use the 2020 Tax Rate Schedule ...... 22. 23. Tax on all taxable income. Enter the smaller of line 21 or line 22 here and on Sch. G, line 1a ...... 23.

Enter the amount from line 54 of Line 2b—General Business certain credits have limitations and Schedule I (Form 1041) on line 1c. Credit special computations that may require you to complete the source form. See Line 1d—Total. If the amount from Don't include any amounts that the Instructions for Form 3800 for more line 14 of Form 8978 is a positive are allocated to a beneficiary. information. amount, include it in the total reported ! CAUTION Credits that are allocated on line 1d. between the estate or trust and the Line 2c—Credit for Prior Year Line 2a—Foreign Tax Credit beneficiaries are listed in the Minimum Tax Attach Form 1116, Foreign Tax Credit instructions for Schedule K-1, box 13, An estate or trust that paid AMT in a (Individual, Estate, or Trust), if you elect later. Generally, these credits are previous year may be eligible for a to claim credit for income or profits apportioned on the basis of the income minimum tax credit in 2020. See Form taxes paid or accrued to a foreign allocable to the estate or trust and the 8801, Credit for Prior Year Minimum country or a U.S. possession. The beneficiaries. Tax—Individuals, Estates, and Trusts. estate or trust may claim credit for that Enter on line 2b the estate's or trust's Line 2d—Bond Credits part of the foreign taxes not allocable to total general business credit allowed for Complete and attach Form 8912, Credit the beneficiaries (including charitable the current year from Form 3800. The beneficiaries). Enter the estate's or to Holders of Tax Credit Bonds, if the estate or trust must file Form 3800 to estate or trust claims a credit for holding trust's share of the credit on line 2a. See claim any of the general business Pub. 514, Foreign Tax Credit for a tax credit bond. Also, be sure to credits. Generally, if the estate's or include the credit in interest income. Individuals, for details. trust's only source of a credit is from a pass-through entity and the beneficiary Line 2e—Total Credits isn't entitled to an allocable share of a To claim a credit allowable to the estate credit, you aren't required to complete or trust other than the credits entered on the source form for that credit. However, lines 2a through 2d, include the

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ESBT Tax Worksheet—Schedule G, Part I, line 4 Keep for Your Records Electing Small Business Trust Tax Computation

1. Ordinary income (loss) from Schedule K-1 (Form 1120-S) ...... 1. 2a. Total ordinary dividends from Schedule K-1 (Form 1120-S) ...... 2a. 2b. Qualified Dividends from Schedule K-1 (Form 1120-S) ...... 2b. 3. Capital gain. See instructions and attach Schedule D (Form 1041) ...... 3. 4. Other Income (loss) reported on Schedule K-1 (Form 1120-S) ...... 4. 5. Total income. Add lines 1, 2a, 3, and 4 ...... 5. 6. Other allowable deductions from Schedule K-1 (Form 1120-S) ...... 6. 7. Administrative expenses (allocated to the S portion) ...... 7. 8. State and local income taxes (allocated to the S portion) ...... 8. 9. Interest expense on indebtedness to acquire S corporation stock ...... 9. 10. Charitable contribution deduction. Check here if deduction includes prior year carryover [ ] ...... 10. 11. Qualified business income deduction (S portion). Attach Form 8995 or 8995-A ...... 11. 12. Total deductions. Add lines 6 through 11 ...... 12. 13. Taxable income (S portion). Subtract line 12 from 5 ...... 13. 14a. Tax: Tax on taxable income. See instructions...... 14a. 14b. Alternative minimum tax (S portion). Attach Schedule I (Form 1041) ...... 14b. 14c. Total Add lines 14a and 14b ...... 14c. 15a. Foreign tax credit (S portion). Attach Form 1116 ...... 15a. 15b. General business credit (S portion). Attach Form 3800 ...... 15b. 15c. Credit for prior-year minimum tax (S portion). Attach Form 8801 ...... 15c. 15d. Bond credits (S portion). Attach Form 8912 ...... 15d. 15e. Total credits Add lines 15a through 15d ...... 15e. 16. Recapture taxes (S portion). Check if from: Form 4255 [ ] or Form 8611 [ ] ...... 16. 17. Total ESBT tax. Subtract line 15e from line 14c and add line 16. Enter here and on Form 1041, Schedule G, Part I, line 4 ...... 17. allowable credit in the total for line 2e. Note. You also must attach a separate Line 5—Net Investment Income Complete and attach the appropriate computation of the net 965 tax liability Tax form and write the form number and attributable to the S portion of the ESBT. amount of the allowable credit on the Enter the amount of net investment Portion of net 965 tax attributable to dotted line to the left of the entry space. income tax calculated and attach Form S portion of an ESBT. The net 965 tax 8960. See the Instructions for Form If the amount from line 14 of Form liability attributable to the S portion of an 8960 to calculate the tax and Net 8978 is a negative amount, treat it as a ESBT must be shown separately from Investment Income Tax, later, for more positive amount and add it to the total the regular ESBT tax computation and information. reported on line 2e. separately from any net 965 tax liability attributable to the non-S portion of the Line 6—Recapture Taxes Line 4—Tax on the ESBT trust. Attach a statement that shows the Recapture of investment credit. If Portion of the Trust amount of the net 965 tax liability the estate or trust disposed of Use the ESBT Tax Worksheet, above, attributable to the S portion of the ESBT. investment credit property or changed to figure the ESBT tax. Enter the amount See Line 25–2020 Net 965 Tax Liability its use before the end of the recapture from line 17 of the ESBT Worksheet on Paid and Schedule G, Part II, line 15– period, see Form 4255, Recapture of line 4. 2020 Net 965 Tax Liability-Eligible for Investment Credit, to figure the Installment Payment Election to report recapture tax allocable to the estate or See Electing Small Business Trusts these amounts. (ESBTs), earlier, for the special tax trust. Include the tax on line 6 and write computation rules that apply to the Elections under section 965(i). If “ICR” on the dotted line to the left of the portion of an ESBT consisting of stock you made a section 965(i) election, entry space. in one or more S corporations. include on the attachment the S Recapture of low-income housing corporation shareholder total deferred credit. If the estate or trust disposed of net 965 tax liability from Form 965-A, property (or there was a reduction in the Part I, column (e), line 4. qualified basis of the property) on which

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the low-income housing credit was Line 7 — Household applies is outstanding at the close of the claimed, see Form 8611, Recapture of Employment Taxes year, the estate or trust must include the Low-Income Housing Credit, to figure interest due under section 453(l)(3)(B) any recapture tax allocable to the estate If any of the following apply, get or 453A(c), whichever is applicable, in or trust. Include the tax on line 6 and Schedule H (Form 1040), Household the amount to be entered on line 8 of write “LIHCR” on the dotted line to the Employment Taxes, and its instructions, Schedule G, Form 1041, with the left of the entry space. to see if the estate or trust owes these notation “Section 453(l) interest” or taxes. “Section 453A(c) interest,” whichever is Recapture of qualified electric vehi- 1. The estate or trust paid any one applicable. Attach a schedule showing cle credit. If the estate or trust claimed household employee cash wages of the computation. the qualified electric vehicle credit in a $2,200 or more in 2020. Cash wages prior tax year for a vehicle that ceased include wages paid by checks, money Form 4970, Tax on Accumulation to qualify for the credit, part or all of the orders, etc. When figuring the amount of Distribution of Trusts. Include on this credit may have to be recaptured. See cash wages paid, combine cash wages line any tax due on an accumulation Regulations section 1.30-1(b) for paid by the estate or trust with cash distribution from a trust. To the left of the details. If the estate or trust owes any wages paid to the household employee entry space, write “From Form 4970” recapture tax, include it on line 6 and in the same calendar year by the and the amount of the tax. write “QEVCR” on the dotted line to the household of the decedent or Form 8697, Interest Computation left of the entry space. beneficiary for whom the administrator, Under the Look-Back Method for Recapture of the Indian employment executor, or trustee of the estate or trust Completed Long-Term Contracts. credit. Generally, if the estate or trust is acting. Include the interest due under the terminates a qualified employee less 2. The estate or trust withheld look-back method of section 460(b)(2). than 1 year after the date of initial federal income tax during 2020 at the To the left of the entry space, write employment, any Indian employment request of any household employee. “From Form 8697” and the amount of credit allowed for a prior tax year by interest due. 3. The estate or trust paid total cash reason of wages paid or incurred to that wages of $1,000 or more in any Form 8866, Interest Computation employee must be recaptured. See calendar quarter of 2019 or 2020 to Under the Look-Back Method for Form 8845 and section 45A for details. household employees. Property Depreciated Under the In- If the estate or trust owes any recapture come Forecast Method. Include the tax, include it on line 6 and write “IECR” Enter on line 7 any household interest due under the look-back on the dotted line to the left of the entry employment taxes owed from method of section 167(g)(2). To the left space. Schedule H (Form 1040), Part I, line 8c, of the entry space, write “From Form Recapture of the new markets credit. or Part III, line 26. 8866” and the amount of interest due. If the estate or trust owes any new Note. See Amended Schedule H (Form Interest on deferral of gain from cer- markets recapture tax, include it on 1040 ) under F. Initial Return, Amended tain constructive ownership transac- line 6 and write “NMCR” on the dotted Return, etc., earlier for information on tions. Include the interest due under line to the left of the entry space. For filing an amended Schedule H (Form section 1260(b) on any deferral of gain more information, including how to 1040) for a Form 1041. from certain constructive ownership figure the recapture amount, see section transactions. To the left of the entry 45D(g). Line 8 — Other Taxes and space, write “1260(b)” and the amount Recapture of the credit for employ- Amounts Due of interest due. er-provided child care facilities. If Triggering event under section Form 5329, Additional Taxes on the facility ceased to operate as a 965(i). If you had a triggering event Qualified Plans (Including IRAs) and qualified child care facility or there was under section 965(i) during the year, Other Tax-Favored Accounts. If the a change in ownership, part or all of the enter on Line 8, Other taxes and estate or trust fails to receive the credit may have to be recaptured. See amounts due, the current year tax minimum distribution under section Form 8882 for details. If the estate or liability from the triggered deferred net 4974, use Form 5329 to pay the excise trust owes any recapture tax, include it 965 tax liability from Form 965-A, Part tax. To the left of the entry space, write on line 6 and write “ECCFR” on the IV, column (f). “From Form 5329” and the amount of dotted line to the left of the entry space. ESBTs. If a triggering event occurred the tax. Recapture of the alternative motor in the S portion of the ESBT, also Additional tax on the early disposi- vehicle credit. See section 30B(h)(8) include on the attachment that shows tion of noncash property for which a for details. Include the tax on line 6 and the amount of the net 965 tax liability section 247(g)(3) election was made write “AMVCR” on the dotted line to the attributable to the S portion of the trust by an Alaska Native Settlement left of the entry space. the triggered deferred net 965 tax Trust. This additional 10% tax only Recapture of the alternative fuel ve- liability from Form 965-A, Part IV, should be shown on an amended return hicle refueling property credit. See column (f). filed by a Settlement Trust for the year in section 30C(e)(5) for details. Include the Interest on deferred tax attributable which the Settlement Trust received a tax on line 6 and write “ARPCR” on the to installment sales of certain time- contribution of noncash property from dotted line to the left of the entry space. shares and residential lots and cer- an Alaska Native Corporation and tain nondealer real property install- elected to defer the recognition of ment obligations. If an obligation income related to such property, but arising from the disposition of real disposed of the property within the first property to which section 453(l) or 453A tax year subsequent to the tax year the Settlement Trust received the property.

