Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Introductory Material Future Developments What's New Due date of return. Capital gains and qualified dividends. Bankruptcy estate filing threshold. Qualified disability trust. Qualified sick and family leave credits. Reminders Form 8978 Worksheet. Advanced manufacturing production credit. Net operating loss (NOL) carryback. Section 965. Section 1061 reporting. Excess deductions on termination. Qualified Opportunity Investment. Extension of time to file. Item A. Type of entity. Item F. Net operating loss (NOL) carryback. Item G. Section 645 election. Form 1041 e-filing. Photographs of Missing Children The Taxpayer Advocate Service (TAS) The TAS Is Here To Help You What Is TAS? How Can You Learn About Your Taxpayer Rights? What Can TAS Do for You? How Can You Reach TAS? How Else Does TAS Help Taxpayers? How To Get Forms and Publications Tax forms and publications. General Instructions Purpose of Form Income Taxation of Trusts and Decedents' Estates Abusive Trust Arrangements Definitions Adjusted gross income (AGI). Electing small business trust (ESBT). Beneficiary. Decedent's estate. Distributable net income (DNI). Income in respect of a decedent (IRD). Deductions and credits in respect of a decedent. Income required to be distributed currently. Fiduciary. Trust. Revocable living trust. Who Must File Decedent's Estate Trust Grantor Type Trusts Qualified subchapter S trusts (QSSTs). Special Rule for Certain Revocable Trusts Qualified revocable trusts (QRTs). Election period. Taxpayer identification number (TIN). General procedures for completing Form 1041 during the election period. If there isn't an executor. Responsibilities of the trustee when there is an executor (or there isn't an executor and the trustee isn't the filing trustee). Procedure for completing Form 1041 for the year in which the election terminates. If there isn't an executor. Responsibilities of the trustee when there is an executor (or there isn't an executor and the trustee isn't the filing trustee). Special filing instructions. When the election isn't made by the due date of the QRT's Form 1041. Later appointed executor. Termination of the trust during the election period. Alaska Native Settlement Trusts Bankruptcy Estate Charitable Remainder Trusts (CRTs) Common Trust Funds ESBTs Pooled Income Funds Qualified Funeral Trusts Qualified Settlement Funds Special election. Election statement. Widely Held Fixed Investment Trust (WHFITs) Electronic Filing Private Delivery Services (PDSs) When To File Extension of Time To File Period Covered Where To File Who Must Sign Fiduciary Paid Preparer Paid Preparer Authorization Accounting Methods Accounting Periods Rounding Off to Whole Dollars Estimated Tax Exceptions Electronic Deposits Depositing on time. Section 643(g) Election Interest and Penalties Interest Late Filing of Return Late Payment of Tax Failure To Provide Information Timely Underpaid Estimated Tax Trust Fund Recovery Penalty Other Penalties Other Forms That May Be Required Additional Information Assembly and Attachments Attachments Special Reporting Instructions Grantor Type Trusts How to report. Attachment. QSSTs. Optional Filing Methods for Certain Grantor Type Trusts Exceptions. Optional Method 1. Optional Method 2. Optional Method 3. Changing filing methods. Backup withholding. Pooled Income Funds Electing Small Business Trusts (ESBTs) Tax computation attachment. Other information. Bankruptcy Estates Who Must File EIN Accounting Period When To File Disclosure of Return Information Transfer of Tax Attributes From the Individual Debtor to the Bankruptcy Estate Income, Deductions, and Credits Administrative expenses. Administrative expense loss. Carryback of NOLs and credits. Standard deduction. Discharge of indebtedness. Tax Rate Schedule Prompt Determination of Tax Liability Special Filing Instructions for Bankruptcy Estates Specific Instructions Name of Estate or Trust Name and Title of Fiduciary Address A. Type of Entity Decedent's Estate Simple Trust Complex Trust Qualified Disability Trust ESBT (S Portion Only) Grantor Type Trust Pre-need funeral trusts. Nonqualified deferred compensation plans. QSSTs. Bankruptcy Estate Pooled Income Fund B. Number of Schedules K-1 Attached C. Employer Identification Number D. Date Entity Created E. Nonexempt Charitable and Split-Interest Trusts Section 4947(a)(1) Trust Nonexempt charitable trust treated as a private foundation. Excise taxes. Not a Private Foundation Other returns that must be filed. Section 4947(a)(2) Trust Other returns that must be filed. F. Initial Return, Amended Return, etc. Amended Return Amended Schedule H (Form 1040). Amended Schedule K-1 (Form 1041). Final Return Change in Trust's Name Change in Fiduciary Change in Fiduciary's Name Change in Fiduciary's Address G. Section 645 Election Income Determining Qualified Business Income (QBI) Special Rule for Blind Trust Extraterritorial Income Exclusion Line 1—Interest Income Line 2a—Total Ordinary Dividends Line 2b—Qualified Dividends Qualified dividends. Exception. Line 3—Business Income or (Loss) Line 4—Capital Gain or (Loss) Line 5—Rents, Royalties, Partnerships, Other Estates and Trusts, etc. Line 6—Farm Income or (Loss) Line 7—Ordinary Gain or (Loss) Line 8—Other Income Deductions Depreciation, Depletion, and Amortization Depreciation. Depletion. Amortization. Allocable share from a pass-through entity. Allocation of Deductions for Tax-Exempt Income Exception. Deductions That May Be Allowable for Estate Tax Purposes Accrued Expenses Limitations on Deductions At-Risk Loss Limitations Passive Activity Loss and Credit Limitations In general. Rental activities. Portfolio income. Forms to file. Business Interest Transactions Between Related Taxpayers Line 10—Interest Limitation on deduction of business interest. Investment interest. Qualified residence interest. Line 11—Taxes Safe harbor for certain charitable contributions made in exchange for a state or local tax credit. Line 12—Fiduciary Fees Note. Line 14—Attorney, Accountant, and Return Preparer Fees Line 15a—Other Deductions Other costs paid or incurred by estates and non-grantor trusts. Ownership costs. Appraisal fees. Investment advisory fees. Bundled fees. Other Deductions Reported on Line 15a Bond premium(s). Casualty and theft losses. Estate's or trust's share of amortization, depreciation, and depletion not claimed elsewhere. Section 179D. Line 15b—Net Operating Loss Deduction Line 18—Income Distribution Deduction Cemetery perpetual care fund. Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes Line 20—Qualified Business Income Deduction Line 21—Exemption Decedents' estates. Trusts required to distribute all income currently. Qualified disability trusts. All other trusts. Tax and Payments Line 23—Taxable Income Minimum taxable income. Net operating loss (NOL). Excess deductions on termination. Line 25—Current Payment on Deferred Net 965 Tax Liability Line 27—Estimated Tax Penalty Line 28—Tax Due To pay by check or money order. Note. To pay by credit or debit card. Line 30a—Credited to 2024 Estimated Tax Schedule A—Charitable Deduction General Instructions Additional return to be filed by trusts. Election to treat contributions as paid in the prior tax year. Specific Instructions Line 1—Amounts Paid or Permanently Set Aside for Charitable Purposes From Gross Income Line 2—Tax-Exempt Income Allocable to Charitable Contributions Line 4—Capital Gains for the Tax Year Allocated to Corpus and Paid or Permanently Set Aside for Charitable Purposes Line 6—Section 1202 Exclusion Allocable to Capital Gains Paid or Permanently Set Aside for Charitable Purposes Schedule B—Income Distribution Deduction General Instructions Pooled income funds. Separate share rule. Withholding of tax on foreign persons. Specific Instructions Line 1—Adjusted Total Income Line 2—Adjusted Tax-Exempt Interest Line 3 Line 5 Line 8—Accounting Income Lines 9 and 10 Line 9—Income Required To Be Distributed Currently Line 10—Other Amounts Paid, Credited, or Otherwise Required To Be Distributed Complex trusts. Line 11—Total Distributions Line 12—Adjustment for Tax-Exempt Income Schedule G—Tax Computation and Payments Part I—Tax Computation Line 1a 2023 Tax Rate Schedule. Schedule D (Form 1041) and Schedule D Tax Worksheet. Qualified Dividends Tax Worksheet. Line 1c—Alternative minimum tax. Line 1d—Total. Line 2a—Foreign Tax Credit Line 2b—General Business Credit Line 2c—Credit for Prior Year Minimum Tax Line 2d—Bond Credits Line 2e—Total Credits Line 4—Tax on the ESBT Portion of the Trust ESBT Tax Worksheet—Schedule G, Part I, Line 4 Line 5—Net Investment Income Tax (NIIT) Line 6a—Recapture of Investment Credit Line 6b—Recapture of Low-Income Housing Credit Line 6c—Other Recapture Taxes Recapture of qualified electric vehicle credit. Recapture of the new markets credit. Recapture of the credit for employer-provided childcare facilities and services. Recapture of the alternative motor vehicle credit. Recapture of the alternative fuel vehicle refueling property credit. Recapture of the section 45Q carbon oxide sequestration credit. Line 7—Household Employment Taxes Line 8—Other Taxes and Amounts Due Triggering event under section 965(i). ESBTs. Interest on deferred tax attributable to installment sales of certain timeshares and residential lots and certain nondealer real property installment obligations. Form 4970, Tax on Accumulation Distribution of Trusts. Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method. Interest on deferral of gain from certain constructive ownership transactions. Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Additional tax on the early disposition of noncash property for which a section 247(g)(3) election was made by an Alaska Native Settlement Trust. Form 8978 Worksheet. Form 8978 Worksheet—Schedule G, Part I, Line 8 Line 9—Total Tax Part II—Payments Line 10—2023 Estimated Tax Payments and Amount Applied From 2022 Return Line 11—Estimated Tax Payments Allocated to Beneficiaries (From Form 1041-T) Line 13—Tax Paid With Form 7004 Line 14—Federal Income Tax Withheld Backup withholding. Line 15—Current Net 965 Tax Liability—Eligible for Installment Payment Election Line 16—Credit for Tax Paid on Undistributed Capital Gains Line 17—Credit for Federal Tax on Fuels Line 18a—Elective Payment Election Amount From Form 3800 Line 18b—Other Credits or Payments Net Investment Income Tax (NIIT) Calculation of NII. Distributions on NII. NII allocable to the deduction under section 642(c). Beneficiary reporting. Special rules. Other Information Question 1 Question 2 Question 3 Exception. Question 4 Question 5 Question 6 Question 7 Question 9 Question 10 Question 11a Question 11b Question 12 Question 13 How to report digital asset transactions. Question 14 Question 15 Schedule J (Form 1041)—Accumulation Distribution for Certain Complex Trusts General Instructions Specific Instructions Part I—Accumulation Distribution in 2023 Line 1—Distribution Under Section 661(a)(2) Line 2—Distributable Net Income Line 3—Distribution Under Section 661(a)(1) Line 5—Accumulation Distribution Part II—Ordinary Income Accumulation Distribution Line 6—DNI for Earlier Years Line 7—Distributions Made During Earlier Years Line 11—Prior Accumulation Distribution Thrown Back to Any Throwback Year Line 13—Throwback Years Line 16—Tax-Exempt Interest Included on Line 13 Part III—Taxes Imposed on Undistributed Net Income Line 18—Regular Tax Line 19—Trust's Share of Net Short-Term Gain Line 20—Trust's Share of Net Long-Term Gain Line 22—Taxable Income Line 26—Tax on Income Other Than Long-Term Capital Gain Line 27—Trust's Share of Net Short-Term Gain Line 28—Trust's Share of Taxable Income Less Section 1202 Deduction Part IV—Allocation to Beneficiary Schedule K-1 (Form 1041)—Beneficiary's Share of Income, Deductions, Credits, etc. General Instructions Who Must File Beneficiary's Identifying Number Penalty. Truncating recipient's identification number on beneficiary's statement. Substitute Forms Inclusion of Amounts in Beneficiaries' Income Simple trust. Estates and complex trusts. Gifts and bequests. Past years. Character of income. Allocation of deductions. Beneficiary's Tax Year General Reporting Information Codes. Attached statements. Too few entry spaces on Schedule K-1? Specific Instructions Part I. Information About the Estate or Trust Item D Item E Note. Part II. Information About the Beneficiary Item H Part III. Beneficiary's Share of Current Year Income, Deductions, Credits, and Other Items Box 1—Interest Box 2a—Total Ordinary Dividends Box 2b—Total Qualified Dividends Box 3—Net Short-Term Capital Gain Boxes 4a Through 4c—Net Long-Term Capital Gain Box 5—Other Portfolio and Nonbusiness Income Boxes 6 Through 8—Ordinary Business Income, Rental Real Estate, and Other Rental Income Box 9—Directly Apportioned Deductions Depreciation (code A). Depletion (code B). Amortization (code C). Box 10—Estate Tax Deduction (Including Certain Generation-Skipping Transfer Taxes) Box 11, Code A—Excess Deductions on Termination—Section 67(e) Expenses Box 11, Code B—Excess Deductions on Termination—Non-Miscellaneous Itemized Deductions Box 11, Codes C and D—Unused Capital Loss Carryover Box 11, Codes E and F—NOL Carryover Box 12—AMT Items Adjustment for minimum tax purposes (code A). AMT adjustment attributable to qualified dividends, net short-term capital gains, or net long-term capital gains (codes B through D). AMT adjustment attributable to unrecaptured section 1250 gain or 28% rate gain (codes E and F). Accelerated depreciation, depletion, and amortization (codes G through I). Exclusion items (code J). Box 13—Credits and Credit Recapture Box 14—Other Information Foreign taxes (code B). Qualified rehabilitation expenditures (code C). Basis of energy property (code D). Foreign trading gross receipts (code G). NIIT (code H). Section 199A information (code I). Determining the trust’s or estate’s qualified trades or businesses. Rental real estate. SSTBs excluded from qualified trades or businesses. Exception. Aggregation. Determining the trust’s or estate’s QBI or qualified PTP items. QBI Flowchart. Specific Instructions for Statement A—QBI Pass-Through Entity Reporting. QBI or qualified PTP items. W-2 wages and UBIA of qualified property. Section 199A dividends. Fiscal year trusts and estates. Specific Instructions for Statement B—QBI Pass-Through Entity Aggregation Election(s). Specific Instructions for Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives. QBI items and wages allocable to qualified payments. Section 199A(g) deduction. Code J. Qualifying advanced coal project property and qualifying gasification project property. Code K. Qualifying advanced energy project property. Code L. Advanced manufacturing investment property. Other information (code ZZ). Inclusion of global intangible low-taxed income (GILTI). Foreign-derived intangible income (FDII). Limitation on business interest expense. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Notices Paperwork Reduction Act Notice. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Additional Material Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2023) U.S. Income Tax Return for Estates and Trusts Section references are to the Internal Revenue Code unless otherwise noted. 2023 Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Introductory Material Future Developments For the latest information about developments related to Form 1041 and Schedules A, B, G, J, K-1 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form1041. What's New Due date of return. Calendar year estates and trusts must file Form 1041 by April 15, 2024. If you live in Maine or Massachusetts, you have until April 17, 2024, because of the Patriots' Day and Emancipation Day holidays. Capital gains and qualified dividends. For tax year 2023, the 20% maximum capital gains rate applies to estates and trusts with income above $14,650. The 0% and 15% rates apply to certain threshold amounts. The 0% rate applies to amounts up to $3,000. The 15% rate applies to amounts over $3,000 and up to $14,650. Bankruptcy estate filing threshold. For tax year 2023, the requirement to file a return for a bankruptcy estate applies only if gross income is at least $13,850. Qualified disability trust. For tax year 2023, a qualified disability trust can claim an exemption of up to $4,700. This amount is not subject to phaseout. Qualified sick and family leave credits. Generally, the credits for qualified sick and family leave wages have expired. However, qualified sick and family leave wages paid in 2023 for leave taken before April 1, 2021, and for leave taken after March 31, 2021, and before October 1, 2021, may be eligible to claim the credits in 2023. Reminders Review a copy of the will or trust instrument, including any amendments or codicils, before preparing an estate's or trust's return. We encourage you to use Form 1041-V, Payment Voucher for Estates and Trusts, to accompany your payment of a balance of tax due on Form 1041, particularly if your payment is made by check or money order. Form 8978 Worksheet. A Form 8978 Worksheet—Schedule G, Part I, Line 8 has been added to the instructions to calculate the amount due when there is a negative amount from Form 8978, line 14, that was not used to reduce Schedule G, line 3, to zero, and you have chapter 1 taxes and/or tax and interest from Form 8621. Advanced manufacturing production credit. Section 13502 of the Inflation Reduction Act of 2022 (IRA 2022) created the advanced manufacturing production credit for certain components produced and sold after 2022. See Form 7207, Advanced Manufacturing Production Credit, and its instructions and section 45X. Net operating loss (NOL) carryback. Generally, an NOL arising in a tax year beginning in 2021 or later may not be carried back and instead must be carried forward indefinitely. However, farming losses arising in tax years beginning in 2021 or later may be carried back 2 years and carried forward indefinitely. For special rules for NOLs arising in 2018, 2019 or 2020, see Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, for more information. Section 965. Section 965(a) inclusion amounts are not applicable for tax year 2021 and later years. However, section 965 may still apply to certain estates and trusts (including the S portion of electing small business trusts (ESBTs)) where a section 965(h) or section 965(i) election has been made. Section 1061 reporting. Section 1061 recharacterizes certain long-term capital gains of applicable partnership interests held by an estate or trust as short-term capital gains. See Section 1061 Reporting Guidance FAQs. Excess deductions on termination. Under Final Regulations - TD9918, each excess deduction on termination of an estate or trust retains its separate character as an amount allowed in arriving at adjusted gross income (AGI), a non-miscellaneous itemized deduction, or a miscellaneous itemized deduction. See Box 11, Code A Excess Deductions on Termination—Section 67(e) Expenses and Box 11, Code B Excess Deductions on Termination—Non-Miscellaneous Itemized Deductions, later, for more information. Qualified Opportunity Investment. With the exception of grantor trusts, if you held a qualified investment in a qualified opportunity fund (QOF) at any time during the year, you must file your return with Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments, attached to your return. For more information, see Form 8997 and its instructions. Extension of time to file. The extension of time to file an estate (other than a bankruptcy estate) or trust return is 5½ months. Item A. Type of entity. On page 1 of Form 1041, item A, taxpayers should select more than one box, when appropriate, to reflect the type of entity. Item F. Net operating loss (NOL) carryback. If an amended return is filed for an NOL carryback, check the Net operating loss carryback box in item F. See Amended Return, later, for complete information. Item G. Section 645 election. If the estate has made a section 645 election, the executor must check item G and provide the taxpayer identification number (TIN) of the electing trust with the highest total asset value in the box provided. The executor must also attach a statement to Form 1041 providing the following information for each electing trust (including the electing trust provided in item G): (a) the name of the electing trust, (b) the TIN of the electing trust, and (c) the name and address of the trustee of the electing trust. Form 1041 e-filing. When e-filing Form 1041, use either Form 8453-FE, U.S. Estate or Trust Declaration for an IRS e-file Return, or Form 8879-F, IRS e-file Signature Authorization for Form 1041. Note. Form 8879-F can only be associated with a single Form 1041. Form 8879-F can no longer be used with multiple Forms 1041. For more information about e-filing returns through MeF, see Pub. 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters. Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. The Taxpayer Advocate Service (TAS) The TAS Is Here To Help You What Is TAS? TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS strives to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights. How Can You Learn About Your Taxpayer Rights? The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them. What Can TAS Do for You? TAS can help you resolve problems that you can't resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if: Your problem is causing financial difficulty for you, your family, or your business; You face (or your business is facing) an immediate threat of adverse action; or You’ve tried repeatedly to contact the IRS but no one has responded, or the IRS hasn’t responded by the date promised. How Can You Reach TAS? TAS has offices in every state, the District of Columbia, and Puerto Rico. To find your advocate’s number: Go to TaxpayerAdvocate.IRS.gov/Contact-Us; Download Pub. 1546, The Taxpayer Advocate Service Is Your Voice at the IRS, available at IRS.gov/pub/irs-pdf/p1546.pdf; Call the IRS toll free at 800-TAX-FORM (800-829-3676) to order a copy of Pub. 1546; Check your local directory; or Call TAS toll free at 877-777-4778. How Else Does TAS Help Taxpayers? TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to TAS at IRS.gov/SAMS. Be sure to not include any personal taxpayer information. How To Get Forms and Publications Internet. You can access the IRS website 24 hours a day, 7 days a week, at IRS.gov to: Download forms, including talking tax forms, instructions, and publications; Order IRS products; Use the online Internal Revenue Code, regulations, and other official guidance; Research your tax questions; Search publications by topic or keyword; Apply for an employer identification number (EIN); and Sign up to receive local and national tax news by email. Tax forms and publications. The estate or trust can download or print all of the forms and publications it may need on IRS.gov/FormsPubs. Otherwise, the estate or trust can go to IRS.gov/OrderForms to place an order and have forms mailed to it. The IRS will process your order for forms and publications as soon as possible. General Instructions Purpose of Form The fiduciary of a domestic decedent's estate, trust, or bankruptcy estate uses Form 1041 to report: The income, deductions, gains, losses, etc., of the estate or trust; The income that is either accumulated or held for future distribution or distributed currently to the beneficiaries; Any income tax liability of the estate or trust; Employment taxes on wages paid to household employees; and Net Investment Income Tax (NIIT). See Schedule G, Part I, line 5, and the Instructions for Form 8960. Income Taxation of Trusts and Decedents' Estates A trust or a decedent's estate is a separate legal entity for federal tax purposes. A decedent's estate comes into existence at the time of death of an individual. A trust may be created during an individual's life (inter vivos) or at the time of their death under a will (testamentary). If the trust instrument contains certain provisions, then the person creating the trust (the grantor) is treated as the owner of the trust's assets. Such a trust is a grantor type trust. See Grantor Type Trusts, later, under Special Reporting Instructions. A trust or decedent's estate figures its gross income in much the same manner as an individual. Most deductions and credits allowed to individuals are also allowed to estates and trusts. However, there is one major distinction. A trust or decedent's estate is allowed an income distribution deduction for distributions to beneficiaries. To figure this deduction, the fiduciary must complete Schedule B. The income distribution deduction determines the amount of any distributions taxed to the beneficiaries. For this reason, a trust or decedent's estate is sometimes referred to as a “pass-through entity.” The beneficiary, and not the trust or decedent's estate, pays income tax on their distributive share of income. Schedule K-1 (Form 1041) is used to notify the beneficiaries of the amounts to be included on their income tax returns. Before preparing Form 1041, the fiduciary must figure the accounting income of the estate or trust under the will or trust instrument and applicable local law to determine the amount, if any, of income that is required to be distributed, because the income distribution deduction is based, in part, on that amount. Abusive Trust Arrangements Certain trust arrangements claim to reduce or eliminate federal taxes in ways that are not permitted under the law. Abusive trust arrangements are typically promoted by the promise of tax benefits with no meaningful change in the taxpayer's control over or benefit from the taxpayer's income or assets. The promised benefits may include reduction or elimination of income subject to tax; deductions for personal expenses paid by the trust; depreciation deductions of an owner's personal residence and furnishings; a stepped-up basis for property transferred to the trust; the reduction or elimination of self-employment taxes; and the reduction or elimination of gift and estate taxes. These promised benefits are inconsistent with the tax rules applicable to trust arrangements. Abusive trust arrangements often use trusts to hide the true ownership of assets and income or to disguise the substance of transactions. These arrangements frequently involve more than one trust, each holding different assets of the taxpayer (for example, the taxpayer's business, business equipment, home, automobile, etc.). Some trusts may hold interests in other trusts, purport to involve charities, or are foreign trusts. Funds may flow from one trust to another trust by way of rental agreements, fees for services, purchase agreements, and distributions. Some of the abusive trust arrangements that have been identified include unincorporated business trusts (or organizations), equipment or service trusts, family residence trusts, charitable trusts, and final trusts. In each of these trusts, the original owner of the assets nominally subject to the trust effectively retains the authority to cause financial benefits of the trust to be directly or indirectly returned or made available to the owner. For example, the trustee may be the promoter, a relative, or a friend of the owner who simply carries out the directions of the owner whether or not permitted by the terms of the trust. When trusts are used for legitimate business, family, or estate planning purposes, either the trust, the beneficiary, or the transferor of assets to the trust will pay the tax on income generated by the trust property. Trusts can't be used to transform a taxpayer's personal, living, or educational expenses into deductible items, and can't seek to avoid tax liability by ignoring either the true ownership of income and assets or the true substance of transactions. Therefore, the tax results promised by the promoters of abusive trust arrangements are not allowable under the law, and the participants in and promoters of these arrangements may be subject to civil or criminal penalties in appropriate cases. For more details, including the legal principles that control the proper tax treatment of these abusive trust arrangements, see Notice 97-24, 1997-1 C.B. 409. For additional information about abusive tax arrangements, go to IRS.gov and type “Abusive Trusts” in the search box. Definitions Adjusted gross income (AGI). Compute the AGI of an estate or a non-grantor trust by subtracting the following from total income on line 9 of page 1. The administration costs of the estate or trust (the total of lines 12, 14, and 15a to the extent they are costs incurred in the administration of the estate or trust) that wouldn't have been incurred if the property were not held by the estate or trust. The income distribution deduction (line 18). The amount of the exemption (line 21). The net operating loss deduction (NOLD) claimed on line 15b. Electing small business trust (ESBT). Compute the AGI of the S portion of an ESBT in the same manner as an individual taxpayer, except that administration costs allocable to the S portion (to the extent they are costs incurred in the administration of the trust that wouldn't have been incurred if the property were not held by the estate or trust) shall be deducted in arriving at AGI. Beneficiary. A beneficiary includes an heir, a legatee, or a devisee. Decedent's estate. The decedent's estate is an entity that is formed at the time of an individual's death and is generally charged with gathering the decedent's assets, paying the decedent's debts and expenses, and distributing the remaining assets. Generally, the estate consists of all the property, real or personal, tangible or intangible, wherever situated, that the decedent owned an interest in at death. Distributable net income (DNI). The income distribution deduction allowable to estates and trusts for amounts paid, credited, or required to be distributed to beneficiaries is limited to DNI. This amount, which is figured on Schedule B, line 7, is also used to determine how much of an amount paid, credited, or required to be distributed to a beneficiary will be includible in their gross income. Income in respect of a decedent (IRD). When completing Form 1041, you must take into account any items that are IRD. In general, IRD is income that a decedent was entitled to receive but that was not properly includible in the decedent's final income tax return under the decedent's method of accounting. IRD includes: All accrued income of a decedent who reported their income on the cash method of accounting, Income accrued solely because of the decedent's death in the case of a decedent who reported their income on the accrual method of accounting, and Income to which the decedent had a contingent claim at the time of their death. Some examples of IRD for a decedent who kept their books on the cash method are: Deferred salary payments that are payable to the decedent's estate, Uncollected interest on U.S. savings bonds, Proceeds from the completed sale of farm produce, and The portion of a lump-sum distribution to the beneficiary of a decedent's individual retirement arrangement (IRA) that equals the balance in the IRA at the time of the owner's death. This includes unrealized appreciation and income accrued to that date, less the aggregate amount of the owner's nondeductible contributions to the IRA. Such amounts are included in the beneficiary's gross income in the tax year that the distribution is received. The IRD has the same character it would have had if the decedent had lived and received such amount. Deductions and credits in respect of a decedent. The following deductions and credits, when paid by the decedent's estate, are allowed on Form 1041 even though they were not allowable on the decedent's final income tax return. Business expenses deductible under section 162. Interest deductible under section 163. Taxes deductible under section 164. Percentage depletion allowed under section 611. Foreign tax credit. For more information on IRD, see section 691 andPub. 559, Survivors, Executors, and Administrators. Income required to be distributed currently. Income required to be distributed currently is income that is required under the terms of the governing instrument and applicable local law to be distributed in the year it is received. The fiduciary must be under a duty to distribute the income currently, even if the actual distribution is not made until after the close of the trust's tax year. See Regulations section 1.651(a)-2. Fiduciary. A fiduciary is a trustee of a trust, or an executor, executrix, administrator, administratrix, personal representative, or person in possession of property of a decedent's estate. Note. Any reference in these instructions to “you” means the fiduciary of the estate or trust. Trust. A trust is an arrangement created either by a will or by an inter vivos declaration by which trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts. Revocable living trust. A revocable living trust is an arrangement created by a written agreement or declaration during the life of an individual and can be changed or ended at any time during the individual's life. A revocable living trust is generally created to manage and distribute property. Many people use this type of trust instead of (or in addition to) a will. Because this type of trust is revocable, it is treated as a grantor type trust for tax purposes. See Grantor Type Trusts under Special Reporting Instructions, later, for special filing instructions that apply to grantor trusts. Be sure to read Optional Filing Methods for Certain Grantor Type Trusts, later. Generally, most people that have revocable living trusts will be able to use Optional Method 1. This method is the easiest and least burdensome way to meet your obligations. Who Must File Decedent's Estate The fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic estate that has: Gross income for the tax year of $600 or more; A beneficiary who is a nonresident alien; or If you held a qualified investment in a qualified opportunity fund (QOF) at any time during the year, you must file your return with Form 8997 attached. See the Form 8997 instructions. An estate is a domestic estate if it isn't a foreign estate. A foreign estate is one the income of which is from sources outside the United States that isn't effectively connected with the conduct of a U.S. trade or business and isn't includible in gross income. If you are the fiduciary of a foreign estate, file Form 1040-NR, U.S. Nonresident Alien Income Tax Return, instead of Form 1041. Trust The fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic trust taxable under section 641 that has: Any taxable income for the tax year; Gross income of $600 or more (regardless of taxable income); A beneficiary who is a nonresident alien; or If you held a qualified investment in a QOF at any time during the year, you must file your return with Form 8997 attached. See the Form 8997 instructions. Two or more trusts are treated as one trust if the trusts have substantially the same grantor(s) and substantially the same primary beneficiary(ies) and a principal purpose of such trusts is avoidance of tax. This provision applies only to that portion of the trust that is attributable to contributions to corpus made after March 1, 1984. A trust is a domestic trust if: A U.S. court is able to exercise primary supervision over the administration of the trust (court test), and One or more U.S. persons have the authority to control all substantial decisions of the trust (control test). See Regulations section 301.7701-7 for more information on the court and control tests. Also treated as a domestic trust is a trust (other than a trust treated as wholly owned by the grantor) that: Was in existence on August 20, 1996, Was treated as a domestic trust on August 19, 1996, and Elected to continue to be treated as a domestic trust. A trust that isn't a domestic trust is treated as a foreign trust. If you are the trustee of a foreign trust, file Form 1040-NR instead of Form 1041. Also, a foreign trust with a U.S. owner must generally file Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner. If a domestic trust becomes a foreign trust, it is treated under section 684 as having transferred all of its assets to a foreign trust, except to the extent a grantor or another person is treated as the owner of the trust when the trust becomes a foreign trust. Grantor Type Trusts If all or any portion of a trust is a grantor type trust, then that trust or portion of a trust must follow the special reporting requirements discussed later under Special Reporting Instructions. See Grantor Type Trust under Specific Instructions, later, for more details on what makes a trust a grantor type trust. Note. A trust may be part grantor trust and part “other” type of trust, for example, simple or complex, or ESBT. Qualified subchapter S trusts (QSSTs). QSSTs must follow the special reporting requirements for these trusts, discussed later under Special Reporting Instructions. Special Rule for Certain Revocable Trusts Section 645 provides that if both the executor (if any) of an estate (the related estate) and the trustee of a qualified revocable trust (QRT) elect the treatment in section 645, the trust must be treated and taxed as part of the related estate during the election period. This election may be made by a QRT even if no executor is appointed for the related estate. In general, Form 8855, Election To Treat a Qualified Revocable Trust as Part of an Estate, must be filed by the due date for Form 1041 for the first tax year of the related estate. This applies even if the combined related estate and electing trust don't have sufficient income to be required to file Form 1041. However, if the estate is granted an extension of time to file Form 1041 for its first tax year, the due date for Form 8855 is the extended due date. Once made, the election is irrevocable. Qualified revocable trusts (QRTs). In general, a QRT is any trust (or part of a trust) that, on the day the decedent died, was treated as owned by the decedent because the decedent held the power to revoke the trust as described in section 676. An electing trust is a QRT for which a section 645 election has been made. Election period. The election period is the period of time during which an electing trust is treated as part of its related estate. The election period begins on the date of the decedent's death and terminates on the earlier of: The day on which the electing trust and related estate, if any, distribute all of their assets; or The day before the applicable date. To determine the applicable date, first determine whether a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is required to be filed as a result of the decedent's death. If no Form 706 is required to be filed, the applicable date is 2 years after the date of the decedent's death. If Form 706 is required, the applicable date is the later of 2 years after the date of the decedent's death or 6 months after the final determination of liability for estate tax. For additional information, see Regulations section 1.645-1(f). Taxpayer identification number (TIN). All QRTs must obtain a new TIN following the death of the decedent whether or not a section 645 election is made. (Use Form W-9, Request for Taxpayer Identification Number and Certification, to notify payers of the new TIN.) An electing trust that continues after the termination of the election period doesn't need to obtain a new TIN following the termination unless: An executor was appointed and agreed to the election after the electing trust made a valid section 645 election, and the electing trust filed a return as an estate under the trust's TIN; or No executor was appointed and the QRT was the filing trust (as explained later). A related estate that continues after the termination of the election period doesn't need to obtain a new TIN. For more information about TINs, including trusts with multiple owners, see Regulations sections 1.645-1 and 301.6109-1(a). General procedures for completing Form 1041 during the election period. If there is an executor. The following rules apply to filing Form 1041 while the election is in effect. The executor of the related estate is responsible for filing Form 1041 for the estate and all electing trusts. The return is filed under the name and TIN of the related estate. Be sure to check the “Decedent's estate” box at the top of Form 1041 and item G if the estate has made a section 645 election. The executor continues to file Form 1041 during the election period even if the estate distributes all of its assets before the end of the election period. The Form 1041 includes all items of income, deduction, and credit for the estate and all electing trusts. For item G, the executor must provide the TIN of the electing trust with the highest total asset value. The executor must attach a statement to Form 1041 providing the following information for each electing trust (including the electing trust provided in item G): (a) the name of the electing trust, (b) the TIN of the electing trust, and (c) the name and address of the trustee of the electing trust. The related estate and the electing trust are treated as separate shares for purposes of computing DNI and applying distribution provisions. Also, each of those shares can contain two or more separate shares. For more information, see Separate share rule, later, and Regulations section 1.645-1(e)(2)(iii). The executor is responsible for ensuring that the estate's share of the combined tax obligation is paid. For additional information, including treatment of transfers between shares and charitable contribution deductions, see Regulations section 1.645-1(e). If there isn't an executor. If no executor has been appointed for the related estate, the trustee of the electing trust files Form 1041 as if it were an estate. File using the TIN that the QRT obtained after the death of the decedent. The trustee can choose a fiscal year as the trust's tax year during the election period. Be sure to check the “Decedent's estate” box at the top of Form 1041 and item G if the filing trust has made a section 645 election. For item G, the filing trustee must provide the TIN of the electing trust with the highest total asset value. The electing trust is entitled to a single $600 personal exemption on returns filed for the election period. If there is more than one electing trust, the trusts must appoint one trustee as the filing trustee. Form 1041 is filed under the name and TIN of the filing trustee's trust. A statement providing the same information about the electing trusts (except the filing trust) that is listed under If there is an executor above must be attached to these Forms 1041. All electing trusts must choose the same tax year. If there is more than one electing trust, the filing trustee is responsible for ensuring that the filing trust's share of the combined tax liability is paid. For additional information on filing requirements when there is no executor, including application of the separate share rule, see Regulations section 1.645-1(e). For information on the requirements when an executor is appointed after an election is made and the executor doesn't agree to the election, see later. Responsibilities of the trustee when there is an executor (or there isn't an executor and the trustee isn't the filing trustee). When there is an executor (or there isn't an executor and the trustee isn't the filing trustee), the trustee of an electing trust is responsible for the following during the election period. To timely provide the executor with all the trust information necessary to allow the executor to file a complete, accurate, and timely Form 1041. To ensure that the electing trust's share of the combined tax liability is paid. The trustee does not file a Form 1041 during the election period (except for a final return if the trust terminates during the election period, as explained later). Procedure for completing Form 1041 for the year in which the election terminates. If there is an executor. If there is an executor, the Form 1041 filed under the name and TIN of the related estate for the tax year in which the election terminates includes (a) the items of income, deduction, and credit for the related estate for its entire tax year; and (b) the income, deductions, and credits for the electing trust for the period that ends with the last day of the election period. If the estate won't continue after the close of the tax year, indicate that this Form 1041 is a final return. At the end of the last day of the election period, the combined entity is deemed to distribute the share comprising the electing trust to a new trust. All items of income, including net capital gains, that are attributable to the share comprising the electing trust are included in the calculation of DNI of the electing trust and treated as distributed. The distribution rules of sections 661 and 662 apply to this deemed distribution. The combined entity is entitled to an income distribution deduction for this deemed distribution, and the "new" trust must include its share of the distribution in its income. See Regulations sections 1.645-1(e)(2)(iii) and 1.645-1(h) for more information. If the electing trust continues in existence after the termination of the election period, the trustee must file Form 1041 under the name and TIN of the trust, using the calendar year as its accounting period, if it is otherwise required to file. If there isn't an executor. If there isn't an executor, the following rules apply to filing Form 1041 for the tax year in which the election period ends. The tax year of the electing trust closes on the last day of the election period, and the Form 1041 filed for that tax year includes all items of income, deduction, and credit for the electing trust for the period beginning with the first day of the tax year and ending with the last day of the election period. The deemed distribution rules discussed above apply. Check the box to indicate that this Form 1041 is a final return. If the filing trust continues after the termination of the election period, the trustee must obtain a new TIN. If the trust meets the filing requirements, the trustee must file a Form 1041 under the new TIN for the period beginning with the day after the close of the election period and, in general, ending December 31 of that year. Responsibilities of the trustee when there is an executor (or there isn't an executor and the trustee isn't the filing trustee). In addition to the requirements listed above under this same heading, the trustee is responsible for the following. If the trust will not continue after the close of the election period, the trustee must file a Form 1041 under the name and TIN of the trust. Complete the entity information and items A, C, D, and F. Indicate in item F that this is a final return. Don't report any items of income, deduction, or credit. If the trust will continue after the close of the election period, the trustee must file a Form 1041 for the trust for the tax year beginning the day after the close of the election period and, in general, ending December 31 of that year. Use the TIN obtained after the decedent's death. Follow the general rules for completing the return. Special filing instructions. When