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Determine the increase in tax due to the close of the trust's tax year. Form withheld on income retained by the inclusion of the deferred income and 1041-T shows the amounts to be estate or trust in the total for line 14. include on this line the additional tax allocated to each beneficiary. This Report on Schedule K-1 (Form due, equal to 10% of the increase in tax amount is reported on the beneficiary's 1041), box 13, code B, any credit for due to the inclusion of the deferred Schedule K-1 (Form 1041), box 13, backup withholding on income income. The increase in tax due to the code A. distributed to the beneficiary. inclusion of the deferred income, which is the base amount for the computation Attach Form 1041-T to your return Line 15—2020 Net 965 Tax of the additional 10% tax shown on this only if you haven't yet filed it; however, Liability - Eligible for attaching Form 1041-T to Form 1041 line, should be shown elsewhere on Installment Payment Election Schedule G. If the amended return also doesn't extend the due date for filing If you have a 2020 net 965 tax liability shows changes to income, deductions, Form 1041-T. If you have already filed eligible for installment payment election, or credits unrelated to the inclusion of Form 1041-T, don't attach a copy to enter this amount from Form 965-A, Part the deferred income, attach a schedule your return. I, column (f), line 4. showing the computation of the Failure to file Form 1041-T by additional tax due only to the inclusion the due date (March 8, 2021, for Note. Include on line 15 amounts from of the deferred income. To the left of the calendar year estates and the net 965 tax liability attributable to the entry space, write “Section 247(g)(3) trusts) will result in an invalid election. S portion of an ESBT that are not tax.” An invalid election will require the filing deferred under section 965(i). See of amended Schedules K-1 for each Part II – Payments Schedule G, Part I, Line 4-Tax on beneficiary who was allocated a ESBTs, earlier, for more information. Line 10—2020 Estimated Tax payment of estimated tax. Payments and Amount Applied Line 16a—Credit for Tax Paid Line 13—Tax Paid with Form From 2019 Return on Undistributed Capital Gains 7004 Attach Copy B of Form 2439, Notice to Enter the amount of any estimated tax Shareholder of Undistributed payment you made with Form 1041-ES If you filed Form 7004 to request an Long-Term Capital Gains. for 2020 plus the amount of any extension of time to file Form 1041, overpayment from the 2019 return that enter the amount that you paid with the Line 16b—Credit for Federal extension request. was applied to the 2020 estimated tax. Tax on Fuels If the estate or trust is the beneficiary Line 14—Federal Income Tax Enter any credit for federal excise taxes of another trust and received a payment Withheld paid on fuels that are ultimately used for of estimated tax that was credited to the Use line 14 to claim a credit for any nontaxable purposes (for example, an trust (as reflected on the Schedule K-1 federal income tax withheld (and not off-highway business use). Attach Form issued to the trust), then report this repaid) by: (a) an employer on wages 4136, Credit for Federal Tax Paid on amount separately with the notation and salaries of a decedent received by Fuels. See Pub. 510, Excise Taxes, for “section 643(g)” in the space next to the decedent's estate; (b) a payer of more information. line 10 and include this amount in the certain gambling winnings (for example, Line 17—Refundable Credit for amount entered on line 10. state lottery winnings); or (c) a payer of Don't include on Form 1041 distributions from pensions, annuities, Qualified Sick and Family ! estimated tax paid by an retirement or profit-sharing plans, IRAs, Leave CAUTION individual before death. Instead, insurance contracts, etc., received by a Enter the refundable portion of the include those payments on the decedent's estate or trust. Attach a copy qualified sick and family leave credit decedent's final income tax return. of Form W-2, Form W-2G, or Form from Schedule H (Form 1040), Part I, 1099-R to the front of the return. line 8e on line 17. Line 11—Estimated Tax Except for backup withholding Line 18—Deferral Payments Allocated to (as explained below), withheld income tax can't be passed If you file Schedule H (Form 1040), you Beneficiaries (from Form can defer some of the household 1041-T) through to beneficiaries on either Schedule K-1 or Form 1041-T. employment taxes you may owe on your The trustee (or executor, for the final 2020 Form 1041 and pay them later year of the estate) may elect under Backup withholding. If the estate or instead. However, you can't defer section 643(g) to have any portion of its trust received a 2020 Form 1099 amounts that you have already paid. If estimated tax treated as a payment of showing federal income tax withheld you qualify, use the Deferral Worksheet estimated tax made by a beneficiary or (that is, backup withholding) on interest for Schedule H (Form 1040) beneficiaries. The election is made on income, dividends, or other income, filers—Schedule G, Part II, line 18, later, Form 1041-T, Allocation of Estimated check the box and include the amount to figure the deferral portion of the Tax Payments to Beneficiaries, which payment. Enter the amount from line 12 must be filed by the 65th day after the of the worksheet on line 18.

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Deferral Worksheet for Schedule H (Form 1040) filers—Sch. G, Part II, line 18 Keep for Your Records Before you begin: Complete Schedule H (Form 1040) .

1a. Enter the amount from Form 1041, Sch. G, Part II, line 14 ...... 1a. b. Enter the amount from Form 1041, Sch. G, Part II, line 10 ...... 1b. c. Enter the amount from Form 1041, Sch. G, Part II, line 13 ...... 1c. d. Add lines 1a through 1c ...... 1d. 2. Enter the amount from Form 1041, line 24 ...... 2. 3. Enter the amount(s) from line 8b of your Schedule(s) H ...... 3. 4. Add lines 2 and 3 ...... 4. 5. Enter the amount from line 8d of your Schedule(s) H ...... 5. 6. Subtract line 5 from line 4 ...... 6. 7. Subtract line 6 from line 1d. If zero or less, enter -0- ...... 7. 8. Subtract line 7 from line 5 ...... 8. You can defer payment on up to the amount on line 8 until 12/31/2021 or 12/31/2022 by reporting the amount on line 8 above (or a smaller amount) on Form 1041, Sch. G, Part II, line 18. See instructions. 9. Enter the amount you reported on Form 1041, Sch. G, Part II, line 18 ...... 9. 10. Enter one-half of the amount on line 5 above ...... 10.

11. Enter the smaller of line 9 or line 10. You must pay this amount by 12/31/2022 ...... 11.

12. Subtract line 11 from line 9. You must pay this amount by 12/31/2021 ...... 12.

However, in the case of bankruptcy NII allocable to the deduction under estates, the adjusted gross income Net Investment Income section 642(c). An estate, trust, or threshold is $125,000. pooled income fund’s NII is reduced by Tax Calculation of Net Investment In- the amount of NII allocable to the Certain estates and trusts may be come. In general, an estate or trust’s charitable deduction allowed under subject to the Net Investment Income NII is calculated in the same way as an section 642(c). In the case of an estate, Tax (NIIT). Estates and trusts use Form individual. However, there are special trust, or pooled income fund that has NII 8960 to report their Net Investment rules for the calculation of NII in the and non-NII income in a year when a Income (NII) and calculate the tax. The case of an ESBT. See instructions to section 642(c) deduction is claimed, the amount of NIIT payable by the estate or Form 8960 and Regulations section amount of the NII deduction allocable to trust is reported on Form 1041, 1.1411-3(e) for information on the the section 642(c) deduction will be less Schedule G, line 5. calculation (and Regulations section than the amount reported on Form 1.1411-3(c)(1) for information on the 1041, Schedule A, line 7 (or on the The NIIT is imposed on estates and ESBT calculation). separate calculation in the case of a trusts to the extent that they have pooled income fund). undistributed net investment income Distributions on Net Investment In- and adjusted gross income (AGI) come. The NIIT is imposed on estates Beneficiary reporting. In general, the exceeding $12,950. See Definitions, and trusts to the extent it has amount of the income distribution earler, for the calculation of an estate or undistributed net investment income. In deduction (from Form 1041, trust’s AGI. The following types of order to arrive at the estate or trust’s Schedule B, line 15) that reduces the estates and trusts may owe the NIIT in undistributed net investment income, estate or trust’s NII will be the amount of addition to their regular income tax the estate or trust’s NII is reduced for (1) NII that will be taxable to the liability: distributions of NII to beneficiaries, and beneficiaries on their Schedules K-1 • Decedent’s estates, (2) NII allocable to charities when the (Form 1041). • Simple and complex trusts, estate or trust is allowed a deduction The Schedule K-1 has a code H in • Electing small business trusts under section 642(c). Instructions for box 14 to report the amount of net (ESBTs), Form 8960, line 18, provide more investment income distributed to the • Pooled income funds, and information on the calculation of beneficiary. The amount reported in • Bankruptcy estates. undistributed net investment income. code H represents an adjustment (either