the election isn't made by the due date of the QRT's Form 1041. If the section 645 election hasn't been made by the time the QRT's first income tax return would be due for the tax year beginning with the decedent's death, but the trustee and executor (if any) have decided to make a section 645 election, then the QRT isn't required to file a Form 1041 for the short tax year beginning with the decedent's death and ending on December 31 of that year. However, if a valid election isn't subsequently made, the QRT may be subject to penalties and interest for failure to file and failure to pay. If the QRT files a Form 1041 for this short period, and a valid section 645 election is subsequently made, then the trustee must file an amended Form 1041 for the electing trust, excluding all items of income, deduction, and credit of the electing trust. These amounts are then included on the first Form 1041 filed by the executor for the related estate (or the filing trustee for the electing trust filing as an estate). Later appointed executor. If an executor for the related estate isn't appointed until after the trustee has made a valid section 645 election, the executor must agree to the trustee's election and they must file a revised Form 8855 within 90 days of the appointment of the executor. If the executor doesn't agree to the election, the election terminates as of the date of appointment of the executor. If the executor agrees to the election, the trustee must amend any Form 1041 filed under the name and TIN of the electing trust for the period beginning with the decedent's death. The amended returns are still filed under the name and TIN of the electing trust, and they must include the items of income, deduction, and credit for the related estate for the periods covered by the returns. Also, attach a statement to the amended Forms 1041 identifying the name and TIN of the related estate, and the name and address of the executor. Check the “Final return” box on the amended return for the tax year that ends with the appointment of the executor. Except for this amended return, all returns filed for the combined entity after the appointment of the executor must be filed under the name and TIN of the related estate. If the election terminates as the result of a later appointed executor, the executor of the related estate must file Forms 1041 under the name and TIN of the related estate for all tax years of the related estate beginning with the decedent's death. The electing trust's election period and tax year terminate the day before the appointment of the executor. The trustee isn't required to amend any of the returns filed by the electing trust for the period prior to the appointment of the executor. The trust must file a final Form 1041 following the instructions above for completing Form 1041 in the year in which the election terminates and there is no executor. Termination of the trust during the election period. If an electing trust terminates during the election period, the trustee of that trust must file a final Form 1041 by completing the entity information (using the trust's EIN), checking the Final return box, and signing and dating the form. Don't report items of income, deduction, and credit. These items are reported on the related estate's return. Alaska Native Settlement Trusts The trustee of an Alaska Native Settlement Trust may elect the special tax treatment for the trust and its beneficiaries provided for in section 646. The election must be made by the due date (including extensions) for filing the trust's tax return for its first tax year ending after June 7, 2001. Don't use Form 1041. Use Form 1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, to make the election. Additionally, Form 1041-N is the trust's income tax return and satisfies the section 6039H information reporting requirement for the trust. Bankruptcy Estate The bankruptcy trustee or debtor-in-possession must file Form 1041 for the estate of an individual involved in bankruptcy proceedings under chapter 7 or 11 of title 11 of the U.S. Code if the estate has gross income for the tax year of $13,850 or more. See Bankruptcy Estates, later, for details. Charitable Remainder Trusts (CRTs) A section 664 CRT doesn’t file Form 1041. Instead, a CRT files Form 5227, Split-Interest Trust Information Return. If the CRT has any unrelated business taxable income, it must also file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. Common Trust Funds Don't file Form 1041 for a common trust fund maintained by a bank. Instead, the fund may use Form 1065, U.S. Return of Partnership Income, for its return. For more details, see section 584 and Regulations section 1.6032-1. ESBTs ESBTs file Form 1041. However, see Electing Small Business Trusts (ESBTs), later, for a discussion of the special reporting requirements for these trusts. Pooled Income Funds Pooled income funds file Form 1041. See Pooled Income Funds, later, for the special reporting requirements for these trusts. Additionally, pooled income funds must file Form 5227. Qualified Funeral Trusts Trustees of pre-need funeral trusts who elect treatment under section 685 file Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts. All other pre-need funeral trusts, see Grantor Type Trusts, later, for Form 1041 reporting requirements. Qualified Settlement Funds The trustee of a designated or qualified settlement fund (QSF) must generally file Form 1120-SF, U.S. Income Tax Return for Settlement Funds, instead of Form 1041. Special election. If a QSF has only one transferor, the transferor may elect to treat the QSF as a grantor type trust. To make the grantor trust election, the transferor must attach an election statement to a timely filed Form 1041, including extensions, that the administrator files for the QSF for the tax year in which the settlement fund is established. If Form 1041 isn't filed because Optional Method 1 or 2 (described later) was chosen, attach the election statement to a timely filed income tax return, including extensions, of the transferor for the tax year in which the settlement fund is established. Election statement. The election statement may be made separately or, if filed with Form 1041, on the attachment described under Grantor Type Trusts, later. At the top of the election statement, enter “Section 1.468B-1(k) Election” and include the transferor's: Name, Address, TIN, and A statement that they will treat the QSF as a grantor type trust. Widely Held Fixed Investment Trust (WHFITs) Trustees and middlemen of WHFITs don't file Form 1041. Instead, they report all items of gross income and proceeds on the appropriate Form 1099. For the definition of a WHFIT, see Regulations section 1.671-5(b)(22). A tax information statement that includes the information given to the IRS on Forms 1099, as well as additional information identified in Regulations section 1.671-5(e), must be given to trust interest holders. See the General Instructions for Certain Information Returns for more information. Electronic Filing Qualified fiduciaries or transmitters may be able to file Form 1041 and related schedules electronically. To become an e-file provider, complete the following steps. Create an IRS e-Services account. Submit your e-file provider application online. Pass a suitability check. The online application process takes 4–6 weeks to complete. Note. Existing e-file providers must now use e-Services to make account updates. Help is available online at e-services or through the e-Help Desk at 866-255-0654 (512-416-7750 for international calls), Monday through Friday, 6:30 a.m.–6:00 p.m. (Central time). Frequently asked questions and Online Tutorials are available to answer questions or to guide users through the application process. If you file Form 1041 electronically, you may sign the return electronically by using a personal identification number (PIN). See Form 8879-F for details. Form 8879-F can only be associated with a single Form 1041. Form 8879-F can't be used with multiple Forms 1041. Form 1041 may also be e-filed using Form 8453-FE. For more information about e-filing returns through MeF, see Pub. 4164. If Form 1041 is e-filed and there is a balance due, the fiduciary may authorize an electronic funds withdrawal with the return. Private Delivery Services (PDSs) You can use certain PDSs designated by the IRS to meet the “timely mailing as timely filing/paying” rule for tax returns and payments. Go to IRS.gov/PDS for the current list of designated services. The PDS can tell you how to get written proof of the mailing date. For the IRS mailing address to use if you’re using a PDS, go to IRS.gov/PDSstreetAddresses. PDSs can't deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address. When To File For calendar year estates and trusts, file Form 1041 and Schedule(s) K-1 by April 15, 2024. If you live in Maine or Massachusetts, you have until April 17, 2024, because of the Patriots' Day and Emancipation Day holidays. For fiscal year estates and trusts, file Form 1041 by the 15th day of the 4th month following the close of the tax year. For example, an estate that has a tax year that ends on June 30, 2024, must file Form 1041 by October 15, 2024. If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. Extension of Time To File If more time is needed to file the estate or trust return, use Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to apply for an automatic 5½-month extension of time to file. Period Covered File the 2023 return for calendar year 2023 and fiscal years beginning in 2023 and ending in 2024. If the return is for a fiscal year or a short tax year (less than 12 months), fill in the tax year space at the top of the form. The 2023 Form 1041 may also be used for a tax year beginning in 2024 if: The estate or trust has a tax year of less than 12 months that begins and ends in 2024, and The 2024 Form 1041 isn't available by the time the estate or trust is required to file its tax return. However, the estate or trust must show its 2024 tax year on the 2023 Form 1041 and incorporate any tax law changes that are effective for tax years beginning after 2023. Where To File For all estates and trusts, including charitable and split-interest trusts (other than CRTs). THEN use this address if you... IF you are located in... Are not enclosing a check or money order: Are enclosing a check or money order: Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0048 Department of the Treasury Internal Revenue Service Kansas City, MO 64999-0148 Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming Department of the Treasury Internal Revenue Service Ogden, UT 84201-0048 Department of the Treasury Internal Revenue Service Ogden, UT 84201-0148 A foreign country or U.S. territory Internal Revenue Service P.O. Box 409101 Ogden, UT 84409 Internal Revenue Service P.O. Box 409101 Ogden, UT 84409 Who Must Sign Fiduciary The fiduciary, or an authorized representative, must sign Form 1041. If there are joint fiduciaries, only one is required to sign the return. A financial institution that submitted estimated tax payments for trusts for which it is the trustee must enter its EIN in the space provided for the EIN of the fiduciary. Don't enter the EIN of the trust. For this purpose, a financial institution is one that maintains a Treasury Tax and Loan (TT&L) account. If you are an attorney or other individual functioning in a fiduciary capacity, leave this space blank. Don't enter your individual social security number (SSN). Paid Preparer Generally, anyone who is paid to prepare a tax return must have a Preparer Tax Identification Number (PTIN), sign the return, and fill in the other blanks in the Paid Preparer Use Only area of the return. The person required to sign the return must: Complete the required preparer information including their PTIN, Sign it in the space provided for the preparer's signature (a facsimile signature is acceptable), and Give you a copy of the return for your records. If you, as fiduciary, fill in Form 1041, leave the Paid Preparer Use Only space blank. If someone prepares this return and doesn't charge you, that person should not sign the return. Paid Preparer Authorization If the fiduciary wants to allow the IRS to discuss the estate's or trust's 2023 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the Paid Preparer Use Only area of the estate's or trust's return. It doesn't apply to the firm, if any, shown in that section. If the “Yes” box is checked, the fiduciary is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of the estate's or trust's return. The fiduciary is also authorizing the paid preparer to: Give the IRS any information that is missing from the estate's or trust's return; Call the IRS for information about the processing of the estate's or trust's return or the status of its refund or payment(s); and Respond to certain IRS notices that the fiduciary has shared with the preparer about math errors, offsets, and return preparation. The notices won't be sent to the preparer. The fiduciary isn't authorizing the paid preparer to receive any refund check, bind the estate or trust to anything (including any additional tax liability), or otherwise represent the estate or trust before the IRS. The authorization will automatically end no later than the due date (without regard to extensions) for filing the estate's or trust's 2024 tax return. If the fiduciary wants to expand the paid preparer's authorization or revoke the authorization before it ends, see Pub. 947, Practice Before the IRS and Power of Attorney. Accounting Methods Figure taxable income using the method of accounting regularly used in keeping the estate's or trust's books and records. Generally, permissible methods include the cash method, the accrual method, or any other method authorized by the Internal Revenue Code. In all cases, the method used must clearly reflect income. Generally, the estate or trust may change its accounting method (for income as a whole or for any material item) only by getting consent on Form 3115, Application for Change in Accounting Method. For more information, see Pub. 538, Accounting Periods and Methods. Accounting Periods For a decedent's estate, the moment of death determines the end of the decedent's tax year and the beginning of the estate's tax year. As executor or administrator, you choose the estate's tax period when you file its first income tax return. The estate's first tax year may be any period of 12 months or less that ends on the last day of a month. If you select the last day of any month other than December, you are adopting a fiscal tax year. To change the accounting period of an estate, use Form 1128, Application To Adopt, Change, or Retain a Tax Year. Generally, a trust must adopt a calendar year. The following trusts are exempt from this requirement. A trust that is exempt from tax under section 501(a). A charitable trust described in section 4947(a)(1). A trust that is treated as wholly owned by a grantor under the rules of sections 671 through 679. Rounding Off to Whole Dollars You may round off cents to whole dollars on the estate's or trust's return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3. If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total. If you are entering amounts that include cents, make sure to include the decimal point. There is no cents column on the form. Estimated Tax Generally, an estate or trust must pay estimated income tax for 2024 if it expects to owe, after subtracting any withholding and credits, at least $1,000 in tax, and it expects the withholding and credits to be less than the smaller of: 90% of the tax shown on the 2024 tax return (662/3% of the tax if the estate or trust qualifies as a farmer or fisherman); or 100% of the tax shown on the 2023 tax return (110% of that amount if the estate's or trust's AGI on that return is more than $150,000, and less than 2/3 of gross income for 2023 and 2024 is from farming or fishing). However, if a return was not filed for 2023 or that return didn't cover a full 12 months, item 2 doesn't apply. For this purpose, include household employment taxes in the tax shown on the tax return, but only if either of the following is true. The estate or trust will have federal income tax withheld for 2024 (see the instructions for Schedule G, Part II, line 14). The estate or trust would be required to make estimated tax payments for 2024 even if it didn't include household employment taxes when figuring estimated tax. Exceptions Estimated tax payments aren't required from: An estate of a domestic decedent or a domestic trust that had no tax liability for the full 12-month 2023 tax year; A decedent's estate for any tax year ending before the date that is 2 years after the decedent's death; or A trust that was treated as owned by the decedent if the trust will receive the residue of the decedent's estate under the will (or, if no will is admitted to probate, is the trust primarily responsible for paying debts, taxes, and expenses of administration) for any tax year ending before the date that is 2 years after the decedent's death. For more information, see Form 1041-ES, Estimated Income Tax for Estates and Trusts. Electronic Deposits A financial institution that has been designated as an authorized federal tax depository, and acts as a fiduciary for at least 200 taxable trusts that are required to pay estimated tax, is required to deposit the estimated tax payments electronically using the Electronic Federal Tax Payment System (EFTPS). A fiduciary that isn't required to make electronic deposits of estimated tax on behalf of a trust or an estate may voluntarily participate in EFTPS. To enroll in or get more information about EFTPS, go to EFTPS.gov or call 800-555-4477. To contact EFTPS using Telecommunications Relay Services (TRS) for people who are deaf, hard of hearing, or have a speech disability, dial 711 and then provide the TRS assistant the 800-555-4477 number above or 800-733-4829. Also, see Pub. 966, Electronic Federal Tax Payment System: A Guide to Getting Started. Depositing on time. For a deposit using EFTPS to be on time, the deposit must be submitted by 8:00 p.m. Eastern time the day before the due date of the deposit. Section 643(g) Election Fiduciaries of trusts that pay estimated tax may elect under section 643(g) to have any portion of their estimated tax payments allocated to any of the beneficiaries. The fiduciary of a decedent's estate may make a section 643(g) election only for the final year of the estate. Make the election by filing Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries, by the 65th day after the close of the estate's or trust's tax year. Then, include that amount in box 13, code A, of Schedule K-1 (Form 1041) for any beneficiaries for whom it was elected. If Form 1041-T was timely filed, the payments are treated as paid or credited to the beneficiary on the last day of the tax year and must be included as an other amount paid, credited, or required to be distributed on Form 1041, Schedule B, line 10. See the instructions for Schedule B, line 10, later. Failure to make a timely election will result in the estimated tax payments not being transferred to the beneficiary(ies) even if you entered the amount on Schedule K-1. See the instructions for Schedule G, Part II, line 11, for more details. Interest and Penalties Interest Interest is charged on taxes not paid by the due date, even if an extension of time to file is granted. Interest is also charged on penalties imposed for failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements. Interest is charged on the penalty from the due date of the return (including extensions). The interest charge is figured at a rate determined under section 6621. Late Filing of Return The law provides a penalty of 5% of the tax due for each month, or part of a month, for which a return isn't filed up to a maximum of 25% of the tax due (15% for each month, or part of a month, up to a maximum of 75% if the failure to file is fraudulent). If the return is more than 60 days late, the minimum penalty is the smaller of $485 or the tax due. The penalty won't be imposed if you can show that the failure to file on time was due to reasonable cause. If you receive a notice about penalty and interest after you file this return, send us an explanation and we will determine if you meet reasonable-cause criteria. Don't attach an explanation when you file Form 1041. Late Payment of Tax Generally, the penalty for not paying tax when due is ½ of 1% of the unpaid amount for each month or part of a month it remains unpaid. The maximum penalty is 25% of the unpaid amount. The penalty applies to any unpaid tax on the return. Any penalty is in addition to interest charges on late payments. If you include interest on either of these penalties with your payment, identify and enter these amounts in the bottom margin of Form 1041, page 1. Don't include the interest or penalty amount in the balance of tax due on line 28. Failure To Provide Information Timely You must provide Schedule K-1 (Form 1041), on or before the day you are required to file Form 1041, to each beneficiary who receives a distribution of property or an allocation of an item of the estate. For each failure to provide Schedule K-1 to a beneficiary when due and each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information), a $310 penalty may be imposed with regard to each Schedule K-1 for which a failure occurs. The maximum penalty is $3,783,000 for all such failures during a calendar year. If the requirement to report information is intentionally disregarded, each $310 penalty is increased to $630 or, if greater, 10% of the aggregate amount of items required to be reported, and no maximum penalty applies. The penalty won't be imposed if the fiduciary can show that not providing information timely and correctly was due to reasonable cause and not due to willful neglect. Underpaid Estimated Tax If the fiduciary underpaid estimated tax, use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to figure any penalty. Enter the amount of any penalty on Form 1041, line 27. Trust Fund Recovery Penalty This penalty may apply if certain excise, income, social security, and Medicare taxes that must be collected or withheld aren't collected or withheld, or these taxes aren't paid. These taxes are generally reported on Forms 720, 941, 943, 944, or 945. The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to have been responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The penalty is equal to the unpaid trust fund tax. See the Instructions for Form 720; Pub. 15 (Circular E), Employer's Tax Guide; or Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for more details, including the definition of responsible persons. Other Penalties Other penalties can be imposed for negligence, substantial understatement of tax, and fraud. See Pub. 17, Your Federal Income Tax, for details on these penalties. Other Forms That May Be Required Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements. Form 56, Notice Concerning Fiduciary Relationship. You must notify the IRS of the creation or termination of a fiduciary relationship. You may use Form 56 to provide this notice to the IRS. Form 461, Limitation on Business Losses. Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return; or Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States. Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions. Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust. Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations. Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Form 720, Quarterly Federal Excise Tax Return. Use Form 720 to report environmental excise taxes, communications and air transportation taxes, fuel taxes, luxury tax on passenger vehicles, manufacturers' taxes, ship passenger tax, and certain other excise taxes. See Trust Fund Recovery Penalty, earlier. Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Use this form to report certain information required under section 6038B. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. The estate or trust may be liable for FUTA tax and may have to file Form 940 if it paid wages of $1,500 or more in any calendar quarter during the calendar year (or the preceding calendar year) or one or more employees worked for the estate or trust for some part of a day in any 20 different weeks during the calendar year (or the preceding calendar year). Form 941, Employer's QUARTERLY Federal Tax Return. Employers must file this form quarterly to report income tax withheld on wages and employer and employee social security and Medicare taxes. Certain small employers must file Form 944, Employer's ANNUAL Federal Tax Return, instead of Form 941. For more information, see the Instructions for Form 944. Agricultural employers must file Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, instead of Form 941, to report income tax withheld and employer and employee social security and Medicare taxes on farmworkers. See Trust Fund Recovery Penalty, earlier. Form 945, Annual Return of Withheld Federal Income Tax. Use this form to report income tax withheld from nonpayroll payments, including pensions, annuities, IRAs, gambling winnings, and backup withholding. See Trust Fund Recovery Penalty, earlier. Form 965-A, Individual Report of Net 965 Tax Liability. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Form 1040, U.S. Individual Income Tax Return. Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Form 1040-SR, U.S. Tax Return for Seniors. Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts. Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons; and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. Use these forms to report and transmit withheld tax on payments or distributions made to nonresident alien individuals, foreign partnerships, or foreign corporations to the extent such payments or distributions constitute gross income from sources within the United States that isn't effectively connected with a U.S. trade or business. For more information, see sections 1441 and 1442, and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Forms 1099-A, B, INT, LTC, MISC, NEC, OID, Q, R, S, and SA. You may have to file these information returns to report acquisitions or abandonments of secured property; proceeds from broker and barter exchange transactions; interest payments; payments of long-term care and accelerated death benefits; miscellaneous income payments; nonemployee compensation; original issue discount; distributions from Coverdell ESAs; distributions from pensions, annuities, retirement or profit-sharing plans, IRAs (including SEPs, SIMPLEs, Roth IRAs, Roth Conversions, and IRA recharacterizations), insurance contracts, etc.; proceeds from real estate transactions; and distributions from an HSA, Archer MSA, or Medicare Advantage MSA. Also, use certain of these returns to report amounts received as a nominee on behalf of another person, except amounts reported to beneficiaries on Schedule K-1 (Form 1041). Form 8275, Disclosure Statement. File Form 8275 to disclose items or positions, except those contrary to a regulation, that are not otherwise adequately disclosed on a tax return. The disclosure is made to avoid parts of the accuracy-related penalty imposed for disregard of rules or substantial understatement of tax. Form 8275 is also used for disclosures relating to preparer penalties for understatements due to unrealistic positions or disregard of rules. Form 8275-R, Regulation Disclosure Statement, is used to disclose any item on a tax return for which a position has been taken that is contrary to Treasury regulations. Form 8288, U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons; and Form 8288-A, Statement of Withholding on Certain Dispositions by Foreign Persons. Use these forms to report and transmit withheld tax on the sale of U.S. real property by a foreign person. Also, use these forms to report and transmit tax withheld from amounts distributed to a foreign beneficiary from a “U.S. real property interest account” that a domestic estate or trust is required to establish under Regulations section 1.1445-5(c)(1)(iii). Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Generally, this form is used to report the receipt of more than $10,000 in cash or foreign currency in one transaction (or a series of related transactions). Form 8855, Election To Treat a Qualified Revocable Trust as Part of an Estate. This election allows a QRT to be treated and taxed (for income tax purposes) as part of its related estate during the election period. Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. The estate or trust may have to file Form 8865 if it: Controlled a foreign partnership (that is, owned more than a 50% direct or indirect interest in a foreign partnership); Owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership; Had an acquisition, disposition, or change in proportional interest in a foreign partnership that: Increased its direct interest to at least 10%, Reduced its direct interest of at least 10% to less than 10%, or Changed its direct interest by at least a 10% interest; or Contributed property to a foreign partnership in exchange for a partnership interest if: Immediately after the contribution, the estate or trust owned, directly or indirectly, at least a 10% interest in the foreign partnership; or The fair market value (FMV) of the property the estate or trust contributed to the foreign partnership, for a partnership interest, when added to other contributions of property made to the foreign partnership during the preceding 12-month period, exceeds $100,000. Also, the estate or trust may have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that foreign partnership if it was a partner at the time of the disposition. For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions. Form 8886, Reportable Transaction Disclosure Statement. Use Form 8886 to disclose information for each reportable transaction in which the trust participated, directly or indirectly. Form 8886 must be filed for each tax year that the federal income tax liability of the estate or trust is affected by its participation in the transaction. The estate or trust may have to pay a penalty if it has a requirement to file Form 8886 but you fail to file it. The following are reportable transactions. Any transaction that is the same as or substantially similar to tax avoidance transactions identified by the IRS as listed transactions. Any transaction offered under conditions of confidentiality and for which the estate or trust paid a minimum fee (confidential transaction). Any transaction for which the estate or trust or a related party has contractual protection against disallowance of the tax benefits (transaction with contractual protection). Any transaction resulting in a loss of at least $2 million in any single year or $4 million in any combination of years ($50,000 in any single year if the loss is generated by a section 988 transaction) (loss transactions). Any transaction substantially similar to one of the types of transactions identified by the IRS as a transaction of interest. See the Instructions for Form 8886 for more details and exceptions. Form 8918, Material Advisor Disclosure Statement. Material advisors who provide material aid, assistance, or advice on organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and who directly or indirectly receive or expect to receive a minimum fee, must use Form 8918 to disclose any reportable transaction under Regulations section 301.6111-3. For more information, see Form 8918 and its instructions. Form 8938, Statement of Specified Foreign Financial Assets. Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent. Form 8975, Country-by-Country Report. Schedule A (Form 8975), Tax Jurisdiction and Constituent Entity Information. Form 8978, Partner's Additional Reporting Year Tax. Form 8990, Limitation on Business Interest Expense Under Section 163(j). Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income(GILTI). Form 8995, Qualified Business Income Deduction Simplified Computation. Form 8995-A, Qualified Business Income Deduction. Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments. Additional Information The following publications may assist you in preparing Form 1041. Pub. 550, Investment Income and Expenses. Pub. 559, Survivors, Executors, and Administrators. Pub. 590-A, Contributions to Individual Retirement Arrangements (IRAs). Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs). Pub. 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Assembly and Attachments Assemble any schedules, forms, and attachments behind Form 1041 in the following order. Schedule I (Form 1041). Form 4952. Schedule H (Form 1040). Schedule D (Form 1041). Form 8949. Form 8995 or Form 8995-A. Form 4136. Form 8978. Form 965-A. Form 8941. Form 3800. Form 8997. Form 8960. Schedule A (Form 8936). Additional schedules in alphabetical order. Additional forms in numerical order. All other attachments. Attachments If you need more space on the forms or schedules, attach separate sheets. Use the same size and format as on the printed forms. But show the totals on the printed forms. Attach these separate sheets after all the schedules and forms. Enter the estate's or trust's EIN on each sheet. Don't file a copy of the decedent's will or the trust instrument unless the IRS requests it. Special Reporting Instructions Grantor type trusts, the S portion of ESBTs, and bankruptcy estates all have reporting requirements that are significantly different than other subchapter J trusts and decedents’ estates. Additionally, grantor type trusts have optional filing methods available. Pooled income funds have many similar reporting requirements that other subchapter J trusts (other than grantor type trusts and ESBTs) have but there are some very important differences. These reporting differences and optional filing methods are discussed below by entity. Grantor Type Trusts A trust is a grantor trust if the grantor retains certain powers or ownership benefits. This can also apply to only a portion of a trust. See Grantor Type Trust, later, for details on what makes a trust a grantor trust. In general, a grantor trust is ignored for income tax purposes and all of the income, deductions, etc., are treated as belonging directly to the grantor. This also applies to any portion of a trust that is treated as a grantor trust. Note. If only a portion of the trust is a grantor type trust, indicate both grantor trust and the other type of trust, for example, simple or complex trust, as the type of entities checked in Section A on page 1 of Form 1041. The following instructions apply only to grantor type trusts that are not using an optional filing method. How to report. If the entire trust is a grantor trust, fill in only the entity information of Form 1041. Don't show any dollar amounts on the form itself; show dollar amounts only on an attachment to the form. Don't use Schedule K-1 (Form 1041) as the attachment. If only part of the trust is a grantor type trust, the portion of the income, deductions, etc., that is allocable to the non-grantor part of the trust is reported on Form 1041, under normal reporting rules. The amounts that are allocable directly to the grantor are shown only on an attachment to the form. Don't use Schedule K-1 (Form 1041) as the attachment. However, Schedule K-1 is used to reflect any income distributed from the portion of the trust that isn't taxable directly to the grantor or owner. The fiduciary must give the grantor (owner) of the trust a copy of the attachment. Attachment. On the attachment, show: The name, identifying number, and address of the person(s) to whom the income is taxable; The income of the trust that is taxable to the grantor or another person under sections 671 through 678—report the income in the same detail as it would be reported on the grantor's return had it been received directly by the grantor; and Any deductions, credits, or elections that apply to this income. Report these deductions and credits in the same detail as they would be reported on the grantor's return had they been received directly by the grantor. The income taxable to the grantor or another person under sections 671 through 678 and the deductions and credits that apply to that income must be reported by that person on their own income tax return. Example. The John Doe Trust is a grantor type trust. During the year, the trust sold 100 shares of ABC stock for $1,010 in which it had a basis of $10 and 200 shares of XYZ stock for $10 in which it had a $1,020 basis. The trust doesn't report these transactions on Form 1041. Instead, a schedule is attached to the Form 1041 showing each stock transaction separately and in the same detail as John Doe (grantor and owner) will need to report these transactions on his Form 8949, Sales and Other Dispositions of Capital Assets; and Schedule D (Form 1040). The trust doesn't net the capital gains and losses, nor does it issue John Doe a Schedule K-1 (Form 1041) showing a $10 long-term capital loss. QSSTs. Income allocated to S corporation stock held by the trust is treated as owned by the income beneficiary of the portion of the trust that owns the stock. Report this income following the rules discussed above for grantor type trusts. A QSST can't elect any of the optional filing methods discussed below. However, the trust, and not the income beneficiary, is treated as the owner of the S corporation stock for figuring and attributing the tax results of a disposition of the stock. For example, if the disposition is a sale, the QSST election ends as to the stock sold, and any gain or loss recognized on the sale will be that of the trust. For more information on QSSTs, see Regulations section 1.1361-1(j). Optional Filing Methods for Certain Grantor Type Trusts Generally, if a trust is treated as owned by one grantor or other person, the trustee may choose Optional Method 1 or Optional Method 2 as the trust's method of reporting instead of filing Form 1041. Spouses will be treated as one grantor for purposes of these two optional methods if: All of the trust is treated as owned by the spouses, and The spouses file their income tax return jointly for that tax year. Generally, if a trust is treated as owned by two or more grantors or other persons, the trustee may choose Optional Method 3 as the trust's method of reporting instead of filing Form 1041. Once you choose the trust's filing method, you must follow the rules under Changing filing methods, later, if you want to change to another method. Exceptions. The following trusts can't report using the optional filing methods. A common trust fund (as defined in section 584(a)). A foreign trust or a trust that has any of its assets located outside the United States. A QSST (as defined in section 1361(d)(3)). A trust all of which is treated as owned by one grantor or one other person whose tax year is other than a calendar year. A trust all of which is treated as owned by one or more grantors or other persons, one of which isn't a U.S. person. A trust all of which is treated as owned by one or more grantors or other persons if at least one grantor or other person is an exempt recipient for information reporting purposes, unless at least one grantor or other person isn't an exempt recipient and the trustee reports without treating any of the grantors or other persons as exempt recipients. Optional Method 1. For a trust treated as owned by one grantor or by one other person, the trustee must give all payers of income during the tax year the name and TIN of the grantor or other person treated as the owner of the trust and the address of the trust. This method may be used only if the owner of the trust provides the trustee with a signed Form W-9. In addition, unless the grantor or other person treated as owner of the trust is the trustee or a co-trustee of the trust, the trustee must give the grantor or other person treated as owner of the trust a statement that: Shows all items of income, deduction, and credit of the trust; Identifies the payer of each item of income; Explains how the grantor or other person treated as owner of the trust takes those items into account when figuring the grantor's or other person's taxable income or tax; and Informs the grantor or other person treated as the owner of the trust that those items must be included when figuring taxable income and credits on their income tax return. Grantor trusts that haven't applied for an EIN and are going to file under Optional Method 1 don't need an EIN for the trust as long as they continue to report under that method. Optional Method 2. For a trust treated as owned by one grantor or by one other person, the trustee must give all payers of income during the tax year the name, address, and TIN of the trust. The trustee must also file with the IRS the appropriate Forms 1099 to report the income or gross proceeds paid to the trust during the tax year that show the trust as the payer and the grantor, or other person treated as owner, as the payee. The trustee must report each type of income in the aggregate and each item of gross proceeds separately. The due date for any Forms 1099 required to be filed with the IRS by a trustee under this method is February 28, 2024 (March 31, 2024, if filed electronically). In addition, unless the grantor, or other person treated as owner of the trust, is the trustee or a co-trustee of the trust, the trustee must give the grantor or other person treated as owner of the trust a statement that: Shows all items of income, deduction, and credit of the trust; Explains how the grantor or other person treated as owner of the trust takes those items into account when figuring the grantor's or other person's taxable income or tax; and Informs the grantor or other person treated as the owner of the trust that those items must be included when figuring taxable income and credits on their income tax return. This statement satisfies the requirement to give the recipient copies of the Forms 1099 filed by the trustee. Optional Method 3. For a trust treated as owned by two or more grantors or other persons, the trustee must give all payers of income during the tax year the name, address, and TIN of the trust. The trustee must also file with the IRS the appropriate Forms 1099 to report the income or gross proceeds paid to the trust by all payers during the tax year attributable to the part of the trust treated as owned by each grantor, or other person, showing the trust as the payer and each grantor, or other person treated as owner of the trust, as the payee. The trustee must report each type of income in the aggregate and each item of gross proceeds separately. The due date for any Forms 1099 required to be filed with the IRS by a trustee under this method is February 28, 2024 (March 31, 2024, if filed electronically). In addition, the trustee must give each grantor or other person treated as owner of the trust a statement that: Shows all items of income, deduction, and credit of the trust attributable to the part of the trust treated as owned by the grantor or other person; Explains how the grantor or other person treated as owner of the trust takes those items into account when figuring the grantor's or other person's taxable income or tax; and Informs the grantor or other person treated as the owner of the trust that those items must be included when figuring taxable income and credits on their income tax return. This statement satisfies the requirement to give the recipient copies of the Forms 1099 filed by the trustee. Changing filing methods. A trustee who previously had filed Form 1041 can change to one of the optional methods by filing a final Form 1041 for the tax year that immediately precedes the first tax year for which the trustee elects to report under one of the optional methods. On the front of the final Form 1041, the trustee must enter “Pursuant to section 1.671-4(g), this is the final Form 1041 for this grantor trust,” and check the Final return box in item F. For more details on changing reporting methods, including changes from one optional method to another, see Regulations section 1.671-4(g). Backup withholding. The following grantor trusts are treated as payors for purposes of backup withholding. A trust established after 1995, all of which is owned by two or more grantors (treating spouses filing a joint return as one grantor). A trust with 10 or more grantors established after 1983 but before 1996. The trustee must withhold a certain percentage of reportable payments made to any grantor who is subject to backup withholding. For more information, see section 3406 and its regulations. Pooled Income Funds If you are filing for a pooled income fund, attach a statement to support the following. The calculation of the yearly rate of return. The computation of the deduction for distributions to the beneficiaries. The computation of any charitable deduction. See section 642 and the regulations thereunder for more information. You don't have to complete Schedule A or B of Form 1041. Also, you must file Form 5227 for the pooled income fund. However, if all amounts were transferred in trust before May 27, 1969, or if an amount was transferred to the trust after May 26, 1969, for which no deduction was allowed under any of the sections listed under section 4947(a)(2), then Form 5227 does not have to be filed. Note. Form 1041-A is no longer filed by pooled income funds. Electing Small Business Trusts (ESBTs) Special rules apply when figuring the tax on the S portion of an ESBT. The S portion of an ESBT is the portion of the trust that consists of stock in one or more S corporations and isn't treated as a grantor type trust. The tax on the S portion: Must be figured separately from the tax on the remainder of the ESBT (if any) and attached to the return; and Is entered on Schedule G, Part I, line 4. The tax on the remainder (non-S portion) of the ESBT is figured in the normal manner on Form 1041. Tax computation attachment. Attach to the return the tax computation for the S portion of the ESBT. If you need to complete and attach a tax form or worksheet for the S portion of the trust, enter “ESBT” in the top margin of the tax form, worksheet, or attachment. To compute the tax on the S portion: Treat that portion of the ESBT as if it were a separate trust; Include only the income, losses, deductions, and credits allocated to the ESBT as an S corporation shareholder and gain or loss from the disposition of S corporation stock; Aggregate items of income, losses, deductions, and credits allocated to the ESBT as an S corporation shareholder if the S portion of the ESBT has stock in more than one S corporation; Deduct state and local income taxes directly related to the S portion or allocated to the S portion if the allocation is reasonable in light of all the circumstances and administrative expenses that wouldn't have been incurred if the S corporation shares were not held by the trust; Deduct interest expense paid or accrued on indebtedness incurred to acquire stock in an S corporation; and Deduct charitable contributions attributable to the S portion. See Pub. 526 to figure the amount of the deduction if either of the following apply. Cash contributions or contributions of ordinary income property