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positive or negative) that the beneficiary attach it to the return. Enter only the If you are required to file must use in completing its Form 8960 (if deductible amounts on the return. Don't ! FinCEN Form 114 but don't, you necessary). In the case where the trust’s figure the allocation on the return itself. CAUTION may have to pay a penalty of up income distribution deduction allowed in For more information, see the to $10,000 (or more in some cases). calculating undistributed net investment instructions for Allocation of Deductions income is less than the amount on for Tax-Exempt Income, earlier. Question 4 Schedule B, line 15, then code H will Report the amount of tax-exempt The estate or trust may be required to show a negative number that is the interest income received or accrued in file Form 3520, Annual Return To difference between the two amounts. In the space provided below Question 1. Report Transactions With Foreign the case of an estate or trust that issues Trusts and Receipt of Certain Foreign more than one Schedule K-1 for a year, Also, include any exempt-interest Gifts, if: the sum of the amounts reported in dividends the estate or trust received as • It directly or indirectly transferred code H on all of the Schedules K-1 will a shareholder in a mutual fund or other property or money to a foreign trust. For be the difference between Schedule B, regulated investment company. this purpose, any U.S. person who line 15, and the amount deducted on Question 2 created a foreign trust is considered a Form 8960, line 18b, for amounts of NII transferor; distributed to a beneficiary. All salaries, wages, and other • It is treated as the owner of any part compensation for personal services The beneficiary's NII will equal of the assets of a foreign trust under the must be included on the return of the TIP all taxable amounts reported on grantor trust rules; or person who earned the income, even if the Schedule K-1, adjusted by • It received a distribution from a the income was irrevocably assigned to the amount reported in box 14, code H. foreign trust. a trust by a contract assignment or similar arrangement. An owner of a foreign trust must The only instance where code H ensure that the trust files an will be a positive number is The grantor or person creating the annual information return on when: trust is considered the owner if he or Form 3520-A, Annual Information • The estate or trust owns directly, or she keeps “beneficial enjoyment” of or Return of Foreign Trust With a U.S. indirectly, an (a) interest in a section substantial control over the trust Owner. 1291 fund, or (b) interest in a controlled property. The trust's income, foreign corporation or qualified electing deductions, and credits are allocable to Question 5 the owner. fund and no election under Regulations An estate or trust claiming an interest section 1.1411–10(g) has been made If you checked “Yes” for Question 2, deduction for qualified residence with respect to that interest, and see Special Reporting Instructions, interest (as defined in section 163(h)(3)) • The distribution from one of the earlier. on seller-provided financing must entities described above is (a) net include on an attachment to the 2020 investment income to the estate or trust, Question 3 Form 1041 the name, address, and TIN but not included in its taxable income, Check the “Yes” box and enter the of the person to whom the interest was and (b) the distributions from the estate name of the foreign country if either 1 or paid or accrued (that is, the seller). or trust to the beneficiary(s) in the year 2 below applies. exceed the amount of the income 1. The estate or trust owns more If the estate or trust received or distribution deduction allowed for than 50% of the stock in any corporation accrued such interest, it must provide regular tax purposes (from Schedule B, that owns one or more foreign bank identical information on the person line 15). accounts. liable for such interest (that is, the buyer). This information doesn't need to 2. At any time during the year the Special rules. In the final year of an be reported if it duplicates information estate or trust had an interest in or estate or trust, deductions in excess of already reported on Form 1098. income may be reported to the signature or other authority over a bank, beneficiary on Schedule K-1, box 11. securities, or other financial account in a Question 6 These deductions may also be foreign country. To make the section 663(b) election to deductible by the beneficiary for NIIT treat any amount paid or credited to a Exception. Check “No” if either of the purposes. In this situation, the beneficiary within 65 days following the following applies to the estate or trust: terminating estate or trust should close of the tax year as being paid or The combined value of the accounts provide the beneficiary information • credited on the last day of that tax year, was $10,000 or less during the whole regarding whether the amounts reported check the box. This election can be year, or in box 11, codes A through E, include made by the fiduciary of a complex trust The accounts were with a U.S. any amounts that are deductible for NIIT • or the executor of a decedent's estate. military banking facility operated by a purposes. See Regulations section For the election to be valid, you must file U.S. financial institution. 1.1411-4(g)(4). Form 1041 by the due date (including If you checked “Yes” for Question 3, extensions). Once made, the election is electronically file FinCEN Form 114, irrevocable. Other Information Report of Foreign Bank and Financial Accounts (FBAR), with the Department Question 7 Question 1 of the Treasury using the FinCEN's BSA To make the section 643(e)(3) election If the estate or trust received tax-exempt E-Filing Sytem. Because FinCEN Form to recognize gain on property distributed income, figure the allocation of 114 isn't a tax form, don't file it with in kind, check the box and see the expenses between tax-exempt and Form 1041. Instructions for Schedule D (Form taxable income on a separate sheet and See fincen.gov for more information. 1041).

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Question 9 965(i) transferee. See the instructions estate or trust entered into a transfer Generally, a beneficiary is a skip person for Form 965-A for additional agreement as an eligible 965(i) if the beneficiary is in a generation that information. transferee, the estate or trust must report the transfer in of that liability on is two or more generations below the The transfer agreement must be Part IV of Form 965-A. See the generation of the transferor to the trust. filed within 30 days of the ! instructions for Form 965-A for CAUTION triggering event. See Form To determine if a beneficiary that is a additional information. 965-D, Transfer Agreement Under trust is a skip person, and for exceptions 965(i)(2), and the related instructions for to the general rules, see the definition of Question 13 additional information. a skip person in the instructions for If the deemed owner of a grantor portion Schedule R of Form 706. of the ESBT is a nonresident alien, the Question 11b items of income, deduction, and credit Question 10 If the estate or trust distributed S from that grantor portion must be A domestic trust that is a specified corporation shares and the estate or reallocated to the S portion. See domestic entity must file Form 8938 trust did not enter into a timely transfer Schedule G, Part I, line 4, Tax on the along with Form 1041 for the tax year. agreement for all shares transferred ESBT Portion of the Trust, earlier for Form 8938 must be filed each year the during the tax year, the transfer of how to figure the tax on the S portion of value of the trust's specified foreign shares not covered by a transfer the trust. financial assets meets or exceeds the agreement is a triggering event. See reporting threshold. A trust exceeds the Triggering event under section 965(i), Question 14 threshold amount if the total value of the earlier. The S portion of the ESBT must take specified foreign financial assets is into account the qualified items of The estate or trust may file a consent more than $50,000 on the last day of the income, gain, deduction, and loss and agreement under section 965(i)(4)(D) to tax year or more than $75,000 at any other items from any S corporation make the election under section 965(h) time during the tax year. For more owned by the ESBT, and any qualified to pay in installments the triggered information on domestic trusts that are items of income, gain, deduction, and section 965(i) net tax liability. See Form specified domestic entities, the filing loss and other items reallocated to the S 965-E, Consent Agreement Under threshold, and the types of foreign portion. See Question 13, earlier. For Section 965(i)(4)(D), and the related financial assets that must be reported, purposes of determining whether the instructions for how to file the consent see the Instructions for Form 8938. taxable income of an ESBT exceeds the agreement. See the instructions for threshold amount, the S portion and the A domestic trust that is required to Triggered deferred S non-S portion of an ESBT are treated as file Form 8938 along with Form 1041 for corporation-related net 965 tax liability, a single trust. See Regulations section the tax year must check “Yes” to in Part I of the instructions for Form 1.199A-6(d)(3)(vi). Question 10 under Other Information, 965-A for how to make the installment Form 1041. election. Schedule J (Form 1041) — Question 11a See Line 25 — 2020 Net 965 Tax A distribution of S corporation stock by Liability Paid, and Schedule G, Part II, Accumulation Distribution an estate or trust that results in a Line 15 — 2020 Net 965 Tax Liability – for Certain Complex change of ownership for federal income Eligible for Installment Payment Trusts tax purposes is a triggering event Election, earlier, for how to report described in Regulations section payments of the 965 tax. General Instructions 1.965-7(c)(3). If the estate or trust The due date of the original Use Schedule J (Form 1041) to report transfers less than all of its shares of Form 965-E is within 30 days of an accumulation distribution for a stock of the S corporation, the transfer the triggering event. domestic complex trust that was: will be a triggering event only with • Previously treated at any time as a respect to the portion of the estate’s or The due date of the election to foreign trust (unless an exception is trust’s section 965(i) net tax liability that pay in installments is the due provided in future regulations), or is properly allocable to the transferred date of the return for the tax • Created before March 1, 1984, shares. If the person who received the year, including extension. The actual unless that trust would not be distribution of S corporation stock is an payment of the first installment is due no aggregated with other trusts under the eligible section 965(i) transferee, the later than the due date of the return for rules of section 643(f) if that section estate or trust may enter into a transfer the tax year without extension, even if applied to the trust. agreement with the eligible section the election is made on a return filed by An accumulation distribution is the 965(i) transferee to prevent the the extended due date. assessment of the estate’s or trust’s excess of amounts properly paid, section 965(i) net tax liability in the tax Question 12 credited, or required to be distributed year that includes the triggering event. (other than income required to be Note: Check the “Yes” box if the estate distributed currently) over the DNI of the The estate or trust must report in Part or trust entered into a transfer trust reduced by income required to be IV, column (g) of Form 965-A, Individual agreement as an eligible 965(i) distributed currently. To have an Report of Net 965 Tax Liability, the transferee. accumulation distribution, the transfer out of the section 965 tax distribution must exceed the accounting liability properly allocable to S The estate or trust must report on income of the trust. corporation shares for which the estate Form 965-A the net 965 tax liability with or trust entered into a transfer respect to an S corporation, whether or agreement with an eligible section not deferred. If during the tax year the

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Specific Instructions Line 6—DNI for Earlier Years preceding tax year is the amount by which the accumulation distribution is Enter the applicable amounts as Part I—Accumulation Distribution larger than the total of the UNI for all follows: in 2020 earlier preceding tax years.

Throwback Line 1—Distribution Under Section year(s) Amount from line A tax year of a trust during which the trust was a simple trust for the entire 661(a)(2) 1969–1977 .. Form 1041, Schedule C, line 5 1978–1979 .. Form 1041, line 61 year isn't a preceding tax year unless (a) Enter the amount from Form 1041, 1980 ...... Form 1041, line 60 during that year the trust received Schedule B, line 10, for 2020. This is the 1981–1982 .. Form 1041, line 58 outside income, or (b) the trustee didn't amount properly paid, credited, or 1983–1996 .. Form 1041, Schedule B, line 9 distribute all of the trust's income that required to be distributed other than the 1997–2019 .. Form 1041, Schedule B, line 7 was required to be distributed currently amount of income for the current tax for that year. In this case, UNI for that year required to be distributed currently. year must not be more than the greater For information about throwback of the outside income or income not Line 2—DNI years, see the instructions for line 13. distributed during that year. Enter the amount from Form 1041, For purposes of line 6, in figuring the Schedule B, line 7, for 2020. This is the DNI of the trust for a throwback year, The term “outside income” means amount of DNI for the current tax year subtract any estate tax deduction for amounts that are included in the DNI of determined under section 643(a). IRD if the income is includible in figuring the trust for that year but that aren't the DNI of the trust for that year. “income” of the trust as defined in Regulations section 1.643(b)-1. Some Line 3—Distribution Under Section Line 7—Distributions Made During examples of outside income are: (a) 661(a)(1) income taxable to the trust under Earlier Years Enter the amount from Form 1041, section 691; (b) unrealized accounts Schedule B, line 9, for 2020. This is the Enter the applicable amounts as receivable that were assigned to the amount of income for the current tax follows: trust; and (c) distributions from another year required to be distributed currently. trust that include the DNI or UNI of the Throwback Amount from line other trust. year(s) Line 5—Accumulation Distribution 1969–1977 .. Form 1041, Schedule C, line 8 Line 16—Tax-Exempt Interest If line 11 of Form 1041, Schedule B, is 1978 ...... Form 1041, line 64 more than line 8 of Form 1041, 1979 ...... Form 1041, line 65 Included on Line 13 Schedule B, complete the rest of 1980 ...... Form 1041, line 64 For each throwback year, divide line 15 1981–1982 .. Form 1041, line 62 by line 6 and multiply the result by the Schedule J and file it with Form 1041, 1983–1996 .. Form 1041, Schedule B, line 13 unless the trust has no previously 1997–2019 .. Form 1041, Schedule B, line 11 following: accumulated income. Throwback Amount from line Generally, amounts accumulated year(s) before a beneficiary reaches age 21 Line 11—Prior Accumulation 1969–1977 .. Form 1041, Schedule C, may be excluded by the beneficiary. line 2(a) Distribution Thrown Back to Any See sections 665 and 667(c) for 1978–1979 .. Form 1041, line 58(a) exceptions relating to multiple trusts. Throwback Year 1980 ...... Form 1041, line 57(a) 1981–1982 .. Form 1041, line 55(a) The trustee reports to the IRS the total Enter the amount of prior accumulation 1983–2019 .. Form 1041, Schedule B, line 2 amount of the accumulation distribution distributions thrown back to the before any reduction for income throwback years. Don't enter accumulated before the beneficiary distributions excluded under section Part III—Taxes Imposed on reaches age 21. If the multiple trust 663(a)(1) for gifts, bequests, etc. rules don't apply, the beneficiary claims Undistributed Net Income the exclusion when filing Form 4970, as Line 13—Throwback Years For the regular tax computation, if there you may not be aware that the is a capital gain, complete lines 18 beneficiary may be a beneficiary of Allocate the amount on line 5 that is an through 25 for each throwback year. If other trusts with other trustees. accumulation distribution to the earliest the trustee elected the alternative tax on applicable year first, but don't allocate capital gains, complete lines 26 through For examples of accumulation more than the amount on line 12 for any 31 instead of lines 18 through 25 for distributions that include payments from throwback year. An accumulation each applicable year. If there is no one trust to another trust, and amounts distribution is thrown back first to the capital gain for any year, or there is a distributed for a dependent's support, earliest preceding tax year in which capital loss for every year, enter on see Regulations section 1.665(b)-1A(b). there is undistributed net income (UNI). line 9 the amount of the tax for each Then, it is thrown back beginning with Part II—Ordinary Income year identified in the instruction for the next earliest year to any remaining line 18 and don't complete Part III. If the Accumulation Distribution preceding tax years of the trust. The trust received an accumulation Enter the applicable year at the top of portion of the accumulation distribution distribution from another trust, see each column for each throwback year. allocated to the earliest preceding tax Regulations section 1.665(b)-1A. year is the amount of the UNI for that year. The portion of the accumulation Note. The alternative tax on capital distribution allocated to any remaining gains was repealed for tax years

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beginning after December 31, 1978. Line 20—Trust's Share of Net Throwback Amount from line The maximum rate on net capital gain Long-Term Gain year(s) for 1981, 1987, and 1991 through 2019 1969 ...... Schedule D, line 20 isn't an alternative tax for this purpose. Enter the applicable amounts as 1970 ...... Schedule D, line 19 follows: 1971 ...... Schedule D, line 50 1972–1975 .... Schedule D, line 48 Throwback year(s) Amount from line Line 18—Regular Tax 1976–1978 .... Schedule D, line 27 Enter the applicable amounts as 1969–1970 .... 50% of Schedule D, line 13(e) follows: 1971–1977 .... 50% of Schedule D, line 17(e) Throwback Amount from line Line 27—Trust's Share of Net year(s) 1978 ...... Schedule D, line 17(e), or Short-Term Gain line 1969–1976 .. Form 1041, page 1, line 24 31, whichever is If there is a loss on any of the following 1977 ...... Form 1041, page 1, line 26 applicable, lines, enter zero on line 27 for the 1978–1979 .. Form 1041, line 27 less Form 1041, line 23 1980–1984 .. Form 1041, line 26c applicable throwback year. Otherwise, 1979 ...... Schedule D, line 25 or 1985–1986 .. Form 1041, line 25c line 27, enter the applicable amounts as follows: 1987 ...... Form 1041, line 22c whichever is applicable, 1988–2019 .. Form 1041, Schedule G, less Throwback Amount from line line 1a Form 1041, line 23 year(s) .... 1980–1981 Schedule D, line 21, less 1969–1970 . Schedule D, line 10, column 2 Schedule D, line 22 1971–1978 . Schedule D, line 14, column 2 1982 ...... Schedule D, line 23, less Line 19—Trust's Share of Net Schedule D, line 24 1983–1986 .... Schedule D, line 22, less Short-Term Gain Schedule D, line 23 For each throwback year, enter the 1987–1996 .... Schedule D, the smaller Line 28—Trust's Share of Taxable smaller of the capital gain from the two of any gain on line 16 Income Less Section 1202 or line 17, column (b) lines indicated. If there is a capital loss Deduction or a zero on either or both of the two 1997–2001 .... Schedule D, the smaller of any gain on line 15c or Enter the applicable amounts as lines indicated, enter zero on line 19. line 16, column (2) follows: Throwback year(s) Amount from line 2002 ...... Schedule D, the smaller 1969–1970 ..... Schedule D, line 10, of any gain on line 15a or Throwback year(s) Amount from line column 2, or line 16, column (2) 1969 ...... Schedule D, line 19 Schedule D, line 12, ...... 2003 Schedule D, the smaller 1970 ...... Schedule D, line 18 column 2 of any gain on line 15a or 1971 ...... Schedule D, line 38 1971–1978 ..... Schedule D, line 14, line 16a, column (2) 1972–1975 ..... Schedule D, line 39 column 2, or .... 2004–2012 Schedule D, the smaller 1976–1978 ..... Schedule D, line 21 Schedule D, line 16, of any gain on line 14a column 2 or line 15, column (2) 1979 ...... Schedule D, line 18, 2013–2019 ... Schedule D, the smaller of column (b), or any gain on line 18a or Part IV—Allocation to Schedule D, line 20, line 19, column (2) column (b) Beneficiary 1980–1981 ..... Schedule D, line 14, Complete Part IV for each beneficiary. If column (b), or the accumulation distribution is Schedule D, line 16, column (b) Line 23—Taxable Income allocated to more than one beneficiary, attach an additional copy of Schedule J 1982 ...... Schedule D, line 16, Enter the applicable amounts as with Part IV completed for each column (b), or follows: Schedule D, line 18, additional beneficiary. Give each column (b) Throwback Amount from line beneficiary a copy of his or her 1983–1996 ..... Schedule D, line 15, year(s) respective Part IV information. If more column (b), or Schedule D, line 17, 1969–1976 ... Form 1041, page 1, line 23 than 5 throwback years are involved, column (b) 1977 ...... Form 1041, page 1, line 25 use another Schedule J, completing 1978–1979 ... Form 1041, line 26 1997–2002 ..... Schedule D, line 14, Parts II and III for each additional 1980–1984 ... Form 1041, line 25 column (2), or throwback year. 1985–1986 ... Form 1041, line 24 Schedule D, line 16, 1987 ...... Form 1041, line 21 column (2) If the beneficiary is a nonresident 1988–1996 ... Form 1041, line 22 2003 ...... Schedule D, line 14a, 1997 ...... Form 1041, line 23 alien individual or a foreign corporation, column (2), or 1998–2018 ... Form 1041, line 22 see section 667(e) about retaining the Schedule D, line 16a, 2019 ...... Form 1041, line 23 character of the amounts distributed to column (2) 2004–2012 ..... Schedule D, line 13, determine the amount of the U.S. column (2), or withholding tax. Schedule D, line 15, column (2) Line 26—Tax on Income Other The beneficiary uses Form 4970 to 2013–2019 .. Schedule D, line 17, Than Long-Term Capital Gain figure the tax on the distribution. The column (2), or beneficiary also uses Form 4970 for the Schedule D, line 19, Enter the applicable amounts as section 667(b)(6) tax adjustment if an column (2) follows: accumulation distribution is subject to estate or generation-skipping transfer tax. This is because the trustee can't be

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the estate or generation-skipping number with asterisks (*) or Xs (for See Regulations section 1.662(c)-4 transfer tax return filer. example, a SSN xxx-xx-xxxx would for a comprehensive example. appear as ***-**-xxxx or XXX-XX-xxxx). For complex trusts that have more For more information, see Regulations Schedule K-1 (Form than one beneficiary, and if different section 301.6109-4. beneficiaries have substantially 1041)— Beneficiary's separate and independent shares, their Share of Income, Substitute Forms shares are treated as separate trusts for Deductions, Credits, etc. You don't need IRS approval to use a the sole purpose of determining the substitute Schedule K-1 if it is an exact amount of DNI allocable to the General Instructions copy of the IRS schedule. The boxes respective beneficiaries. A similar rule Use Schedule K-1 (Form 1041) to report must use the same numbers and titles applies to treat substantially separate the beneficiary's share of income, and must be in the same order and and independent shares of different deductions, and credits from a trust or a format as on the comparable IRS beneficiaries of an estate as separate decedent's estate. Schedule K-1. The substitute schedule estates. For examples of the application must include the OMB number and the of the separate share rule, see the Grantor type trusts don't use regulations under section 663(c). Schedule K-1 (Form 1041) to 6-digit form ID code in the upper ! right-hand corner of the schedule. CAUTION report the income, deductions, Gifts and bequests. Don't include in or credits of the grantor (or other person the beneficiary's income any gifts or You must provide each beneficiary bequests of a specific sum of money or treated as owner). See Grantor Type with the Instructions for Beneficiary Trusts, earlier. of specific property under the terms of Filing Form 1040 or other prepared the governing instrument that are paid specific instructions for each item or credited in three installments or less. Who Must File reported on the beneficiary's Schedule K-1. Amounts that can be paid or credited The fiduciary (or one of the joint only from income of the estate or trust fiduciaries) must file Schedule K-1. A don't qualify as a gift or bequest of a copy of each beneficiary's Schedule K-1 Inclusion of Amounts in specific sum of money. Beneficiaries' Income is attached to the Form 1041 filed with Past years. Don't include in the the IRS, and each beneficiary is given a Simple trust. The beneficiary of a beneficiary's income any amounts copy of his or her respective simple trust must include in his or her deducted on Form 1041 for an earlier Schedule K-1. One copy of each gross income the amount of the income year that were credited or required to be Schedule K-1 must be retained for the required to be distributed currently, distributed in that earlier year. fiduciary's records. whether or not distributed, or if the Character of income. The income required to be distributed Beneficiary's Identifying Number beneficiary's income is considered to currently to all beneficiaries exceeds the have the same proportion of each class As a payer of income, you are required DNI, his or her proportionate share of of items entering into the computation of to request and provide a proper the DNI. The determination of whether DNI that the total of each class has to identifying number for each recipient of trust income is required to be distributed the DNI (for example, half dividends and income. Enter the beneficiary's number currently depends on the terms of the half interest if the income of the estate on the respective Schedule K-1 when trust instrument and applicable local or trust is half dividends and half you file Form 1041. Individuals and law. See Regulations section 1.652(c)-4 interest). business recipients are responsible for for a comprehensive example. Allocation of deductions. giving you their TINs upon request. You Estates and complex trusts. The Generally, items of deduction that enter may use Form W-9 to request the beneficiary of a decedent's estate or into the computation of DNI are beneficiary's identifying number. complex trust must include in his or her allocated among the items of income to gross income the sum of: Penalty. You may be charged a $50 the extent such allocation isn't penalty for each failure to provide a 1. The amount of the income inconsistent with the rules set out in required TIN, unless reasonable cause required to be distributed currently, or if section 469 and its regulations, relating is established for not providing it. the income required to be distributed to passive activity loss limitations, in the Explain any reasonable cause in a currently to all beneficiaries exceeds the following order. signed affidavit and attach it to this DNI (figured without taking into account First, all deductions directly return. the charitable deduction), his or her attributable to a specific class of income proportionate share of the DNI (as so Truncating recipient's identification are deducted from that income. For figured), and number on beneficiary's statement. example, rental expenses, to the extent The estate or trust can truncate a 2. All other amounts properly paid, allowable, are deducted from rental beneficiary’s identifying number on the credited, or required to be distributed, or income. if the sum of the income required to be Schedule K-1 the estate or trust sends Second, deductions that aren't distributed currently and other amounts to the beneficiary. Truncation isn't directly attributable to a specific class of properly paid, credited, or required to be allowed on the Schedule K-1 the estate income generally may be allocated to distributed to all beneficiaries exceeds or trust files with the IRS. Also, the any class of income, as long as a the DNI, his or her proportionate share estate or trust can't truncate its own reasonable portion is allocated to any of the excess of DNI over the income identification number on any form. tax-exempt income. Deductions required to be distributed currently. To truncate, where allowed, replace considered not directly attributable to a the first five digits of the nine-digit specific class of income under this rule