are more than 30% of the AGI of the S portion. Gifts of capital gain property are more than 20% of the AGI of the S portion. Don't claim a deduction for capital losses in excess of capital gains; Don't claim an income distribution deduction or an exemption amount; Don't claim an exemption amount in figuring the alternative minimum tax (AMT); and Don't use the tax rate schedule to figure the tax. The tax is 37% of the S portion's taxable income except in figuring the maximum tax on qualified dividends and capital gains. For additional information, see Regulations section 1.641(c)-1. Other information. When figuring the tax and DNI on the remaining (non-S) portion of the trust, disregard the S corporation items. Don't apportion to the beneficiaries any of the S corporation items. If the ESBT consists entirely of stock in one or more S corporations, don't make any entries on lines 1–23 of page 1. Instead: Complete the entity portion; Follow the instructions above for figuring the tax on the S corporation items; Enter the ESBT tax on Schedule G, Part I, line 4; Carry the Total tax from line 9 of Schedule G, Part I, to line 24 on page 1; and Complete the rest of the return. The grantor portion (if any) of an ESBT will follow the rules discussed under Grantor Type Trusts, earlier. Bankruptcy Estates The bankruptcy estate that is created when an individual debtor files a petition under either chapter 7 or 11 of title 11 of the U.S. Code is treated as a separate taxable entity. The bankruptcy estate is administered by a trustee or a debtor-in-possession. If the case is later dismissed by the bankruptcy court, the individual debtor is treated as if the bankruptcy petition had never been filed. A separate taxable entity isn't created if a partnership or corporation files a petition under any chapter of title 11 of the U.S. Code. For additional information about bankruptcy estates, see Pub. 908, Bankruptcy Tax Guide. Who Must File Every trustee (or debtor-in-possession) for an individual's bankruptcy estate under chapter 7 or 11 of title 11 of the U.S. Code must file a return if the bankruptcy estate has gross income of $13,850 or more for tax years beginning in 2023. Failure to do so may result in an estimated Request for Administrative Expenses being filed by the IRS in the bankruptcy proceeding or a motion to compel filing of the return. The filing of a tax return for the bankruptcy estate doesn't relieve the individual debtor(s) of their individual tax obligations. EIN Every bankruptcy estate of an individual required to file a return must have its own EIN. The SSN of the individual debtor can't be used as the EIN for the bankruptcy estate. Accounting Period A bankruptcy estate is allowed to have a fiscal year. However, this period can't be longer than 12 months. When To File File Form 1041 on or before the 15th day of the 4th month following the close of the tax year. Use Form 7004 to apply for an automatic 6-month extension of time to file. Disclosure of Return Information Under section 6103(e)(5), tax returns of individual debtors who have filed for bankruptcy under chapter 7 or 11 of title 11 are, upon written request, open to inspection by or disclosure to the trustee. The returns subject to disclosure to the trustee are those for the year the bankruptcy begins and prior years. Use Form 4506, Request for Copy of Tax Return, to request copies of the individual debtor's tax returns. If the bankruptcy case wasn't voluntary, disclosure can't be made before the bankruptcy court has entered an order for relief, unless the court rules that the disclosure is needed for determining whether relief should be ordered. Transfer of Tax Attributes From the Individual Debtor to the Bankruptcy Estate The bankruptcy estate succeeds to the following tax attributes of the individual debtor. NOL carryovers. Charitable contribution carryovers. Recovery of tax benefit items. Credit carryovers. Capital loss carryovers. Basis, holding period, and character of assets. Method of accounting. Unused passive activity losses. Unused passive activity credits. Unused section 465 losses. Income, Deductions, and Credits Under section 1398(c), the taxable income of the bankruptcy estate is generally figured in the same manner as that of an individual. The gross income of the bankruptcy estate includes any income included in property of the estate as defined in U.S. Code, title 11, sections 541, 1115, and 1186. In certain chapter 11 cases, under section 1115 of title 11, property of the bankruptcy estate includes (a) earnings from services performed by the debtor after the beginning of the case (both wages and self-employment income) and before the case is closed, dismissed, or converted to a case under a different chapter; and (b) property described in section 541 of title 11 and income earned therefrom that the debtor acquires after the beginning of the case and before the case is closed, dismissed, or converted. If section 1115 of title 11 applies, the bankruptcy estate's gross income includes, as described above, (a) the debtor's earnings from services performed after the beginning of the case, and (b) the income from property acquired after the beginning of the case. The income from property owned by the debtor when the case began is also included in the bankruptcy estate's gross income. However, if this property is exempted from the bankruptcy estate or is abandoned by the trustee or debtor-in-possession, the income from the property isn't included in the bankruptcy estate's gross income. Also included in income is gain from the sale of the bankruptcy estate's property. To figure gain, the trustee or debtor-in-possession must determine the correct basis of the property. To determine whether any amount paid or incurred by the bankruptcy estate is allowable as a deduction or credit, or is treated as wages for employment tax purposes, treat the amount as if it were paid or incurred by the individual debtor in the same trade or business or other activity the debtor engaged in before the bankruptcy proceedings began. Administrative expenses. The bankruptcy estate is allowed a deduction for any administrative expense allowed under section 503 of title 11 of the U.S. Code, and any fee or charge assessed under chapter 123 of title 28 of the U.S. Code, to the extent not disallowed under an Internal Revenue Code provision (for example, section 263, 265, or 275). Bankruptcy administrative expenses and fees, including accounting fees, attorney fees, and court costs, are deductible on Schedule 1 (Form 1040), Part II, line 24z, as allowable in arriving at AGI because they would not have been incurred if property had not been held by the bankruptcy estate. See section 67(e) and Final Regulations - TD9918. Administrative expenses of the bankruptcy estate attributable to conducting a trade or business or for the production of estate rents or royalties are deductible in arriving at AGI on Form 1040, Schedules C, E, and F. Administrative expense loss. When figuring an NOL, nonbusiness deductions (including administrative expenses) are limited under section 172(d)(4) to the bankruptcy estate's nonbusiness income. The excess nonbusiness deductions are an administrative expense loss that may be carried back to each of the 3 preceding tax years and forward to each of the 7 succeeding tax years of the bankruptcy estate. The amount of an administrative expense loss that may be carried to any tax year is determined after the NOL deductions allowed for that year. An administrative expense loss is allowed only to the bankruptcy estate and can't be carried to any tax year of the individual debtor. Carryback of NOLs and credits. Generally, an NOL arising in a tax year beginning in 2021 or later may not be carried back and instead must be carried forward indefinitely. However, farming losses arising in tax years beginning in 2021 or later may be carried back 2 years and carried forward indefinitely. See Pub. 536 and Pub. 225, Farmer’s Tax Guide, for more information. If the bankruptcy estate itself incurs an NOL (apart from losses carried forward to the estate from the individual debtor), it can carry back its NOLs not only to previous tax years of the bankruptcy estate, but also to tax years of the individual debtor prior to the year in which the bankruptcy proceedings began. Excess credits, such as the foreign tax credit, may also be carried back to pre-bankruptcy years of the individual debtor. Standard deduction. A bankruptcy estate that doesn't itemize deductions is allowed a standard deduction of $13,850 for tax year 2023. Discharge of indebtedness. In a title 11 case, gross income doesn't include amounts that would normally be included in gross income resulting from the discharge of indebtedness. However, any amounts excluded from gross income must be applied to reduce certain tax attributes in a certain order. Attach Form 982 to show the reduction of tax attributes. Tax Rate Schedule Figure the tax for the bankruptcy estate using the tax rate schedule below. Enter the tax on Form 1040 or 1040-SR, line 16. If taxable income is: Over— But not over— The tax is: Of the amount over— $0 $11,000 10% $0 11,000 44,725 $1,100.00 12% 11,000 44,725 95,375 5,147.00 22% 44,725 95,375 182,100 16,290.00 24% 95,375 182,100 231,250 37,104.00 32% 182,100 231,250 346,875 52,832.00 35% 231,250 346,875 ...... 93,300.75 37% 346,875 Prompt Determination of Tax Liability To request a prompt determination of the tax liability of the bankruptcy estate, the trustee or debtor-in-possession must file a written request for the determination with the IRS. The request must be submitted in duplicate and executed under penalties of perjury. The request must include a statement indicating that it is a request for prompt determination of tax liability and (a) the return type, and all the tax periods for which prompt determination is sought; (b) the name and location of the office where the return was filed; (c) the debtor's name; (d) the debtor's SSN, TIN, or EIN; (e) the type of bankruptcy estate; (f) the bankruptcy case number; and (g) the court where the bankruptcy is pending. Send the request to the Centralized Insolvency Operation, P.O. Box 7346, Philadelphia, PA 19101-7346 (marked “Request for Prompt Determination”). The IRS will notify the trustee or debtor-in-possession within 60 days from receipt of the request if the return filed by the trustee or debtor-in-possession has been selected for examination or has been accepted as filed. If the return is selected for examination, it will be examined as soon as possible. The IRS will notify the trustee or debtor-in-possession of any tax due within 180 days from receipt of the request or within any additional time permitted by the bankruptcy court. See Rev. Proc. 2006-24, 2006-22 I.R.B. 943, available at IRS.gov/irb/2006-22_IRB/ar12.html, modified by Announcement 2011-77, available at IRS.gov/irb/2011-51_IRB/ar13. Special Filing Instructions for Bankruptcy Estates Use Form 1041 only as a transmittal for Form 1040 or 1040-SR. In the top margin of Form 1040 or 1040-SR, enter “Attachment to Form 1041. DO NOT DETACH.” Attach Form 1040 or 1040-SR to Form 1041. Complete only the identification area at the top of Form 1041. Enter the name of the individual debtor in the following format: “John Q. Public Bankruptcy Estate.” Beneath, enter the name of the trustee in the following format: “Avery Snow, Trustee.” In item D, enter the date the petition was filed or the date of conversion to a chapter 7 or 11 case. Enter on Form 1041, line 24, the total tax from line 24 of Form 1040 or 1040-SR. Complete lines 25 through 30 of Form 1041, and sign and date it. In a chapter 11 case, the bankruptcy estate's gross income may be affected by section 1115 or 1186 of title 11 of the U.S. Code. See Income, Deductions, and Credits, earlier. The debtor may receive a Form W-2, 1099-INT, 1099-DIV, 1099-MISC, or 1099-NEC or other information return reporting wages or other income to the debtor for the entire year, even though some or all of this income is includible in the bankruptcy estate's gross income under section 1115 of title 11 of the U.S. Code. If this happens, the income reported to the debtor on the Form W-2 or 1099, or other information return (and the withheld income tax shown on these forms) must be reasonably allocated between the debtor and the bankruptcy estate. The debtor-in-possession (or the chapter 11 trustee, if one was appointed) must attach a schedule that shows (a) all the income reported on the Form W-2, Form 1099, or other information return; (b) the portion of this income includible in the bankruptcy estate's gross income; and (c) all the withheld income tax, if any, and the portion of withheld tax reasonably allocated to the bankruptcy estate. Also, the debtor-in-possesion (or the chapter 11 trustee, if one was appointed) must attach a copy of the Form W-2, if any, issued to the debtor for the tax year if the Form W-2 reports wages to the debtor and some or all of the wages are includible in the bankruptcy estate's gross income because of section 1115 of title 11 of the U.S. Code. For more details, including acceptable allocation methods, see Notice 2006-83, 2006-40 I.R.B. 596, available at IRS.gov/irb/2006-40_IRB/ar12.html. Specific Instructions Name of Estate or Trust Copy the exact name of the estate or trust from the Form SS-4, Application for Employer Identification Number, that you used to apply for the EIN. If the name of the trust was changed during the tax year for which you are filing, enter the trust's new name and check the “Change in trust's name” box in item F. If a grantor type trust (discussed later), enter the name, identification number, and address of the grantor(s) or other owner(s) in parentheses after the name of the trust. Name and Title of Fiduciary Enter the name and title of the fiduciary. If the name entered is different from the name on the prior year's return, see Change in Fiduciary's Name and Change in Fiduciary, later. Address Include the suite, room, or other unit number after the street address. If the post office doesn't deliver mail to the street address and the fiduciary has a P.O. box, show the box number instead. If you want a third party (such as an accountant or an attorney) to receive mail for the estate or trust, enter on the street address line “C/O” followed by the third party's name and street address or P.O. box. If the estate or trust has had a change of address (including a change to an “in care of” name and address) and did not file Form 8822-B, Change of Address or Responsible Party — Business, check the Change in fiduciary's address box in item F. If the estate or trust has a change of mailing address (including a new "in care of" name and address) or responsible party after filing its return, file Form 8822-B to notify the IRS of the change. A. Type of Entity Check the appropriate box(es) that describes the entity for which you are filing the return. In some cases, more than one box is checked. Check all boxes that apply to your trust. For example, if only a portion of a trust is a grantor type trust or if only a portion of an ESBT is the S portion, then more than one box is checked. Note. Determination of entity status is made on an annual basis. There are special reporting requirements for grantor type trusts, pooled income funds, ESBTs, and bankruptcy estates. See Special Reporting Instructions, earlier. Decedent's Estate An estate of a deceased person is a taxable entity separate from the decedent. It generally continues to exist until the final distribution of the assets of the estate is made to the heirs and other beneficiaries. The income earned from the property of the estate during the period of administration or settlement must be accounted for and reported by the estate. Simple Trust A trust may qualify as a simple trust if: The trust instrument requires that all income must be distributed currently; The trust instrument doesn't provide that any amounts are to be paid, permanently set aside, or used for charitable purposes; and The trust doesn't distribute amounts allocated to the corpus of the trust. Complex Trust A complex trust is any trust that doesn't qualify as a simple trust as explained above. Qualified Disability Trust A qualified disability trust is any non-grantor trust: Described in 42 U.S.C. 1396p(c)(2)(B)(iv) and established solely for the benefit of an individual under 65 years of age who is disabled, and All the beneficiaries of which are determined by the Commissioner of Social Security to have been disabled for some part of the tax year within the meaning of 42 U.S.C. 1382c(a)(3). A trust will not fail to meet item 2 above just because the trust's corpus may revert to a person who isn't disabled after the trust ceases to have any disabled beneficiaries. ESBT (S Portion Only) The S portion of an ESBT is the portion of the trust that consists of S corporation stock and that isn't treated as owned by the grantor or another person. See Electing Small Business Trusts (ESBTs), earlier, for more information about an ESBT. Grantor Type Trust A grantor type trust is a legal trust under applicable state law that isn't recognized as a separate taxable entity for income tax purposes because the grantor or other substantial owners have not relinquished complete dominion and control over the trust. Generally, for transfers made in trust after March 1, 1986, the grantor is treated as the owner of any portion of a trust in which they have a reversionary interest in either the income or corpus therefrom, if, as of the inception of that portion of the trust, the value of the reversionary interest is more than 5% of the value of that portion. Also, the grantor is treated as holding any power or interest that was held by either the grantor's spouse at the time that the power or interest was created or who became the grantor's spouse after the creation of that power or interest. See Grantor Type Trusts, earlier, for more information. Pre-need funeral trusts. The purchasers of pre-need funeral services are the grantors and the owners of pre-need funeral trusts established under state laws. See Rev. Rul. 87-127, 1987-2 C.B. 156. However, the trustees of pre-need funeral trusts can elect to file the return and pay the tax for qualified funeral trusts. For more information, see Form 1041-QFT. Nonqualified deferred compensation plans. Taxpayers may adopt and maintain grantor trusts in connection with nonqualified deferred compensation plans (sometimes referred to as “rabbi trusts”). Rev. Proc. 92-64, 1992-2 C.B. 422, provides a “model grantor trust” for use in rabbi trust arrangements. The procedure also provides guidance for requesting rulings on the plans that use these trusts. QSSTs. The beneficiary of a QSST is treated as the substantial owner of that portion of the trust which consists of stock in an S corporation for which an election under section 1361(d)(2) has been made. See QSSTs, earlier. Bankruptcy Estate A chapter 7 or 11 bankruptcy estate is a separate and distinct taxable entity from the individual debtor for federal income tax purposes. See Bankruptcy Estates, earlier. For more information, see section 1398 and Pub. 908. Pooled Income Fund A pooled income fund is a split-interest trust with a remainder interest for a public charity and a life income interest retained by the donor or for another person. The property is held in a pool with other pooled income fund property and doesn't include any tax-exempt securities. The income for a retained life interest is figured using the yearly rate of return earned by the trust. See section 642(c) and the related regulations for more information. B. Number of Schedules K-1 Attached Every trust or decedent's estate claiming an income distribution deduction on page 1, line 18, must enter the number of Schedules K-1 (Form 1041) that are attached to Form 1041. C. Employer Identification Number Every estate or trust that is required to file Form 1041 must have an EIN. An EIN may be applied for in the following ways. Online at IRS.gov/EIN. The EIN is issued immediately once the application information is validated. By mailing or faxing Form SS-4. If the estate or trust hasn't received its EIN by the time the return is due, enter “Applied for” and the date you applied in the space for the EIN. For more details, see Pub. 583, Starting a Business and Keeping Records. D. Date Entity Created Enter the date the trust was created, or, if a decedent's estate, the date of the decedent's death. E. Nonexempt Charitable and Split-Interest Trusts Section 4947(a)(1) Trust Check this box if the trust is a nonexempt charitable trust within the meaning of section 4947(a)(1). A nonexempt charitable trust is a trust: That isn't exempt from tax under section 501(a); In which all of the unexpired interests are devoted to one or more charitable purposes described in section 170(c)(2)(B); and For which a deduction was allowed under section 170 (for individual taxpayers) or similar Code section for personal holding companies, foreign personal holding companies, or estates or trusts (including a deduction for estate or gift tax purposes). Nonexempt charitable trust treated as a private foundation. If a nonexempt charitable trust is treated as though it were a private foundation under section 509, then the fiduciary must file Form 990-PF, Return of Private Foundation, in addition to Form 1041. If a nonexempt charitable trust is treated as though it were a private foundation, and it has no taxable income under subtitle A, it may check the box on Form 990-PF, Part VI-A, line 15, and enter the tax-exempt interest received or accrued during the year on that line, instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year. Excise taxes. If a nonexempt charitable trust is treated as a private foundation, then it is subject to the same excise taxes under chapters 41 and 42 that a private foundation is subject to. If the nonexempt charitable trust is liable for any of these taxes (except the section 4940 tax), then it reports these taxes on Form 4720. Taxes paid by the trust on Form 4720 or on Form 990-PF (the section 4940 tax) can't be taken as a deduction on Form 1041. Not a Private Foundation Check this box if the nonexempt charitable trust (section 4947(a)(1)) isn't treated as a private foundation under section 509. For more information, see Regulations section 53.4947-1. Other returns that must be filed. If a nonexempt charitable trust isn't treated as though it were a private foundation, the fiduciary must file Form 990, Return of Organization Exempt From Income Tax; or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, in addition to Form 1041, if the trust meets the filing requirements for either of those forms. If a nonexempt charitable trust isn't treated as though it were a private foundation, and it has no taxable income under subtitle A, it may answer “Yes” on Form 990, Part V, line 12a, and enter the tax-exempt interest received or accrued during the year on Form 990, Part V, line 12b, instead of filing Form 1041 to meet its section 6012 filing requirement for that tax year (or if Form 990-EZ is filed instead of Form 990, you may check the box on Form 990-EZ, line 43, and enter the tax-exempt interest received or accrued during the year on that line). Section 4947(a)(2) Trust Check this box if the trust is a split-interest trust described in section 4947(a)(2). A split-interest trust is a trust that: Isn't exempt from tax under section 501(a); Has some unexpired interests that are devoted to purposes other than religious, charitable, or similar purposes described in section 170(c)(2)(B); and Has amounts transferred in trust after May 26, 1969, for