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include fiduciary fees, and state income instructions and on the back of the enter the beneficiary's name, address, and personal property taxes. The Schedule K-1. and identifying number. charitable deduction, however, must be Attached statements. Enter an ratably apportioned among each class asterisk (*) after the code, if any, in the Item H of income included in DNI. column to the left of the dollar amount Check the foreign beneficiary box if the Finally, any excess deductions that entry space for each item for which you beneficiary is a nonresident alien are directly attributable to a class of have attached a statement providing individual, a foreign corporation, or a income may be allocated to another additional information. For those foreign estate or trust. Otherwise, check class of income. However, in no case informational items that can't be the domestic beneficiary box. can excess deductions from a passive reported as a single dollar amount, activity be allocated to income from a enter the code and asterisk in the Part III. Beneficiary's Share of nonpassive activity, or to portfolio left-hand column and enter “STMT” in Current Year Income, income earned by the estate or trust. the entry space to the right to indicate Deductions, Credits, and Other Excess deductions attributable to that the information is provided on an Items tax-exempt income can't offset any attached statement. More than one other class of income. attached statement can be placed on Box 1—Interest In no case can deductions be the same sheet of paper and should be Enter the beneficiary's share of the allocated to an item of income that isn't identified in alphanumeric order by box taxable interest income minus allocable included in the computation of DNI, or number followed by the letter code (if deductions. attributable to corpus. any). For example: “Box 9, Code You can't show any negative A—Depreciation” (followed by the Box 2a—Total Ordinary Dividends amounts for any class of income shown information the beneficiary needs). Enter the beneficiary's share of ordinary in boxes 1 through 8 of Schedule K-1. Too few entry spaces on Sched- dividends minus allocable deductions. However, for the final year of the estate ule K-1? If the estate or trust has more or trust, certain deductions or losses coded items than the number of spaces can be passed through to the in box 9 or boxes 11 through 14, don't Box 2b—Total Qualified Dividends beneficiary(ies). See the instructions for enter a code or dollar amount in the last Enter the beneficiary's share of qualified box 11 for more information on these entry space of the box. In the last entry dividends minus allocable deductions. deductions and losses. Also, the space, enter an asterisk in the left beneficiary's share of depreciation and column and enter “STMT” in the entry Box 3—Net Short-Term Capital depletion is apportioned separately. space to the right. Report the additional Gain These deductions may be allocated to items on an attached statement and the beneficiary(ies) in amounts greater provide the box number, code, Enter the beneficiary's share of the net than his or her income. See description, and dollar amount or short-term capital gain from Schedule D Depreciation, Depletion, and information for each additional item. For (Form 1041), line 17, column (1), minus Amortization, earlier, and Rev. Rul. example: “Box 13, Code H—Biofuel allocable deductions. Don't enter a loss 74-530, 1974-2 C.B. 188. Producer Credit, $500.00.” in box 3. If, for the final year of the estate or trust, there is a capital loss Specific Instructions Beneficiary's Tax Year carryover, enter in box 11, code C, the Part I. Information About the beneficiary's share of short-term capital The beneficiary's income from the loss carryover. However, if the estate or trust must be included in the Estate or Trust beneficiary is a corporation, enter in beneficiary's tax year during which the On each Schedule K-1, enter the name, box 11, code C, the beneficiary's share tax year of the estate or trust ends. See address, and identifying number of the of all short- and long-term capital loss Pub. 559 for more information, including estate or trust. Also, enter the name and carryovers as a single item. See section the effect of the death of a beneficiary address of the fiduciary. 642(h) and related regulations for more during the tax year of the estate or trust. information. General Reporting Information Item D If the return is for a fiscal year or a short If the fiduciary of a trust or decedent's Boxes 4a through 4c—Net tax year, fill in the tax year space at the estate filed Form 1041-T, you must Long-Term Capital Gain top of each Schedule K-1. On each check this box and enter the date it was Enter the beneficiary's share of the net Schedule K-1, enter the information filed. long-term capital gain from Schedule D about the estate or trust and the (Form 1041), lines 18a through 18c, beneficiary in Parts I and II (items A Item E column (1), minus allocable deductions. through H). In Part III, enter the If this is the final year of the estate or beneficiary's share of each item of Don't enter a loss in boxes 4a trust, you must check this box. income, deduction, credit, and any other through 4c. If, for the final year of the information the beneficiary needs to file Note. If this is the final K-1 for the estate or trust, there is a capital loss his or her income tax return. beneficiary, check the “Final K-1” box at carryover, enter in box 11, code D, the Codes. In box 9 and boxes 11 through the top of Schedule K-1. beneficiary's share of the long-term 14, identify each item by entering a Part II. Information About the capital loss carryover. (If the beneficiary is a corporation, see the instructions for code in the column to the left of the Beneficiary entry space for the dollar amount. box 3.) See section 642(h) and related These codes are identified in these Complete a Schedule K-1 for each regulations for more information. beneficiary. On each Schedule K-1,

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Gains or losses from the complete or limitations, also attach a separate computation, see Regulations section partial disposition of a rental, rental real schedule showing the beneficiary's 1.691(c)-2. Figure the computation on a estate, or trade or business activity that share of directly apportionable separate sheet and attach it to the is a passive activity must be shown on deductions derived from each trade or return. an attachment to Schedule K-1. business, rental real estate, and other rental activity. Box 11, Code A—Excess Box 5—Other Portfolio and Enter the beneficiary's share of directly Deductions on Termination - Nonbusiness Income apportioned deductions using codes A Section 67(e) Expenses through C. Enter the beneficiary's share of If this is the final return of the estate or annuities, royalties, or any other Depreciation (code A). Enter the trust, and there are excess deductions income, minus allocable deductions beneficiary's share of the depreciation on termination (see the instructions for (other than directly apportionable deductions directly apportioned to each line 23), enter the beneficiary's share of deductions), that isn't subject to any activity reported in boxes 5 through 8. excess deductions for section 67(e) passive activity loss limitation rules at See the instructions under Deductions, expenses (amounts allowed in arriving the beneficiary level. Use boxes 6 earlier, for a discussion of how the at adjusted gross income) in box 11, through 8 to report income items subject depreciation deduction is apportioned using code A. See Final Regulations- to the passive activity rules at the between the beneficiaries and the TD9918, for examples of allowable beneficiary's level. estate or trust. Report any AMT excess deductions on termination of an adjustment or tax preference item estate or trust. Boxes 6 through 8—Ordinary attributable to depreciation separately in Business Income, Rental Real box 12, using code G. Excess deductions on termination Estate, and Other Rental Income occur only during the last tax year of the Note. An estate or trust can't make an trust or decedent's estate when the total Enter the beneficiary's share of trade or election under section 179 to expense deductions (excluding the charitable business, rental real estate, and other certain depreciable business assets. deduction and exemption) are greater rental income, minus allocable Depletion (code B). Enter the than the gross income during that tax deductions (other than directly beneficiary's share of the depletion year. apportionable deductions). To assist the deduction under section 611 directly beneficiary in figuring any applicable apportioned to each activity reported in Generally, a deduction based on an passive activity loss limitations, also boxes 5 through 8. See Depreciation, NOL carryover isn't available to a attach a separate schedule showing the Depletion, and Amortization, earlier, for beneficiary as an excess deduction. beneficiary's share of income derived a discussion of how the depletion However, if the last tax year of the from each trade or business, rental real deduction is apportioned between the estate or trust is also the last year in estate, and other rental activity. beneficiaries and the estate or trust. which an NOL carryover may be taken Report any tax preference item (see section 172(b)), the NOL carryover Box 9—Directly Apportioned attributable to depletion separately in is considered an excess deduction on Deductions box 12, using code H. the termination of the estate or trust to the extent it isn't absorbed by the estate The limitations on passive Amortization (code C). Itemize the beneficiary's share of the amortization or trust during its final tax year. For more ! activity losses and credits under information, see Regulations section CAUTION deductions directly apportioned to each section 469 apply to estates 1.642(h)-4 for a discussion of the and trusts. Estates and trusts that activity reported in boxes 5 through 8. Apportion the amortization deductions allocation of the carryover among the distribute income to beneficiaries are beneficiaries. allowed to apportion depreciation, between the estate or trust and the depletion, and amortization deductions beneficiaries in the same way that the Only the beneficiary of an estate or to the beneficiaries. These deductions depreciation and depletion deductions trust that succeeds to its property is are referred to as “directly apportionable are divided. Report any AMT allowed to deduct that entity's excess deductions.” adjustment attributable to amortization separately in box 12, using code I. deductions on termination. A beneficiary who doesn't have enough income in that Rules for treating a beneficiary's income year to absorb the entire deduction can't and directly apportionable deductions Box 10—Estate Tax Deduction carry the balance over to any from an estate or trust and other rules (Including Certain succeeding year. for applying the passive loss and credit Generation-Skipping Transfer limitations to beneficiaries of estates and trusts haven't yet been issued. Taxes) Box 11, Code B—Excess Deductions on Termination - Any directly apportionable deduction, If the distribution deduction consists of such as depreciation, is treated by the any IRD, and the estate or trust was Non-Miscellaneous Itemized beneficiary as having been incurred in allowed a deduction under section Deductions the same activity as incurred by the 691(c) for the estate tax paid attributable to such income (see the If this is the final return of the estate or estate or trust. However, the character trust, and there are excess deductions of such deduction may be determined line 19 instructions), then the beneficiary is allowed an estate tax deduction in on termination (see the instructions for as if the beneficiary incurred the line 23), enter the beneficiary's share of deduction directly. proportion to his or her share of the distribution that consists of such excess deductions for non- To assist the beneficiary in figuring any income. For an example of the miscellaneous itemized deductions in applicable passive activity loss box 11, using code B. Figure the