which a deduction was allowed under section 170 (for individual taxpayers) or similar Code sections for personal holding companies, foreign personal holding companies, or estates or trusts (including a deduction for estate or gift tax purposes). Other returns that must be filed. The fiduciary of a split-interest trust must file Form 5227. However, see the Instructions for Form 5227 for the exception that applies to split-interest trusts other than section 664 CRTs. F. Initial Return, Amended Return, etc. Amended Return If you are filing an amended Form 1041: Check the “Amended return” box in item F, Complete the entire return, Correct the appropriate lines with the new information, and Refigure the estate's or trust's tax liability. Note. If you are amending the return for an NOL carryback, also check the “Net operating loss carryback” box in item F. If the total tax on line 24 is larger on the amended return than on the original return, you should generally pay the difference with the amended return. However, you should adjust this amount if there is any increase or decrease in the total payments shown on line 26. Attach a sheet that explains the reason for the amendments and identifies the lines and amounts being changed on the amended return. Amended Schedule H (Form 1040). If you discover an error on a Schedule H (Form 1040), Household Employment Taxes, that you previously filed with Form 1041, file an “Amended” Form 1041 and attach a corrected Schedule H. In the top margin of your corrected Schedule H, enter “CORRECTED” and the date you discovered the error. Also, on an attachment, explain the reason for your correction. If you owe tax, pay the tax in full with your amended Form 1041. If you overpaid tax on a previously filed Schedule H, depending on whether you choose the adjustment or claim for refund process to correct the error, you must either repay or reimburse the employee's share of social security and Medicare taxes or get the employee's consent to the filing of a refund claim for their share. See Pub. 926, Household Employer's Tax Guide, for more information. Amended Schedule K-1 (Form 1041). If the amended return results in a change to income, or a change in distribution of any income or other information provided to a beneficiary, an amended Schedule K-1 (Form 1041) must also be filed with the amended Form 1041 and given to each beneficiary. Check the “Amended K-1” box at the top of the amended Schedule K-1. Final Return Check this box if this is a final return because the estate or trust has terminated. Also, check the “Final K-1” box at the top of Schedule K-1. If, on the final return, there are excess deductions, an unused capital loss carryover, or an NOL carryover, see the instructions for box 11 of Schedule K-1, later. Change in Trust's Name If the name of the trust has changed from the name shown on the prior year's return (or Form SS-4 if this is the first return being filed), be sure to check this box. Change in Fiduciary If a different fiduciary enters their name on the line for Name and title of fiduciary than was shown on the prior year's return (or Form SS-4 if this is the first return being filed) and you didn't file a Form 8822-B, be sure to check this box. If there is a change in the fiduciary whose address is used as the mailing address for the estate or trust after the return is filed, use Form 8822-B to notify the IRS. Change in Fiduciary's Name If the fiduciary changed their name from the name they entered on the prior year's return (or Form SS-4 if this is the first return being filed), be sure to check this box. Change in Fiduciary's Address If the same fiduciary who filed the prior year's return (or Form SS-4 if this is the first return being filed) files the current year's return and changed the address on the return (including a change to an "in care of" name and address), and didn't report the change on Form 8822-B, check this box. If the address shown on Form 1041 changes after you file the form (including a change to an "in care of" name and address), file Form 8822-B to notify the IRS of the change. G. Section 645 Election If a section 645 election was made by filing Form 8855, check the box in item G. See Special Rule for Certain Revocable Trusts under Who Must File, earlier, and Form 8855 for more information about this election. Income Determining Qualified Business Income (QBI) The estate's or trust's QBI includes items of income, gain, deduction, and loss that are effectively connected with the conduct of a trade or business within the United States and included or allowed in determining taxable income for the year. This includes the estate's or trust's share of items of income, gain, deduction, and loss from trades or business conducted by partnerships (other than publicly traded partnerships (PTPs)), S corporations, and other estates or trusts. For more information, see section 199A, the Instructions for Form 8995, and the Instructions for Form 8995-A. Special Rule for Blind Trust If you are reporting income from a qualified blind trust (under the Ethics in Government Act of 1978), don't identify the payer of any income to the trust but complete the rest of the return as provided in the instructions. Also enter “Blind Trust” at the top of page 1. Extraterritorial Income Exclusion The extraterritorial income exclusion isn't allowed for transactions after 2006. However, income from certain long-term sales and leases may still qualify for the exclusion. For details and to figure the amount of the exclusion, see Form 8873, Extraterritorial Income Exclusion, and its separate instructions. The estate or trust must report the extraterritorial income exclusion on line 15a of Form 1041, page 1. Although the extraterritorial income exclusion is entered on line 15a, it is an exclusion from income and should be treated as tax-exempt income when completing other parts of the return. Line 1—Interest Income Report the estate's or trust's share of all taxable interest income that was received during the tax year. Examples of taxable interest include interest from: Accounts (including certificates of deposit and money market accounts) with banks, credit unions, and thrift institutions; Notes, loans, and mortgages; U.S. Treasury bills, notes, and bonds; U.S. savings bonds; Original issue discount; and Income received as a regular interest holder of a real estate mortgage investment conduit (REMIC). For taxable bonds acquired after 1987, amortizable bond premium is treated as an offset to the interest income instead of as a separate interest deduction. See Pub. 550. For the year of the decedent's death, Forms 1099-INT issued in the decedent's name may include interest income earned after the date of death that should be reported on the income tax return of the decedent's estate. When preparing the decedent's final income tax return, report on Schedule B (Form 1040), line 1, the total interest shown on Form 1099-INT. Under the last entry on line 1, subtotal all the interest reported on line 1. Below the subtotal, enter “Form 1041” and the name and address shown on Form 1041 for the decedent's estate. Also, show the part of the interest reported on Form 1041 and subtract it from the subtotal. Line 2a—Total Ordinary Dividends Report the estate's or trust's share of all ordinary dividends received during the tax year. For the year of the decedent's death, Forms 1099-DIV issued in the decedent's name may include dividends earned after the date of death that should be reported on the income tax return of the decedent's estate. When preparing the decedent's final income tax return, report on Schedule B (Form 1040), line 5, the ordinary dividends shown on Form 1099-DIV. Under the last entry on line 5, subtotal all the dividends reported on line 5. Below the subtotal, enter “Form 1041” and the name and address shown on Form 1041 for the decedent's estate. Also, show the part of the ordinary dividends reported on Form 1041 and subtract it from the subtotal. Report capital gain distributions on Schedule D (Form 1041), line 13. Line 2b—Qualified Dividends Enter the beneficiary's allocable share of qualified dividends on line 2b(1) and enter the estate's or trust's allocable share on line 2b(2). If the estate or trust received qualified dividends that were derived from IRD, you must reduce the amount on line 2b(2) by the portion of the estate tax deduction claimed on Form 1041, page 1, line 19, that is attributable to those qualified dividends. Don't reduce the amounts on line 2b by any other allocable expenses. Note. The beneficiary's share (as figured above) may differ from the amount entered on line 2b of Schedule K-1 (Form 1041). Qualified dividends. Qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, these dividends are reported to the estate or trust in box 1b of Form(s) 1099-DIV. See Pub. 550 for the definition of qualified dividends if the estate or trust received dividends not reported on Form 1099-DIV. Exception. Some dividends may be reported to the estate or trust as in box 1b of Form 1099-DIV but aren't qualified dividends. These include the following. Dividends received on any share of stock that the estate or trust held for less than 61 days during the 121-day period that began 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock isn't entitled to receive the next dividend payment. When counting the number of days the stock was held, include the day the estate or trust disposed of the stock but not the day it acquired the stock. However, you can't count certain days during which the estate's or trust's risk of loss was diminished. See Pub. 550 for more details. Dividends attributable to periods totaling more than 366 days that the estate or trust received on any share of preferred stock held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date. When counting the number of days the stock was held, include the day the estate or trust disposed of the stock but not the day it acquired the stock. However, you can't count certain days during which the estate's or trust's risk of loss was diminished. See Pub. 550 for more details. Preferred dividends attributable to periods totaling less than 367 days are subject to the 61-day holding period rule above. Dividends on any share of stock to the extent that the estate or trust is under an obligation (including a short sale) to make related payments with respect to positions in substantially similar or related property. Payments in lieu of dividends, but only if you know or have reason to know that the payments are not qualified dividends. If you have an entry on line 2b(2), be sure you use Schedule D (Form 1041), the Schedule D Tax Worksheet, or the Qualified Dividends Tax Worksheet, whichever applies, to figure the estate's or trust's tax. Figuring the estate's or trust's tax liability in this manner will usually result in a lower tax. Line 3—Business Income or (Loss) If the estate operated a business, report the income and expenses on Schedule C (Form 1040), Profit or Loss From Business. Enter the net profit or (loss) from Schedule C on line 3. Line 4—Capital Gain or (Loss) Enter the gain from Schedule D (Form 1041), Part III, line 19, column (3), or the loss from Part IV, line 20. If you deferred a capital gain into a QOF, you must file your return with Schedule D, Form 8949, and Form 8997 attached. You will need to file Form 8997 annually until you dispose of the investment. See the Form 8997 instructions. Don't substitute Schedule D (Form 1040) for Schedule D (Form 1041). Line 5—Rents, Royalties, Partnerships, Other Estates and Trusts, etc. Use Schedule E (Form 1040), Supplemental Income and Loss, to report the estate's or trust's share of income or (losses) from rents, royalties, partnerships, S corporations, other estates and trusts, and REMICs. Also use Schedule E (Form 1040) to report farm rental income and expenses based on crops or livestock produced by a tenant. Enter the net profit or (loss) from Schedule E on line 5. See the Instructions for Schedule E (Form 1040) for reporting requirements. If the estate or trust received a Schedule K-1 from a partnership, S corporation, or other flow-through entity, use the corresponding lines on Form 1041 to report the interest, dividends, capital gains, etc., from the flow-through entity. Line 6—Farm Income or (Loss) If the estate or trust operated a farm, use Schedule F (Form 1040), Profit or Loss From Farming, to report farm income and expenses. Enter the net profit or (loss) from Schedule F on line 6. If an estate or trust has farm rental income and expenses based on crops or livestock produced by a tenant, report the income and expenses on Schedule E (Form 1040). Don't use Form 4835, Farm Rental Income and Expenses, or Schedule F (Form 1040) to report such income and expenses and don't include the net profit or (loss) from such income and expenses on line 6. Line 7—Ordinary Gain or (Loss) Enter from line 17 of Form 4797, Sales of Business Property, the ordinary gain or loss from the sale or exchange of property other than capital assets and also from involuntary conversions (other than casualty or theft). Line 8—Other Income Enter other items of income not included on lines 1, 2a, and 3 through 7. List the type and amount on an attached schedule if the estate or trust has more than one item. Items to be reported on line 8 include the following. Unpaid compensation received by the decedent's estate that is IRD. Any part of a total distribution shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that is treated as ordinary income. For more information, see Form 4972, Tax on Lump-Sum Distributions, and its instructions. Taxable contributions received during the tax year by an Alaska Native Settlement Trust from an Alaska Native Corporation. Report gain from taxable contributions of noncash property on Schedule D (Form 1041). The amount of payroll tax credit taken by an employer on its 2023 employment tax returns (Forms 941, 943, and 944) for qualified paid sick and qualified paid family leave under the Families First Coronavirus Response Act (FFCRA) and the American Rescue Plan Act of 2021 (ARP) (both the nonrefundable and refundable portions). These amounts must be included in gross income for the tax year that includes the last day of the calendar quarter with respect to which the credit is allowed. A credit is available only if the leave was taken sometime after March 31, 2020, and before October 1, 2021, and only after the qualified leave wages were paid, which might under certain circumstances not occur until a quarter after September 30, 2021, including quarters during 2022. Accordingly, all lines related to qualified sick and family leave wages remain on the employment tax returns for 2023. Note. Beginning in tax year 2021, there is no current year section 965(a) income inclusion reported on line 8. However, see the instructions for Schedule G, Part I, line 8, later, for information about a triggering event for a section 965(i) net tax liability. Deductions Depreciation, Depletion, and Amortization A trust or decedent's estate is allowed a deduction for depreciation, depletion, and amortization only to the extent the deductions aren't apportioned to the beneficiaries. An estate or trust isn't allowed to make an election under section 179 to expense depreciable business assets. The estate's or trust's share of depreciation, depletion, and amortization is generally reported on the appropriate lines of Schedule C, E, or F (Form 1040), the net income or loss from which is shown on line 3, 5, or 6 of Form 1041. If the deduction isn't related to a specific business or activity, then report it on line 15a. Depreciation. For a decedent's estate, the depreciation deduction is apportioned between the estate and the heirs, legatees, and devisees on the basis of the estate's income allocable to each. For a trust, the depreciation deduction is apportioned between the income beneficiaries and the trust on the basis of the trust income allocable to each, unless the governing instrument (or local law) requires or permits the trustee to maintain a depreciation reserve. If the trustee is required to maintain a reserve, the deduction is first allocated to the trust, up to the amount of the reserve. Any excess is allocated among the income beneficiaries and the trust in the same manner as the trust's accounting income. See Regulations section 1.167(h)-1(b). Depletion. For mineral or timber property held by a decedent's estate, the depletion deduction is apportioned between the estate and the heirs, legatees, and devisees on the basis of the estate's income from such property allocable to each. For mineral or timber property held in trust, the depletion deduction is apportioned between the income beneficiaries and the trust based on the trust income from such property allocable to each, unless the governing instrument (or local law) requires or permits the trustee to maintain a reserve for depletion. If the trustee is required to maintain a reserve, the deduction is first allocated to the trust, up to the amount of the reserve. Any excess is allocated among the beneficiaries and the trust in the same manner as the trust's accounting income. See Regulations section 1.611-1(c)(4). Amortization. The deduction for amortization is apportioned between an estate or trust and its beneficiaries under the same principles used to apportion the deductions for depreciation and depletion. The deduction for the amortization of reforestation expenditures under section 194 is allowed only to an estate. Allocable share from a pass-through entity. Depreciation, depletion, and amortization received from a pass-through entity on a Schedule K-1 are apportioned and reported in the same manner as discussed above. A section 179 expense received from a pass-through entity on a Schedule K-1 isn't deductible by the estate or trust. Allocation of Deductions for Tax-Exempt Income Generally, no deduction that would otherwise be allowable is allowed for any expense (whether for business or for the production of income) that is allocable to tax-exempt income. Examples of tax-exempt income include: Certain death benefits (section 101), Interest on state or local bonds (section 103), Compensation for injuries or sickness (section 104), and Income from discharge of indebtedness in a title 11 case (section 108). Exception. State income taxes and business expenses that are allocable to tax-exempt interest are deductible. Expenses that are directly allocable to tax-exempt income are allocated only to tax-exempt income. A reasonable proportion of expenses indirectly allocable to both tax-exempt income and other income must be allocated to each class of income. Deductions That May Be Allowable for Estate Tax Purposes Administration expenses and casualty and theft losses deductible on Form 706 may be deducted, to the extent otherwise deductible for income tax purposes, on Form 1041 if the fiduciary files a statement waiving the right to deduct the expenses and losses on Form 706. The statement must be filed before the expiration of the statutory period of limitations for the tax year the deduction is claimed. See Pub. 559 for more information. Accrued Expenses Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year that (a) all events have occurred that determine the liability, and (b) the amount of the liability can be figured with reasonable accuracy. However, all the events that establish liability are treated as occurring only when economic performance takes place. There are exceptions for recurring items. See section 461(h). Limitations on Deductions At-Risk Loss Limitations Generally, the amount the estate or trust has “at-risk” limits the loss it can deduct for any tax year. Use Form 6198, At-Risk Limitations, to figure the deductible loss for the year and file it with Form 1041. For more information, see Pub. 925, Passive Activity and At-Risk Rules. Passive Activity Loss and Credit Limitations In general. Section 469 and the regulations thereunder generally limit losses from passive activities to the amount of income derived from all passive activities. Similarly, credits from passive activities are generally limited to the tax attributable to such activities. These limitations are first applied at the estate or trust level. Generally, an activity is a passive activity if it involves the conduct of any trade or business, and the taxpayer does not materially participate in the activity. Passive activities don't include working interests in oil and gas properties. See section 469(c)(3). Note. Material participation standards for estates and trusts haven't been established by regulations. For a grantor trust, material participation is determined at the grantor level. If the estate or trust distributes an interest in a passive activity, the basis of the property immediately before the distribution is increased by the passive activity losses allocable to the interest, and such losses can't be deducted. See section 469(j)(12). Losses from passive activities are first subject to the at-risk rules. When the losses are deductible under the at-risk rules, the passive activity rules then apply. Rental activities. Generally, rental activities are passive activities, whether or not the taxpayer materially participates. However, certain taxpayers who materially participate in real property trades or businesses aren't subject to the passive activity limitations on losses from rental real estate activities in which they materially participate. For more details, see section 469(c)(7). For tax years of an estate ending less than 2 years after the decedent's date of death, up to $25,000 of deductions and deduction equivalents of credits from rental real estate activities in which the decedent actively participated are allowed. Any excess losses or credits are suspended for the year and carried forward. Portfolio income. Portfolio income isn't treated as income from a passive activity, and passive losses and credits generally may not be applied to offset it. Portfolio income generally includes interest, dividends, royalties, and income from annuities. Portfolio income of an estate or trust must be accounted for separately. Forms to file. See Form 8582, Passive Activity Loss Limitations, to figure the amount of losses allowed from passive activities. See Form 8582-CR, Passive Activity Credit Limitations, to figure the amount of credit allowed for the current year. Business Interest Business interest expense could be limited. For more information about limitations on deductions for business interest, see section 163(j) and Line 10—Interest, later. Transactions Between Related Taxpayers Under section 267, a trust that uses the accrual method of accounting may only deduct business expenses and interest owed to a related party in the year the payment is included in the income of the related party. For this purpose, a related party includes: A grantor and a fiduciary of any trust; A fiduciary of a trust and a fiduciary of another trust, if the same person is a grantor of both trusts; A fiduciary of a trust and a beneficiary of such trust; A fiduciary of a trust and a beneficiary of another trust, if the same person is a grantor of both trusts; A fiduciary of a trust and a corporation more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust; and An executor of an estate and a beneficiary of that estate, except for a sale or exchange to satisfy a pecuniary bequest (that is, a bequest of a sum of money). Line 10—Interest Enter the amount of interest (subject to limitations) paid or incurred by the estate or trust on amounts borrowed by the estate or trust, or on debt acquired by the estate or trust (for example, outstanding