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deductions on a separate sheet and Note. Schedule B, line 15 equals the Income tax withheld on wages attach it to the return. sum of all Schedules K-1, boxes 1, 2a, can't be distributed to the 3, 4a, 5, 6, 7, and 8. beneficiary. An individual beneficiary must be able to itemize deductions in order to AMT adjustment attributable to • The low-income housing credit (code claim excess deductions that are qualified dividends, net short-term C). Attach a statement that shows the non-miscellaneous itemized deductions capital gains, or net long-term capi- beneficiary's share of the amount, if any, in determining taxable income. tal gains (codes B through D). If any entered on line 6 of Form 8586, part of the amount reported in box 12, Low-Income Housing Credit, with Note. Section 67(g) suspends code A, is attributable to qualified instructions to report that amount on miscellaneous itemized deductions dividends (code B), net short-term Form 8586, line 4 or Form 3800, Part III, subject to the 2% floor for tax years capital gain (code C), or net long-term line 1d, if the beneficiary's only source 2018 through 2025. Therefore, capital gain (code D), enter that part for the credit is a pass-through entity. miscellaneous itemized deductions are using the applicable code. Also, show the beneficiary's share of the amount, if any, entered on line 13 of not deductible as excess deductions on AMT adjustment attributable to un- Form 8586 with instructions to report termination of an estate or trust. Consult recaptured section 1250 gain or 28% that amount on Form 8586, line 11 or your state taxing authority for rate gain (codes E and F). Enter the Form 3800, Part III, line 4d, if the information about deducting beneficiary's distributive share of any beneficiary's only source for the credit is miscellaneous itemized deductions on AMT adjustments to the unrecaptured a pass-through entity. your state tax return. section 1250 gain (code E) or 28% rate Rehabilitation credit and energy gain (code F), whichever is applicable, • credit (code D). Attach a statement that Box 11, Codes C and D—Unused in box 12. shows the beneficiary's apportioned Capital Loss Carryover Accelerated depreciation, depletion, share of basis, expenditures, and other Upon termination of the trust or and amortization (codes G through information that is necessary for the decedent's estate, the beneficiary I). Enter any adjustments or tax beneficiary to complete Form 3468, succeeding to the property is allowed as preference items attributable to Investment Credit, for the rehabilitation a deduction any unused capital loss depreciation, depletion, or amortization credit and the energy credit. See the carryover under section 1212. If the that were directly apportioned to the Instructions for Form 3468 for more estate or trust incurs capital losses in beneficiary. For property placed in information. the final year, use the Capital Loss service before 1987, report separately • Other qualifying investment credit Carryover Worksheet in the Instructions the accelerated depreciation of real and (code E). Attach a statement that shows for Schedule D (Form 1041) to figure the leased personal property. the beneficiary's apportioned share of amount of capital loss carryover to be Exclusion items (code J). Enter the qualified investment and other allocated to the beneficiary. beneficiary's share of the adjustment for information that is necessary for the minimum tax purposes from beneficiary to complete Form 3468 for Box 11, Codes E and F—NOL Schedule K-1, box 12, code A, that is the qualifying advanced coal project credit, qualifying gasification project Carryover attributable to exclusion items (Schedule I (Form 1041), lines 2, 3, 4, 5, credit, and qualifying advanced energy Upon termination of a trust or and 7). project credit. See the Instructions for decedent's estate, a beneficiary Form 3468 for more information. succeeding to its property is allowed to • Work opportunity credit (code F). deduct any unused NOL (and any Box 13—Credits and Credit • Credit for small employer health ATNOL) carryover for regular and AMT Recapture insurance premiums (code G). purposes if the carryover would be Enter each beneficiary's share of the • Biofuel producer credit (code H). allowable to the estate or trust in a later credits and credit recapture using the • Credit for increasing research tax year but for the termination. Enter in applicable codes. Listed below are the activities (code I). box 11, using codes E and F, the credits that can be allocated to the • Renewable electricity, refined coal, unused carryover amounts. beneficiary(ies). Attach a statement if and Indian coal production credit (code additional information must be provided J). Attach a statement that shows Box 12—AMT Items to the beneficiary as explained below. separately the amount of the credit the beneficiary must report on line 19 of Adjustment for minimum tax purpo- • Credit for estimated taxes (code A). Form 8835, including the allocation of ses (code A). Enter the beneficiary's Payment of estimated tax to be credited the Part II credit for production during share of the adjustment for minimum tax to the beneficiary (section 643(g)). the 4-year period beginning on the date purposes. the facility was placed in service and for To figure the adjustment, subtract the See the instructions for production after that period. beneficiary's share of the income ! Schedule G, Part II, line 11 • Empowerment zone employment distribution deduction figured on CAUTION before you make an entry to credit (code K). Schedule B, line 15, from the allocate any estimated tax payments to • Indian employment credit (code L). beneficiary's share of the income a beneficiary. If the fiduciary doesn't • Orphan drug credit (code M). distribution deduction on a minimum tax make a valid election, then the IRS will • Credit for employer provided child basis figured on Schedule I (Form disallow the estimated tax payment that care and facilities (code N). 1041), line 42. The difference is the is reported on Schedule K-1 and • Biodiesel and renewable diesel fuels beneficiary's share of the adjustment for claimed on the beneficiary's return. credit (code O). If the credit includes the minimum tax purposes. • Credit for backup withholding (code small agri-biodiesel credit, attach a B). statement that shows the beneficiary's

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share of the small agri-biodiesel credit, indicate that the information is provided of qualified property limitations. the number of gallons claimed for the on an attached statement. Do not add Therefore, neither the PTP nor its small agri-biodiesel credit, and the amounts into a single number and owners (including estates and trusts) is estate's or trust's productive capacity for report it on Schedule K-1. The required to report W-2 wages or UBIA of agri-biodiesel. information must be separately qualified property amounts related to a • Credit to holders of tax credit bonds identified for each trade or business the trade or business operated by a PTP. (code P). trust or estate directly conducts, • Credit for employer differential wage including specified service trades or Trusts and estates should use payments (code Q). businesses (SSTBs). The trust or estate Statement B—QBI Pass-through Entity • Recapture of credits (code R). On an must attach the statement to each Aggregation Election(s), in these attached statement to Schedule K-1, Schedule K-1, separately identifying the instructions, or a substantially similar provide any information the beneficiary beneficiary’s allocable share of: statement, to report aggregated trades will need to report recapture of credits. 1. Qualified items of income, gain, or businesses and provide supporting • Other credits (code Z). Use code Z to deduction, and loss; information to beneficiaries on each report the beneficiary's share of the Schedule K-1. employee retention credit. See Form 2. W-2 wages; 5884-A and its instructions for more 3. Unadjusted basis immediately Trusts and estates should use information about the employee after acquisition (UBIA) of qualified Statement C—QBI Pass-through Entity retention credit. property; Reporting- Patrons of Specified 4. Qualified PTP items; and Agricultural and Horticultural Box 14—Other Information 5. Section 199A dividends, also Cooperatives, in these instructions, or a substantially similar statement, to report Enter the dollar amounts and applicable known as qualified real estate investment trust (REIT) dividends. allocable QBI and W-2 wages allocable codes for the items listed under Other to qualified payments from a specified Information. agricultural or horticultural cooperative Foreign taxes (code B). Enter the The trust or estate must make an initial for each trade or business. This beneficiary's allocable share of taxes determination of which items are statement should also be used to report paid or accrued to a foreign country. qualified items of income, gain, each beneficiary’s allocable section Attach a statement reporting the deduction, and loss at its level and 199A(g) deduction reported to the trust beneficiary's share of foreign tax (paid report to each beneficiary their share of or estate by the specified cooperative. or accrued) and income by category all items that may be qualified items at Determining the trust or estate’s including interest, dividends, rents and the beneficiary level. See the heading qualified trades or businesses. The royalties, and other income. See Form Determining the Trust or Estate’s QBI or trust or estate’s qualified trades or 1116 and Pub. 514 for more Qualified PTP Income, later. The businesses include its section 162 information. beneficiary must then determine whether each item is includible in QBI. trades or businesses, except for Foreign trading gross receipts specified service trades or businesses, (code G). Enter the beneficiary's In addition, the trust or estate must also or the trade or business of providing share, if any, of foreign trading gross report on whether any of its trades or services as an employee. A section 162 receipts. See Form 8873, Extraterritorial businesses are SSTBs and identify on trade or business generally includes any Income Exclusion, for more information. the statement any trades or businesses activity carried on to make a profit and with considerable, regular, and Net investment income tax (code H). that are aggregated. continuous activity. For more Use code H to identify the amount of the information on what qualifies as a trade beneficiary's adjustment for section Trusts and estates should use or business for purposes of section 1411 net investment income or Statement A—QBI Pass-through Entity 199A, see the Instructions for Form deductions. See the Instructions for Reporting, in these instructions, or a 8995, Qualified Business Income Form 8960. An attachment may be substantially similar statement, to report Deduction Simplified Computation, or provided with the K-1 informing the each beneficiary’s allocable information Form 8995-A, Qualified Business beneficiary of the detailed items to be from each trade or business, including Income Deduction. reported on Form 1040 or 1040-SR. QBI items, W-2 wages, UBIA of See Net Investment Income Tax, earlier, qualified property, qualified PTP items, Rental real estate. Rental real for more information on these amounts. and section 199A dividends by estate may constitute a trade or attaching the completed statement(s) to Section 199A information (code I). business for purposes of the QBI each beneficiary’s Schedule K-1. The In the case of a trust or estate, the deduction if the rental real estate: trust or estate should also use qualified business income (QBI) • Rises to the level of a trade or Statement A—QBI Pass-through Entity deduction, also known as the section business under section 162, Reporting to report each beneficiary’s 199A deduction, is determined at the • Satisfies the requirements for the share of QBI items, W-2 wages, UBIA of beneficiary level for the portions of QBI, rental real estate safe harbor in Rev. qualified property, qualified PTP items, qualified REIT dividends, and qualified Proc. 2019-38, 2019-42 I.R.B. 942, or and section 199A dividends reported to publicly traded partnership items • Meets the self-rental exception (that the trust or estate by another entity. apportioned to the beneficiaries. To is, the rental or licensing of property to a commonly controlled trade or business allow beneficiaries to correctly figure Note. The estate or trust must report their QBI deduction, the trust or estate conducted by an individual or relevant each beneficiary's share of qualified passthrough entity (RPE)) in must enter an asterisk (*) on each items of income, gain, deduction and beneficiary’s Schedule K-1 next to code Regulations section 1.199A-1(b)(14). loss from a PTP. The PTP component is I and enter “STMT” in the right column to not limited by the W-2 wages and UBIA