obligations from the decedent) that isn't claimed elsewhere on the return. If the proceeds of a loan were used for more than one purpose (for example, to purchase a portfolio investment and to acquire an interest in a passive activity), the fiduciary must make an interest allocation according to the rules in Temporary Regulations section 1.163-8T. Don't include interest paid on indebtedness incurred or continued to purchase or carry obligations on which the interest is wholly exempt from income tax. Personal interest isn't deductible. Examples of personal interest include interest paid on: Revolving charge accounts used to purchase personal-use property; Personal notes for money borrowed from a bank, a credit union, or other person; Installment loans on personal-use property; and Underpayments of federal, state, or local income taxes. Interest that is paid or incurred on indebtedness allocable to a trade or business (including a rental activity) should be deducted on the appropriate line of Schedule C, E, or F (Form 1040), the net income or loss from which is shown on line 3, 5, or 6 of Form 1041. Types of interest to include on line 10 are: Any investment interest (subject to limitations—see below), Any qualified residence interest (see later), and Any interest payable under section 6601 on any unpaid portion of the estate tax attributable to the value of a reversionary or remainder interest in property for the period during which an extension of time for payment of such tax is in effect. Limitation on deduction of business interest. Business interest expense is limited to the sum of business interest income, 30% of the adjusted taxable income, and floor plan financing interest. Business interest expense includes any interest paid or accrued on indebtedness properly allocable to a trade or business. A taxpayer, other than a tax shelter, that meets the gross receipts test is not required to limit business interest expense under section 163(j). A taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $29 million or less for the 3 prior tax years. Gross receipts include the aggregate gross receipts from all persons treated as a single employer such as a controlled group of corporations, commonly controlled partnerships or proprietorships, and affiliated service groups. If the taxpayer fails to meet the gross receipts test, Form 8990 is generally required. Investment interest. Generally, investment interest is interest (including amortizable bond premium on taxable bonds acquired after October 22, 1986, but before January 1, 1988) that is paid or incurred on indebtedness that is properly allocable to property held for investment. Investment interest doesn't include any qualified residence interest, or interest that is taken into account under section 469 in figuring income or loss from a passive activity. Generally, net investment income (NII) is the excess of investment income over investment expenses. Investment expenses (other than interest) are deductible only to the extent they are allowable under section 67(e). The amount of the investment interest deduction may be limited. Use Form 4952, Investment Interest Expense Deduction, to figure the allowable investment interest deduction. If you must complete Form 4952, check the box on line 10 of Form 1041 and attach Form 4952. Then, add the deductible investment interest to the other types of deductible interest and enter the total on line 10. Qualified residence interest. Interest paid or incurred by an estate or trust on indebtedness secured by a qualified residence of a beneficiary of an estate or trust is treated as qualified residence interest if the residence would be a qualified residence (that is, the principal residence or the secondary residence selected by the beneficiary) if owned by the beneficiary. The beneficiary must have a present interest in the estate or trust or an interest in the residuary of the estate or trust. See Pub. 936, Home Mortgage Interest Deduction, for an explanation of the general rules for deducting home mortgage interest. See section 163(h)(3) for a definition of qualified residence interest and for limitations on indebtedness. Line 11—Taxes The deduction for state and local taxes is limited to $10,000. The limitation applies to the total of your state and local income taxes (or general sales taxes, if elected instead of income taxes), real estate taxes, and personal property taxes. The limitation does not apply to foreign income taxes, and state and local taxes paid or accrued in carrying on a trade or business or for the production of income. Enter any deductible taxes paid or incurred during the tax year that aren't deductible elsewhere on Form 1041. Deductible taxes include the following. State and local income taxes. You can deduct state and local income taxes unless you elect to deduct state and local general sales taxes. You can't deduct both. State and local general sales taxes. You can elect to deduct state and local general sales taxes instead of state and local income taxes. Generally, you can elect to deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2023 if the tax rate was the same as the general sales tax rate. However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Sales taxes on motor vehicles are also deductible as a general sales tax if the tax rate was more than the general sales tax rate, but the tax is deductible only up to the amount of tax that would have been imposed at the general sales tax rate. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Also include any state and local general sales taxes paid for a leased motor vehicle. Do not include sales taxes paid on items used in a trade or business. An estate or trust cannot use the Optional State Sales Tax Tables for individuals in the Instructions for Schedule A (Form 1040), Itemized Deductions, to figure its deduction. State and local real property taxes. Note. The deduction for foreign real property taxes is no longer allowed. State and local personal property taxes. Foreign or U.S. territory income taxes. You may want to take a credit for the tax instead of a deduction. See the instructions for Schedule G, Part I, line 2a, later, for more details. The generation-skipping transfer (GST) tax imposed on income distributions. Don't deduct: Federal income taxes; Estate, inheritance, legacy, succession, and gift taxes; Federal duties and excise taxes; or Foreign real property taxes. Do not deduct the estate's or trust's deduction for social security and Medicare taxes by the amount claimed on its employment tax returns for the nonrefundable and refundable portions of the FFCRA and the ARP credits for qualified sick and family leave wages. Instead, report this amount as income on line 8. Safe harbor for certain charitable contributions made in exchange for a state or local tax credit. If you made a charitable contribution in exchange for a state or local tax credit and your charitable contribution deduction must be reduced as a result of receiving or expecting to receive the tax credit, you may qualify for a safe harbor that allows you to treat some or all of the disallowed charitable contribution as a payment of state and local taxes. The safe harbor applies if you meet the following conditions. You made a cash contribution to an entity described in section 170(c). In return for the cash contribution, you received a state or local tax credit. You must reduce your charitable contribution deduction by the amount of the state or local tax credit you receive. If you meet these conditions, and to the extent you apply the state or local tax credit to this or a prior year's state or local tax liability, you may include this amount on line 11. To the extent you apply a portion of the credit to offset your state or local tax liability in a subsequent year (as permitted by law), you may treat this amount as state or local tax paid in the year the credit is applied. For more information about this safe harbor and examples, see Notice 2019-12. Line 12—Fiduciary Fees Enter the deductible fees paid or incurred to the fiduciary for administering the estate or trust during the tax year. Fiduciary expenses include probate court fees and costs, fiduciary bond premiums, legal publication costs of notices to creditors or heirs, the cost of certified copies of the decedent's death certificate, and costs related to fiduciary accounts. Fiduciary fees deducted on Form 706 can't be deducted on Form 1041. Note. Fiduciary fees are allowable under section 67(e) if they are costs that are paid or incurred in connection with the administration of an estate or a non-grantor trust that would not have been incurred if the property were not held in such estate or trust. See Final Regulations - TD9918 and Regulations section 1.67-4 for more information. Line 14—Attorney, Accountant, and Return Preparer Fees Expenses for preparation of fiduciary income tax returns, the decedent's final individual income tax returns, and all estate and GST tax returns are fully deductible. However, expenses for preparing all other tax returns, including gift tax returns, are considered costs commonly and customarily incurred by individuals and are not deductible. For more information, see Final Regulations - TD9918 and Regulations section 1.67-4. Line 15a—Other Deductions Attach your own statement, listing by type and amount all allowable deductions that aren't deductible elsewhere on Form 1041. Allowable deductions include all deductions listed in section 67(b) (including estate taxes attributable to IRD under section 691(c)), and other costs allowable under section 67(e) paid or incurred in connection with the administration of the estate or trust that would not have been incurred if the property were not held in the estate or trust. Don't include any losses on worthless bonds and similar obligations and nonbusiness bad debts. Report these losses, as applicable, on Form 8949. Don't deduct medical or funeral expenses on Form 1041. Medical expenses of the decedent paid by the estate may be deductible on the decedent's income tax return for the year incurred. See section 213(c). Funeral expenses are deductible only on Form 706. Other costs paid or incurred by estates and non-grantor trusts. Under section 67(e), deductions are allowable for costs which are paid or incurred by an estate or non-grantor trust in connection with the administration of the estate or trust and would not have been incurred if the property were not held in such estate or trust. In determining whether a cost is deductible by an estate or non-grantor trust, it must be determined whether the cost would be “commonly or customarily” incurred by a hypothetical individual owning the same property. If the cost would be deductible by a hypothetical individual, it is not deductible by the estate or non-grantor trust. It is the type of product or service rendered to the estate or non-grantor trust in exchange for the cost, rather than the description of the cost of that product or service, that is determinative. Costs that are incurred commonly or customarily by individuals include costs incurred in defense of a claim against the estate, the decedent, or the non-grantor trust that are unrelated to the existence, validity, or administration of the estate or trust. These amounts are not allowable deductions. Ownership costs. Ownership costs are costs that are chargeable to or incurred by an owner of property simply by reason of being the owner of the property. These costs are commonly or customarily incurred by a hypothetical individual owner of such property and are not deductible by an estate or non-grantor trust. Under section 67(b), they include, but are not limited to, condominium fees, insurance premiums, maintenance and lawn services, automobile registration and insurance costs, and partnership costs deemed to be passed through to and reportable by a partner. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code. Appraisal fees. Appraisal fees incurred to determine the FMV of assets as of the decedent's date of death (or the alternate valuation date), to determine value for purposes of making distributions, or as otherwise required to properly prepare the estate's or trust's tax returns, or a GST tax return, are not incurred commonly or customarily by an individual and are deductible. The cost of appraisals for other purposes (for example, insurance) is commonly or customarily incurred by individuals and is not an allowable deduction. Investment advisory fees. Fees for investment advice, including any related services that would be provided to any individual investor as part of an investment advisory fee, are incurred commonly or customarily by a hypothetical individual investor and are not deductible. However, certain incremental costs of investment advice beyond the amount that would normally be charged to an individual investor are deductible. An incremental cost is a special, additional charge that is added solely because the investment advice is rendered to a trust or estate rather than to an individual, including balancing beyond the usual varying interests of current beneficiaries and remaindermen. The deductible portion of the investment advisory fees is limited to the amount of those fees, if any, that exceeds the fees normally charged to an individual investor. See Regulations section 1.67-4(b)(4). Bundled fees. If an estate or non-grantor trust pays a single fee, commission, or other expense, such as a fiduciary's commission, attorney's fee, or accountant's fee for both costs that are incurred commonly or customarily by individuals and costs (other than a de minimis amount) that are not incurred commonly or customarily by individuals, then (except to the extent provided otherwise by guidance published in the Internal Revenue Bulletin) the single fee, commission, or other expense (bundled fee) must be allocated between the costs that are incurred commonly or customarily by individuals, such costs not being deductible, and costs that are not incurred commonly or customarily by individuals, such costs being deductible. There is an exception to the allocation rule if a bundled fee is not computed on an hourly basis. In this situation, only the portion of that fee that is attributable to investment advice is not deductible. The remaining portion is deductible. Out-of-pocket expenses billed to the estate or non-grantor trust are treated as separate from the bundled fee and are not subject to allocation. Estates and non-grantor trusts cannot deduct payments made from the bundled fee to third parties if such payments would not have been deductible if they had been paid directly by the estate or non-grantor trust. Any reasonable method may be used to allocate a bundled fee, including without limitation the allocation of a portion of a fiduciary commission that is a bundled fee to investment advice. For more information, see Regulations section 1.67-4(c)(4). Note. The reasonable method standard does not apply to determine the portion of the bundled fee attributable to payments made to third parties commonly or customarily incurred by an individual or to any other separately assessed expense commonly or customarily incurred by an individual, because those payments and expenses are readily identifiable without any discretion on the part of the fiduciary or return preparer. For more information, see Regulations section 1.67-4. Other Deductions Reported on Line 15a Bond premium(s). For taxable bonds acquired before October 23, 1986, if the fiduciary elected to amortize the premium, report the amortization on this line. If you made the election to amortize the premium, the basis in the taxable bond must be reduced by the amount of amortization. For tax-exempt bonds, you can't deduct the premium that is amortized. Although the premium can't be deducted, you must amortize the tax-exempt bond by the amount of premium amortized. For more information, see section 171 and Pub. 550. If you claim a bond premium deduction for the estate or trust, figure the deduction on a separate sheet and attach it to Form 1041. Casualty and theft losses. Use Form 4684, Casualties and Thefts, to figure any deductible casualty and theft losses. Estate's or trust's share of amortization, depreciation, and depletion not claimed elsewhere. If you can't deduct the estate's or trust's apportioned share of amortization, depreciation, and depletion as rent or royalty expenses on Schedule E (Form 1040), or as business or farm expenses on Schedule C or F (Form 1040), itemize the estate's or trust's apportioned share of the deductions on an attached sheet and include them on line 15a. Note. Don't report the beneficiary's apportioned share of depreciation, depletion, and amortization on line 15a. Report the beneficiary's apportioned share of deductions in box 9 of Schedule K-1 (Form 1041). Itemize each beneficiary's apportioned share of the deductions and report them in the appropriate box of Schedule K-1 (Form 1041). Section 179D. Enter any applicable deduction under section 179D for costs of energy efficient commercial business property placed in service during the tax year. Complete and attach Form 7205, Energy Efficient Commercial Buildings Deduction. Line 15b—Net Operating Loss Deduction An estate or trust is allowed an NOLD under section 172. If you claim an NOLD for the estate or trust, figure the deduction on a separate sheet and attach it to the return. Line 18—Income Distribution Deduction If the estate or trust was required to distribute income currently or if it paid, credited, or was required to distribute any other amounts to beneficiaries during the tax year, complete Schedule B to determine the estate's or trust's income distribution deduction. However, if you are filing for a pooled income fund, don't complete Schedule B. Instead, attach a statement to support the computation of the income distribution deduction. For more information, see Pooled Income Funds, earlier. If the estate or trust claims an income distribution deduction, complete and attach: Part I (through line 24) and Part II of Schedule I (Form 1041) to refigure the deduction on a minimum tax basis, and Schedule K-1 (Form 1041) for each beneficiary to which a distribution was made or required to be made. Cemetery perpetual care fund. On line 18, deduct the amount, not more than $5 per gravesite, paid for maintenance of cemetery property. To the right of the entry space for line 18, enter the number of gravesites. Also enter “Section 642(i) trust” in parentheses after the trust's name at the top of Form 1041. You don't have to complete Schedule B of Form 1041, and Schedule K-1 (Form 1041). Don't enter less than zero on line 18. Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes If the estate or trust includes IRD in its gross income, and such amount was included in the decedent's gross estate for estate tax purposes, the estate or trust is allowed to deduct in the same tax year that the income is included that portion of the estate tax imposed on the decedent's estate that is attributable to the inclusion of the IRD in the decedent's estate. For an example of the computation, see Regulations section 1.691(c)-1 and Pub. 559. If any amount properly paid, credited, or required to be distributed by an estate or trust to a beneficiary consists of IRD received by the estate or trust, don't include such amounts in determining the estate tax deduction for the estate or trust. Figure the deduction on a separate sheet. Attach the sheet to your return. If you claim a deduction for estate tax attributable to qualified dividends or capital gains, you may have to adjust the amount on Form 1041, page 1, line 2b(2); or Schedule D (Form 1041), line 22. Also, a deduction is allowed for the GST tax imposed as a result of a taxable termination or a direct skip occurring as a result of the death of the transferor. See section 691(c)(3). Enter the estate's or trust's share of these deductions on line 19. Line 20—Qualified Business Income Deduction To figure your QBI deduction, use Form 8995 or Form 8995-A, as applicable. Use Form 8995 if: You have QBI (loss), real estate investment trust (REIT) dividends, or PTP income (loss); Your 2023 taxable income before the QBI deduction is less than or equal to $182,100; and You aren’t a patron in a specified agricultural or horticultural cooperative. If you don’t meet these requirements, use Form 8995-A. Attach whichever form you use (Form 8995 or 8995-A) to your return. Also attach Schedule C, E, or F (Form 1040), whichever form you use to report information about your QBI. See the instructions for Forms 8995 and 8995-A for more information for figuring and reporting your QBI deduction. Note. Report the beneficiary’s apportioned share of items of QBI (loss) subject to beneficiary specific determinations, W-2 wages, unadjusted basis immediately after acquisition (UBIA) of qualified property, qualified REIT dividends, and qualified PTP income on a statement attached to Schedule K-1 (Form 1041). See the instructions for box 14, code I, of Schedule K-1 (Form 1041), later. Line 21—Exemption Decedents' estates. A decedent's estate is allowed a $600 exemption. Trusts required to distribute all income currently. A trust whose governing instrument requires that all income be distributed currently is allowed a $300 exemption, even if it distributed amounts other than income during the tax year. Qualified disability trusts. A qualified disability trust is allowed a $4,700 exemption. This amount is not subject to phaseout. A qualified disability trust is any trust: Described in 42 U.S.C. 1396p(c)(2)(B)(iv) and established solely for the benefit of an individual under 65 years of age who is disabled, and All of the beneficiaries of which are determined by the Commissioner of Social Security to have been disabled for some part of the tax year within the meaning of 42 U.S.C. 1382c(a)(3). A trust will not fail to meet item 2 above just because the trust's corpus may revert to a person who isn't disabled after the trust ceases to have any disabled beneficiaries. All other trusts. A trust not described above is allowed a $100 exemption. Tax and Payments Line 23—Taxable Income Minimum taxable income. Line 23 can't be less than the larger of: The inversion gain of the estate or trust, as figured under section 7874, if the estate or trust is an expatriated entity or a partner in an expatriated entity; or The sum of the excess inclusions of the estate or trust from Schedule Q (Form 1066), Quarterly Notice to Residual Interest Holder of REMIC Taxable Income or Net Loss Allocation, line 2c. Net operating loss (NOL). If line 23 (figured without regard to the minimum taxable income rule stated above) is a loss, the estate or trust may have an NOL. Don't include the deductions claimed on lines 13, 18, and 21 when figuring the amount of the NOL. Generally, an NOL can only be carried forward to subsequent years and cannot be carried back. The 2-year carryback period only applies to the portion of an NOL attributable to a farming loss. For more information, see Pub. 536. Complete Schedule A of Form 1045, Application for Tentative Refund, to figure the amount of the NOL that is available for carryback or carryover. Use Form 1045 or file an amended return to apply for a refund based on an NOL carryback. For more information, see the Instructions for Form 1045. On the termination of the estate or trust, any unused NOL carryover that would be allowable to the estate or trust in a later tax year but for the termination is allowed to the beneficiaries succeeding to the property of the estate or trust. See the instructions for box 11, codes E and F, of Schedule K-1 (Form 1041), later. Excess