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The determination of whether rental real compute their QBI deduction. written explanation for any changes to estate constitutes a trade or business Therefore, the statement attached to the prior year aggregations that describes for purposes of the QBI deduction is Schedule K-1 issued to each beneficiary the change in facts and circumstances. made by the trust or estate. The trust or must identify any items relating to estate must first make this SSTBs. If the trust or estate directly or indirectly determination and then only include the owns an interest in a relevant RPE that allocable share of rental real estate Aggregation. A trust or estate aggregates multiple trades or items of income, gain, loss, and engaged in more than one trade or businesses, it must attach a copy of the deduction on the statement provided to business may choose to aggregate RPE’s aggregation to each beneficiaries. Rental real estate that multiple trades or businesses into a Schedule K-1. The trust or estate does not meet one of the three single trade or business for purposes of cannot break apart the aggregation of conditions noted above does not section 199A if it meets the following another RPE, but it may add trades or constitute a trade or business for requirements. businesses to the aggregation, purposes of the QBI deduction and 1. The same person, or group of assuming the requirements above are must not be included in the QBI persons, either directly or through satisfied. information provided to beneficiaries. attribution, owns 50% or more of each trade or business for a majority of the Determining the Trust or Estate’s Specified service trades or tax year, including the last day of the tax QBI or Qualified PTP Items. The trust businesses excluded from qualified year, and all trades or businesses use or estate’s items of QBI that must be trades or businesses. SSTBs are the same tax year-end; reported to beneficiaries include the generally excluded from the definition of allocated amounts of qualified items of a qualified trade or business. An SSTB 2. None of the trades or businesses income, gain, deduction, and loss from is any trade or business providing are an SSTB; and the trust or estate’s trades or services in the fields of health, law, 3. The trades or businesses to be businesses that are effectively accounting, actuarial science, aggregated meet at least two of the connected with the conduct of a trade or performing arts, consulting, athletics, following three factors: business within the United States. This financial services, brokerage services, a. They provide products, property, may include, but is not limited to, items investing and investment management, or services that are the same or that are such as ordinary business income or trading or dealing in securities, trust or customarily offered together; (losses), section 1231 gains or (losses), estate interests, or commodities or any b. They share facilities or share section 179 deductions, and interest other trade or business where the significant centralized business from debt financed distributions. principal asset is the reputation or skill elements, such as personnel, of one or more of its employees or accounting, legal, manufacturing, QBI may also include rental income owners. The term any trade or business purchasing, human resources, or (losses) or royalty income, if the activity where the principal asset is the information technology resources; or rises to the level of a trade or business; reputation or skill of one or more of its and gambling gains or (losses), but only employees or owners means any trade c. They are operated in coordination if the trust or estate is engaged in the or business that consists of any of the with, or reliance upon, one or more of trade or business of gambling. Whether following: (i) a trade or business in the businesses in the aggregated group. an activity rises to the level of a trade or which a person receives fees, business must be determined at the compensation, or other income for If the trust or estate chooses to entity level and, once made, is binding endorsing products or services; (ii) a aggregate multiple trades or on beneficiaries. trade or business in which a person businesses, it must report the licenses or receives fees, aggregation on Statement B, or a Qualified PTP items that must be compensation, or other income for the substantially similar statement, and reported to the beneficiaries include the use of an individual’s image, likeness, attach it to each Schedule K-1. The allocated amounts of the trust or name, signature, voice, trademark, or statement must provide the information estate’s share of qualified items of any other symbols associated with the necessary to identify each separate income, gain, deduction, and loss from individual’s identity; or (iii) receiving trade or business included in each a PTP and may also include gain or loss fees, compensation, or other income for aggregation, a description of the recognized on the disposition of the appearing at an event or on radio, aggregated trades or businesses, and trust or estate’s partnership interest that television, or another media format. an explanation of the factors met that is not treated as a capital gain or loss. allow the aggregation in accordance Exception. If the beneficiary’s However, QBI and qualified PTP items taxable income is equal to or less than with Regulations section 1.199A-4. The aggregation statement must be don’t include any of the following. the threshold for the reporting 2020 tax • Items that are treated as capital gain year, $163,300 ($326,600 if married completed each year to show the trust or estate's trade or business or loss under any provision of the Code. filing jointly), the QBI from the SSTB • Dividends or dividend equivalents, may be used by the beneficiary to aggregations. Failure to disclose the aggregations may cause them to be including qualified REIT dividends. compute their QBI deduction. If the • Interest income (unless received in beneficiary’s taxable income is within disaggregated. connection with the trade or business). the phase-in range, the threshold • Wage income. amount plus $50,000 ($100,000 if The trust or estate's aggregations must be reported consistently for all • Income that is not effectively married filing jointly), an applicable connected with the conduct of a trade or percentage of the QBI, W-2 wages, and subsequent years, unless there is a change in facts and circumstances that business within the United States (for UBIA of qualified property from an more information, go to IRS.gov and SSTB may be used by the beneficiary to changes or disqualifies the aggregation. The trust or estate must provide a

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type in the key word “effectively • Annuities (unless received in QBI flowchart. Trusts or estates connected income”). connection with the trade or business). may use the flow chart below to help • Commodities transactions, or foreign • Guaranteed payments described in them determine if an allocated item of currency gains or losses described in section 707(c) received by the entity for income, gain, deduction, or loss is section 954(c)(1)(C) or (D). services rendered to a partnership. includible in QBI reportable to • Income, loss, or deductions from • Payments described in section beneficiaries. notional principal contracts under 707(a) received by the entity for section 954(c)(1)(F). services rendered to a partnership.

QBI Flowchart

Questions Yes No Is the item effectively connected with the conduct of a trade or business within the United Continue Stop, this item isn’t QBI. States? Is the item attributable to a trade or business (this may include section 1231 gain (loss), Continue Stop, this item isn’t QBI. section 179 deductions, interest from debt financed distributions, etc.)? Examples of an item not considered attributable to the trade or business at the entity level include gambling income (loss) where the entity isn’t engaged in trade or business of gambling, income (loss) from vacation properties when the entity isn’t in that trade or business, activities not engaged in for profit, etc. Is the item treated as a capital gain or loss under any provision of the Internal Revenue Code Stop, this item isn’t QBI. Continue or is it a dividend or dividend equivalent? Is the item interest income other than interest income properly allocable to a trade or Stop, this item isn’t QBI. Continue business? (Note that interest income attributable to an investment of working capital, reserves, or similar accounts isn’t properly allocable to a trade or business). Is the item an annuity, other than an annuity received in connection with the trade or business? Stop, this item isn’t QBI. Continue Is the item gain or loss from a commodities transaction or foreign currency gain or loss Stop, this item isn’t QBI. Continue described in sections 954(c)(1)(C) or (D)? Is the item gain or loss from a notional principal contract under section 954(c)(1)(F)? Stop, this item isn’t QBI. Continue Is the item of income or loss from a qualified publicly traded partnership? This item is a qualified PTP This item is QBI. Report this item. Report this item as item as QBI subject to qualified PTP income or beneficiary-specific loss, subject to determinations. beneficiary-specific determinations, and check the PTP box.

Specific Instructions for Statement directly or indirectly. Use the QBI Flow computing the W-2 wage and UBIA A—QBI Pass-through Entity Report- Chart above to determine if an allocated limitations. ing. item is reportable as a QBI item or qualified PTP item subject to The W-2 wages are amounts paid to QBI or qualified PTP items. The beneficiary-specific determinations. employees described in section 6051(a) trust or estate must first determine if it is Each item included under “Other” must (3) and (8). If the trust or estate engaged in one or more trades or be stated separately, identifying the conducts more than one trade or businesses. It must then determine if nature and amount of each item. business, it must allocate the W-2 any of its trades or businesses are wages among its trades or businesses. SSTBs. The trust or estate must also W-2 wages and UBIA of qualified See Rev. Proc. 2019-11, 2019-09 I.R.B. determine whether it has qualified PTP property. The trust or estate must 742 or more information. items from an interest in a PTP. The determine the W-2 wages and UBIA of trust or estate must indicate the status qualified property properly allocable to The unadjusted basis of qualified on the appropriate check boxes for each QBI for each qualified trade or business property is figured by adding the trade or business (or aggregated trade and report the allocable share to each unadjusted basis of all qualified assets or business) or PTP interest reported. beneficiary on Statement A, or a immediately after acquisition. Qualified substantially similar statement, attached property includes all tangible property Note. SSTBs and PTPs cannot be to Schedule K-1. This includes the subject to depreciation under section aggregated with any other trade or allocable share of W-2 wages and UBIA 167 for which the depreciable period business. So, if the aggregation box is of qualified property reported to the trust hasn't ended that is held and used for checked, the SSTB and PTP boxes for or estate from any qualified trades or the production of QBI by the trade or that specific aggregated trade or businesses of an RPE the trust or estate business during the tax year and held business should not be checked. owns directly or indirectly. However, on the last day of the tax year. The trusts or estates that own a direct or depreciable period ends on the later of Next, the trust or estate must report to indirect interest in a PTP may not 10 years after the property is placed in each beneficiary their allocable share of include any amounts for W-2 wages or service or the last day of the full year for all apportioned items that are QBI or UBIA of qualified property from the PTP, the applicable recovery period under qualified PTP items for each trade or as the W-2 wages and UBIA of qualified section 168. business the trust or estate owns property from a PTP are not allowed in

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Section 199A dividends. The trust 1(h)(11), plus any apportioned qualified and (8) for the calendar year ended with or estate must report the apportioned REIT dividends received from a or within the trust or estate’s tax year. If allocable share of any REIT dividends to regulated investment company (RIC). the trust or estate conducts more than each beneficiary on Statement A, or a one trade or business, it must allocate substantially similar statement, attached Fiscal year trusts and estates. For W-2 wages among its trades or to Schedule K-1. Section 199A purposes of determining the QBI or businesses. See Rev. Proc. 2019-11 for dividends do not have to be reported by qualified PTP items, UBIA of qualified more information. trade or business and can be reported property, and the aggregate amount of as a single amount to beneficiaries. qualified section 199A dividends, fiscal Note. The trust or estate must report Section 199A dividends include year trusts or estates include all items each beneficiary’s share of qualified dividends the trust or estate receives from the fiscal tax year. items of income, gain, deduction and from a REIT held for more than 45 days, loss from a PTP, but the W-2 wages and for which the payment is not obligated to For purposes of determining W-2 UBIA of qualified property from the PTP someone else, is not a capital gain wages, fiscal year trusts or estates should not be reported as the dividend under section 857(b)(3) and is include apportioned amounts paid to beneficiary cannot use that information not a qualified dividend under section employees under section 6051(a)(3) in computing their QBI deduction.

Statement A—QBI Pass-through Entity Reporting

Pass-through entity’s name: Pass-through entity’s EIN: Beneficiary’s name: Benificiary’s identifying number:

PTP PTP PTP Beneficiary's Share of: Aggregated Aggregated Aggregated SSTB SSTB SSTB QBI or Qualified PTP Items Subject to Beneficiary-specific Determinations TB1 TB2 TB3 Ordinary business income Rental income Other

W-2 Wages UBIA of Qualified Property

Section 199A Dividends

Specific Instructions for Statement business and an explanation of the year aggregations that describes the B—QBI Pass-through Entity Aggre- factors met that allow the aggregation. change in facts and circumstances. gation Election(s). If the trust or estate elects to aggregate more than The aggregation statement must be If the trust or estate holds a direct or one trade or business that meet all the completed each year to show the trust’s indirect interest in an RPE that requirements to aggregate, the trust or or estate’s trade or business aggregates multiple trades or estate must report the aggregation to aggregations. Failure to disclose the businesses, the trust or estate must also beneficiaries on Statement B, or a aggregations may cause them to be include a copy of the RPE’s substantially similar statement, and disaggregated. The trust’s or estate’s aggregations with each beneficiary’s attach it to each Schedule K-1. The trust aggregations must be reported Schedule K-1. The trust or estate or estate must indicate trades or consistently for all subsequent years, cannot break apart the aggregation of businesses that were aggregated by unless there is a change in facts and another RPE, but it may add trades or checking the appropriate box for each circumstances that changes or businesses to the aggregation, aggregated trade or business. The trust disqualifies the aggregation. The trust or assuming the aggregation requirements or estate must also provide a estate must provide a written are satisfied. description of the aggregated trade or explanation for any changes to prior

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Statement B—QBI Pass-through Entity Aggregation Election(s)

Pass-through entity’s name: Pass-through entity’s EIN: Aggregation of Pass-through Business Operations Aggregation 1 Provide a description of the aggregated trades or businesses and an explanation of the factors met that allow the aggregation in accordance with Regulations section 1.199A-4. In addition, if the pass-through entity holds a direct or indirect interest in a relevant pass-through entity (RPE) that aggregates multiple trades or businesses, attach a copy of the RPE's aggregations.

Has this trade or business aggregation changed from the prior year? This includes changes in the aggregation due to a trade or business being formed, acquired, disposed, or ceasing operations. If yes, explain.

Note. If you have more than one aggregated group, attach additional Statements B. Name the additional aggregations 2, 3, 4, and so forth.

Specific Instructions for Statement from each trade or business to each of reported to the trust or estate on Form C—QBI Pass-through Entity Report- its beneficiaries on Statement C, or a 1099-PATR from the cooperative. substantially similar statement, and ing - Patrons of Specified Agricultur- Section 199A(g) Deduction. The al and Horticultural Cooperatives. attach it to Schedules K-1 so each beneficiary can compute their patron trust or estate must report to its QBI items and wages allocable to reduction under section 199A(b)(7). beneficiaries their allocable share of any qualified payments. If the trust or apportioned section 199A(g) deduction estate is a patron of a specified QBI items and W-2 wages allocable to passed-through the cooperative, as agricultural or horticultural cooperative, qualified payments include apportioned reported on Form 1099-PATR. Section the trust or estate must provide the QBI items included on Statement A that 199A(g) deductions do not have to be allocable share of QBI items and W-2 are allocable to the qualified payments reported by trade or business and can wages allocable to qualified payments be reported as a single amount to beneficiaries.

Statement C—QBI Pass-through Entity Reporting- Patrons of Specified Agricultural and Horticultural Cooperatives

Pass-through entity’s name: Pass-through entity’s EIN: Beneficiary’s name: Beneficiary's identifying number:

PTP PTP PTP Beneficiary’s Share of: Aggregated Aggregated Aggregated SSTB SSTB SSTB QBI Items Allocable to Qualified Payments Subject to Beneficiary-Specific TB1 TB2 TB3 Determinations Ordinary business income Rental income Other

W-2 Wages Allocable to Qualified Payments

Section 199A(g) Deduction

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Other information (code Z). List on a foreign tax credit splitter arrangement information to each domestic corporate separate sheet the tax information the under section 909, attach a statement beneficiary for its calculation of FDII beneficiary will need to complete his or that identifies the arrangement including benefit. See section 250 for more her return that isn't entered elsewhere the foreign taxes paid or accrued. information. See the Instructions for Form 8993 for details. on Schedule K-1. Inclusion of global intangible For example, if the estate or trust low-taxed income (GILTI). Section Limitation on business interest ex- participates in a transaction that must 951A requires U.S. shareholders of pense. If an estate or trust is required be disclosed on Form 8886 (see controlled foreign corporations to report to file Form 8990, the adjusted taxable earlier), both the estate or trust and its their ratable share of GILTI in taxable income of an estate or trust beneficiary beneficiaries may be required to file income. If applicable, provide the is reduced by any income (including any Form 8886. The estate or trust must information necessary to figure the distributable net income) received from determine if any of its beneficiaries are GILTI inclusion to each beneficiary. See the estate or trust by the beneficiary to required to disclose the transaction and the Instructions for Form 8992 for the extent such income supported a provide those beneficiaries with details. deduction for business interest expense information they will need to file Form under section 163(j)(1)(B) in computing Foreign-derived intangible 8886. This determination is based on the estate's or trust's taxable income. If income (FDII). Public Law 115-97 the category(ies) under which a applicable, provide the beneficiary the enacted section 250, which allows a transaction qualified for disclosure. See necessary information to calculate this domestic corporation a deduction for the Instructions for Form 8886 for amount in an attachment to the eligible percentage of FDII and details. Schedule K-1. See Form 8990 and the GILTI. Section 250 is effective for tax In addition, if the beneficiary is a Instructions for Form 8990 for additional years beginning after 2017. If information. “covered person” in connection with a applicable, provide the necessary

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You aren't required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by Code section 6103. The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The estimated average times are:

Form 1041 Schedule D Schedule I Schedule J Schedule K-1 Form 1041-V Recordkeeping 25 hr., 35 min. 14 hr., 35 min. 17 hr., 42 min. 11 hr., 00 min. 6 hr., 27 min. 43 min. Learning about the law or the form 15 hr., 52 min. 3 hr., 38 min. 4 hr., 22 min. 1 hr., 27 min. 35 min. - - - - Preparing the form 30 hr., 1 min. 4 hr., 58 min. 4 hr., 51 min. 2 hr., 37 min. 43 min. - - - - Copying, assembling, and sending the form to the IRS 3 hr., 45 min. 16 min. - - - - 16 min. ------

If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler, we would be happy to hear from you. You can send us your comments from IRS.gov/FormComments. Or you can send comments to Internal Revenue Service, Tax Forms and Publications Division,1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Don't send Form 1041 to this address. Instead, see Where To File, earlier.

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Index

Interest income 20 Final 19 A E Inter vivos 3, 4 Nonexempt charitable trust 18 Accounting income 3 Electing small business trusts 14 IRD: Qualified settlement funds 7 Alaska Native Settlement Trusts 7 ESBT (S portion only) 17 Deduction 26 Split-interest trust 19 Amended return 19 S portion 14 When to file 8 Amounts paid or permanently set Elections: Who must file 4 aside 28 Section 643(e)(3) 30 M Revocable Living Trusts: Assembly 12 Section 643(g) 10 Minimum taxable income 27 Section 645 Election 19 Attachments 12 Section 645 5 Special rule for qualified revocable trusts 5 N S B Treating contributions as paid Net investment income tax 35 Second tier distributions 30 Bankruptcy estate 7, 15, 18 in prior tax year 28 Net operating loss 27 Separate share rule 29 Bankruptcy information 15 Electronic deposits 10 Nonexempt charitable Special filing instructions: Beneficiary 4 ESBTs (See Electing small deduction 18 Bankruptcy estates 17 Allocation of estimated tax business trusts) Nonexempt charitable trust 18, 28 Electing small business payment 10 Estate 4, 40 Nonqualified deferred trusts 14 Complex trust 40 Bankruptcy 7, 18 compensation plans 18 Grantor trusts 13 Estate 40 Exemption for 26 Pooled income funds 14 Simple trust 40 Foreign 4 Split-interest trust 19 Who must file 4 Substitute forms 40 Tax year for inclusion 41 P Withholding on foreign Estate tax deduction 26 Estimated tax 9, 27 Paid preparer 9 person 29 Paid preparer authorization 9 Blind trust 19 Allocation of payments to T beneficiaries 9 Penalties: Estimated tax 27 Taxable income 27 Penalty 27 Tax rate schedule 30 Exemption 26 Failure to provide a required TIN 40 Throwback years 38 C Extraterritorial income Trusts 4 Cemetery perpetual care fund 26 exclusion 19 Failure to provide information Charitable deduction 28 timely 10 Alaska Native Settlement 7 Charitable remainder trusts 19 Late filing of return 10 Blind 19 Common trust fund 7 Late payment of tax 10 Common trust fund 7 F Other 10 Complex 40 Fiduciary 4, 8 Trust fund recovery 10 Domestic 5 Fiduciary accounting income Underpaid estimated tax 10 Exemption for 26 D (FAI) (See Accounting income) Pooled income funds 14, 18, 28, Foreign 36 Decedent's Estate 4 Final return 19 29 Grantor 3 Deferral worksheet for Schedule H First tier distributions 30 Pre-need funeral trusts 18 Inter vivos 3, 4 or Schedule SE filers 35 Foreign tax credit 31 Nonexempt charitable 18, 28 Definitions: Form 1041-T 10 Pre-need funeral 18 Accumulation distribution 37 Form 8855 5 Qualified disability 26 Adjusted gross income (AGI) 3 Q Qualified revocable 5 Beneficiary 4 Qualified business income Simple 40 Complex trust 17 deduction 26 Split-interest 19 Decedent's Estate 4 G Qualified disability trust 26 Testamentary 3, 4 Decedent's estate 17 General business credit 31 Qualified revocable trust 5 Who must file 4, 40 DNI 4 Grantor trusts 3, 5, 13, 18 Qualified settlement funds 7 Fiduciary 4 Backup withholding 14 Qualified small business stock 29 Grantor trusts 18 Nonqualified deferred Qualified subchapter S trust IRD 4 compensation plans 18 (QSST) 5, 13, 18 W Outside income 38 Optional filing methods 13 Where to file 8 Pooled income fund 18 Pre-need funeral trusts 18 Who must file: Revocable Living Trust 4 Special filing instructions 13 Decedent's estate 4 GST tax deduction 26 R Trust 4 Simple trust 17 Returns: Withholding on foreign person 29 Trust 4 Amended 19 Trusts 4 Common trust fund 7 Distributable net income (See DNI) I Electronic and magnetic DNI 4, 29 Income distribution deduction 3, media 8 26, 29

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