deductions on termination. If the estate or trust has for its final year deductions (excluding the charitable deduction and personal exemption) in excess of its gross income, the excess deductions are allowed to the beneficiaries succeeding to the property of the estate or trust and retain their separate character as an amount allowed in arriving at AGI, a non-miscellaneous itemized deduction, or a miscellaneous itemized deduction. In general, an unused NOL carryover that is allowed to beneficiaries (as explained above) can't also be treated as an excess deduction. However, if the final year of the estate or trust is also the last year of the NOL carryover period, the NOL carryover not absorbed in that tax year by the estate or trust is included as an excess deduction. See the instructions for box 11, codes A and B, of Schedule K-1 (Form 1041), later. Line 25—Current Payment on Deferred Net 965 Tax Liability If you made a payment with respect to a current net 965 tax liability, enter the amount of the payment from Form 965-A, Part II, column (k). Line 27—Estimated Tax Penalty If line 28 is at least $1,000 and more than 10% of the tax shown on Form 1041, or the estate or trust underpaid its 2023 estimated tax liability for any payment period, it may owe a penalty. See Form 2210 to determine whether the estate or trust owes a penalty and to figure the amount of the penalty. Note. The penalty may be waived or reduced under certain conditions. See Pub. 505, Tax Withholding and Estimated Tax, and the Instructions for Form 2210 for details. Line 28—Tax Due You must pay the tax in full when the return is filed. You may pay by EFTPS. For more information about EFTPS, see Electronic Deposits, earlier. Also, you may pay by check or money order or by credit or debit card. To pay by check or money order. If you pay by check or money order: Make it payable to “United States Treasury”; Make sure the name of the estate or trust appears on the payment; Write the estate’s or trust’s EIN and “2023 Form 1041” on the payment; Consider completing the 2023 Form 1041-V; and Enclose, but don't attach, the payment (and Form 1041-V, if completed) with Form 1041. Note. The IRS can't accept a single check (including a cashier's check) for amounts of $100,000,000 ($100 million) or more. If you're sending $100 million or more by check, you'll need to spread the payments over two or more checks with each check made out for an amount less than $100 million. The $100 million or more amount limit doesn't apply to other methods of payment (such as electronic payments), so please consider paying by means other than checks. To pay by credit or debit card. For information on paying your taxes electronically, including by credit or debit card, go to IRS.gov/E-pay. Line 30a—Credited to 2024 Estimated Tax Enter the amount from line 29 that you want applied to the estate's or trust's 2024 estimated tax. Schedule A—Charitable Deduction General Instructions Generally, any part of the gross income of an estate or trust (other than a simple trust) that, under the terms of the will or governing instrument, is paid (or treated as paid) during the tax year for a charitable purpose specified in section 170(c) is allowed as a deduction to the estate or trust. It isn't necessary that the charitable organization be created or organized in the United States. A pooled income fund or a section 4947(a)(1) nonexempt charitable trust treated as a private foundation must attach a separate sheet to Form 1041 instead of using Schedule A of Form 1041 to figure the charitable deduction. Additional return to be filed by trusts. Trusts, other than split-interest trusts or nonexempt charitable trusts, that claim a charitable deduction also file Form 1041-A unless the trust is required to distribute currently to the beneficiaries all the income for the year determined under section 643(b) and related regulations. Pooled income funds and charitable lead trusts also file Form 5227. See Form 5227 for information about any exceptions. Election to treat contributions as paid in the prior tax year. The fiduciary of an estate or trust may elect to treat as paid during the tax year any amount of gross income received during that tax year or any prior tax year that was paid in the next tax year for a charitable purpose. For example, if a calendar year estate or trust makes a qualified charitable contribution on February 7, 2024, from income earned in 2023 or prior, then the fiduciary can elect to treat the contribution as paid in 2023. To make the election, the fiduciary must file a statement with Form 1041 for the tax year in which the contribution is treated as paid. This statement must include: The name and address of the fiduciary; The name of the estate or trust; An indication that the fiduciary is making an election under section 642(c)(1) for contributions treated as paid during such tax year; The name and address of each organization to which any such contribution is paid; and The amount of each contribution and date of actual payment or, if applicable, the total amount of contributions paid to each organization during the next tax year, to be treated as paid in the prior tax year. The election must be filed by the due date (including extensions) for Form 1041 for the next tax year. If the original return was filed on time, you may make the election on an amended return filed no later than 6 months after the due date of the return (excluding extensions). Enter “Filed pursuant to section 301.9100-2” at the top of the amended return and file it at the same address you used for your original return. For more information about the charitable deduction, see section 642(c) and the related regulations. Specific Instructions Line 1—Amounts Paid or Permanently Set Aside for Charitable Purposes From Gross Income Enter amounts that were paid for a charitable purpose out of the estate's or trust's gross income, including any capital gains that are attributable to income under the governing instrument or local law. Include amounts paid during the tax year from gross income received in a prior tax year, but only if no deduction was allowed for any prior tax year for these amounts. Estates, and certain trusts, may claim a deduction for amounts permanently set aside for a charitable purpose from gross income. Such amounts must be permanently set aside during the tax year to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, or for the establishment, acquisition, maintenance, or operation of a public cemetery not operated for profit. For a trust to qualify, the trust may not be a simple trust, and the set-aside amounts must be required by the terms of a trust instrument that was created on or before October 9, 1969. Further, the trust instrument must provide for an irrevocable remainder interest to be transferred to or for the use of an organization described in section 170(c) or the trust must have been created by a grantor who was at all times after October 9, 1969, under a mental disability to change the terms of the trust. Also, certain testamentary trusts that were established by a will that was executed on or before October 9, 1969, may qualify. See Regulations section 1.642(c)-2(b). Don't include any capital gains for the tax year allocated to corpus and paid or permanently set aside for charitable purposes. Instead, enter these amounts on line 4. Line 2—Tax-Exempt Income Allocable to Charitable Contributions Any estate or trust that pays or sets aside any part of its income for a charitable purpose must reduce the deduction by the portion allocable to any tax-exempt income. If the governing instrument specifically provides as to the source from which amounts are paid, permanently set aside, or to be used for charitable purposes, the specific provisions control. In all other cases, determine the amount of tax-exempt income allocable to charitable contributions by multiplying line 1 by a fraction, the numerator of which is the total tax-exempt income of the estate or trust, and the denominator of which is the gross income of the estate or trust. Don't include in the denominator any losses allocated to corpus. Line 4—Capital Gains for the Tax Year Allocated to Corpus and Paid or Permanently Set Aside for Charitable Purposes Enter the total of all capital gains for the tax year that are: Allocated to corpus, and Paid or permanently set aside for charitable purposes. Line 6—Section 1202 Exclusion Allocable to Capital Gains Paid or Permanently Set Aside for Charitable Purposes If the exclusion of gain from the sale or exchange of qualified small business (QSB) stock was claimed, enter the part of the gain included on Schedule A, lines 1 and 4, that was excluded under section 1202. Schedule B—Income Distribution Deduction General Instructions If the estate or trust was required to distribute income currently or if it paid, credited, or was required to distribute any other amounts to beneficiaries during the tax year, complete Schedule B to determine the estate's or trust's income distribution deduction. Note. Use Schedule I (Form 1041) to compute the DNI and income distribution deduction on a minimum tax basis. Pooled income funds. Don't complete Schedule B for these funds. Instead, attach a separate statement to support the computation of the income distribution deduction. See Pooled Income Funds, earlier, for more information. Separate share rule. If a single trust or an estate has more than one beneficiary, and if different beneficiaries have substantially separate and independent shares, their shares are treated as separate trusts or estates for the sole purpose of determining the DNI allocable to the respective beneficiaries. If the separate share rule applies, figure the DNI allocable to each beneficiary on a separate sheet and attach the sheet to this return. Any deduction or loss that is applicable solely to one separate share of the trust or estate isn't available to any other share of the same trust or estate. For more information, see section 663(c) and related regulations. Withholding of tax on foreign persons. The fiduciary may be liable for withholding tax on distributions to beneficiaries who are foreign persons. For more information, see Pub. 515, and Forms 1042 and 1042-S. Specific Instructions Line 1—Adjusted Total Income Generally, enter on Schedule B, line 1, the amount from line 17 on page 1 of Form 1041. However, if both line 4 and line 17 on page 1 of Form 1041 are losses, enter on Schedule B, line 1, the smaller of those losses. If line 4 is zero or a gain and line 17 is a loss, enter zero on line 1 of Schedule B. If you are filing for a simple trust, subtract from adjusted total income any extraordinary dividends or taxable stock dividends included on page 1, line 2, and determined under the governing instrument and applicable local law to be allocable to corpus. Line 2—Adjusted Tax-Exempt Interest To figure the adjusted tax-exempt interest, follow the steps below. Step 1. Add tax-exempt interest income on line 2 of Schedule A, any expenses allowable under section 212 allocable to tax-exempt interest, and any interest expense allocable to tax-exempt interest. Step 2. Subtract the Step 1 total from the amount of tax-exempt interest (including exempt-interest dividends) received. Section 212 expenses that are directly allocable to tax-exempt interest are allocated only to tax-exempt interest. A reasonable proportion of section 212 expenses that are indirectly allocable to both tax-exempt interest and other income must be allocated to each class of income. Figure the interest expense allocable to tax-exempt interest according to the guidelines in Rev. Proc. 72-18, 1972-1 C.B. 740. See Regulations sections 1.643(a)-5 and 1.265-1 for more information. Line 3 Include all capital gains, whether or not distributed, that are attributable to income under the governing instrument or local law. For example, if the trustee distributed 50% of the current year's capital gains to the income beneficiaries (and reflects this amount on Schedule D (Form 1041), line 19, column (1)), but under the governing instrument all capital gains are attributable to income, then include 100% of the capital gains on line 3. If the amount on Schedule D (Form 1041), line 19, column (1), is a net loss, enter zero. If the exclusion of gain from the sale or exchange of QSB stock was claimed, don't reduce the gain on line 3 by any amount excluded under section 1202. Line 5 In figuring the amount of long-term and short-term capital gain for the tax year included on Schedule A, line 1, the specific provisions of the governing instrument control if the instrument specifically provides as to the source from which amounts are paid, permanently set aside, or to be used for charitable purposes. In all other cases, determine the amount to enter by multiplying line 1 of Schedule A by a fraction, the numerator of which is the amount of net capital gains that are included in the accounting income of the estate or trust (that is, not allocated to corpus) and are distributed to charities, and the denominator of which is all items of income (including the amount of such net capital gains) included in the DNI. Reduce the amount on line 5 by any allocable section 1202 exclusion. Line 8—Accounting Income If you are filing for a decedent's estate or a simple trust, skip this line. If you are filing for a complex trust, enter the income for the tax year determined under the terms of the governing instrument and applicable local law. Don't include extraordinary dividends or taxable stock dividends determined under the governing instrument and applicable local law to be allocable to corpus. Lines 9 and 10 Don't include any: Amount that was deducted on the prior year's return that was required to be distributed in the prior year, Amount that is paid or permanently set aside for charitable purposes or otherwise qualifying for the charitable deduction, or Amount that is properly paid or credited as a gift or bequest of a specific amount of money or specific property. Note. An amount that can be paid or credited only from income isn't considered a gift or bequest. Also, to qualify as a gift or bequest, the amount must be paid in three or fewer installments. Line 9—Income Required To Be Distributed Currently Line 9 is to be completed by all simple trusts as well as complex trusts and decedents’ estates that are required to distribute income currently, whether it is distributed or not. The determination of whether trust income is required to be distributed currently depends on the terms of the governing instrument and the applicable local law. The line 9 distributions are referred to as “first-tier distributions” and are deductible by the estate or trust to the extent of the DNI. The beneficiary includes such amounts in their income to the extent of their proportionate share of the DNI. Line 10—Other Amounts Paid, Credited, or Otherwise Required To Be Distributed Line 10 is to be completed only by a decedent's estate or complex trust. These distributions consist of any other amounts paid, credited, or required to be distributed and are referred to as “second-tier distributions.” Such amounts include annuities to the extent not paid out of income, mandatory and discretionary distributions of corpus, and distributions of property in kind. If Form 1041-T was timely filed to elect to treat estimated tax payments as made by a beneficiary, the payments are treated as paid or credited to the beneficiary on the last day of the tax year and must be included on line 10. Unless a section 643(e)(3) election is made, the value of all noncash property actually paid, credited, or required to be distributed to any beneficiaries is the smaller of: The estate's or trust's adjusted basis in the property immediately before distribution, plus any gain or minus any loss recognized by the estate or trust on the distribution (basis of beneficiary); or The FMV of such property. If a section 643(e)(3) election is made by the fiduciary, then the amount entered on line 10 will be the FMV of the property. A fiduciary of a complex trust or a decedent's estate may elect to treat any amount paid or credited to a beneficiary within 65 days following the close of the tax year as being paid or credited on the last day of that tax year. To make this election, see Question 6 under Other Information, later. The beneficiary includes the amounts on line 10 in their income only to the extent of their proportionate share of the DNI. Complex trusts. If the second-tier distributions exceed the DNI allocable to the second tier, the trust may have an accumulation distribution. See the line 11 instructions below. Line 11—Total Distributions If line 11 is more than line 8, and you are filing for a complex trust that has previously accumulated income, see the instructions for Schedule J, later, to see if you must complete Schedule J (Form 1041), Accumulation Distribution for Certain Complex Trusts. Line 12—Adjustment for Tax-Exempt Income In figuring the income distribution deduction, the estate or trust isn't allowed a deduction for any item of the DNI that isn't included in the gross income of the estate or trust. Thus, for purposes of figuring the allowable income distribution deduction, the DNI (line 7) is figured without regard to any tax-exempt interest. If tax-exempt interest is the only tax-exempt income included in the total distributions (line 11), and the DNI (line 7) is less than or equal to line 11, then enter on line 12 the amount from line 2. If tax-exempt interest is the only tax-exempt income included in the total distributions (line 11), and the DNI is more than line 11 (that is, the estate or trust made a distribution that is less than the DNI), then figure the adjustment by multiplying line 2 by a fraction, the numerator of which is the total distributions (line 11), and the denominator of which is the DNI (line 7). Enter the result on line 12. If line 11 includes tax-exempt income other than tax-exempt interest, figure line 12 by subtracting the total of the following from tax-exempt income included on line 11. The charitable contribution deduction allocable to such tax-exempt income. Expenses allocable to tax-exempt income. Expenses that are directly allocable to tax-exempt income are allocated only to tax-exempt income. A reasonable proportion of expenses indirectly allocable to both tax-exempt income and other income must be allocated to each class of income. Schedule G—Tax Computation and Payments Part I—Tax Computation Line 1a 2023 Tax Rate Schedule. For tax years beginning in 2023, figure the tax using the following Tax Rate Schedule and enter the tax on line 1a. However, see the Instructions for Schedule D (Form 1041) and the Qualified Dividends Tax Worksheet, later. 2023 Tax Rate Schedule If taxable income is: Over— But not over— Its tax is: Of the amount over— $0 $2,900 10% $0 2,900 10,550 $290 24% 2,900 10,550 14,450 $2,126 35% 10,550 14,450 ----- $3,491 37% 14,450 Schedule D (Form 1041) and Schedule D Tax Worksheet. Use Part V of Schedule D (Form 1041), or the Schedule D Tax Worksheet, whichever is applicable, to figure the estate's or trust's tax if the estate or trust files Schedule D (Form 1041) and has: A net capital gain and any taxable income, or Qualified dividends on line 2b(2) of Form 1041 and any taxable income. Qualified Dividends Tax Worksheet. If you don't have to complete Part I or Part II of Schedule D and the estate or trust has an amount entered on line 2b(2) of Form 1041 and any taxable income (line 23), then figure the estate's or trust's tax using the worksheet, later, and enter the tax on line 1a. Note. You must reduce the amount you enter on line 2b(2) of Form 1041 by the portion of the section 691(c) deduction claimed on line 19 of Form 1041 if the estate or trust received qualified dividends that were IRD. Line 1c—Alternative minimum tax. Attach Schedule I (Form 1041) if any of the following apply. The estate or trust must complete Schedule B. The estate or trust claims a credit on line 2b, 2c, or 2d of Schedule G. The estate's or trust's share of alternative minimum taxable income (line 27 of Schedule I (Form 1041)) exceeds $28,400. Enter the amount from line 54 of Schedule I (Form 1041) on line 1c. Qualified Dividends Tax Worksheet—Schedule G, Part I, Line 1a 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 $3,000 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 $14,650 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% (0.15) 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% (0.20) 19. _____ 20. Figure the tax on the amount on line 5. Use the 2023 Tax Rate Schedule 20. _____ 21. Add lines 15, 19, and 20 21. _____ 22. Figure the tax on the amount on line 1. Use the 2023 Tax Rate Schedule 22. _____ 23. Tax on all taxable income. Enter the smaller of line 21 or line 22 here and on Schedule G, line 1a 23. _____ Line 1d—Total. If the amount from line 14 of Form 8978 is a positive amount, include it in the total reported on line 1d. On the dotted line next to line 1d, enter “From Form 8978” and the amount. Attach Form 8978. Line 2a—Foreign Tax Credit Attach Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), if you elect to claim credit for income or profits taxes paid or accrued to a foreign country or a U.S. territory. The estate or trust may claim credit for that part of the foreign taxes not allocable to the beneficiaries (including charitable beneficiaries). Enter the estate's or trust's share of the credit on line 2a. See Pub. 514, Foreign Tax Credit for Individuals, for details. Line 2b—General Business Credit Don't include any amounts that are allocated to a beneficiary. Credits that are allocated between the estate or trust and the beneficiaries are listed in the instructions for box 13 of Schedule K-1, later. Generally, these credits are apportioned on the basis of the income allocable to the estate or trust and the beneficiaries. Enter on line 2b the estate's or trust's total general business credit allowed for the current year from Form 3800. The estate or trust must file Form 3800 to claim any of the general business credits. Generally, if the estate's or trust's only source of a credit is from a pass-through entity and the beneficiary isn't entitled to an allocable share of a credit, you aren't required to complete the source form for that credit. However, certain credits have limitations and special computations that may require you to complete the source form. See the Instructions for Form 3800 for more information. Line 2c—Credit for Prior Year Minimum Tax An estate or trust that paid AMT in a previous year may be eligible for a minimum tax credit in 2023. See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Line 2d—Bond Credits Complete and attach Form 8912, Credit to Holders of Tax Credit Bonds, if the estate or trust claims a credit for holding a tax credit bond. Also, be sure to include the credit in interest income. Line 2e—Total Credits To claim a credit allowable to the estate or trust other than the credits entered on lines 2a through 2d, include the allowable credit in the total for line 2e. Complete and attach the appropriate form and enter the form number and amount of the allowable credit on the dotted line to the left of the entry space. If the amount from line 14 of Form 8978 is a negative amount, treat it as a positive amount and add it to the total reported on line 2e. On the dotted line next to line 2e, enter “From Form 8978” and the amount. Attach Form 8978. Line 4—Tax on the ESBT Portion of the Trust Use the ESBT Tax Worksheet above to figure the ESBT tax. Enter the amount from line 17 of the ESBT Tax Worksheet on line 4. See Electing Small Business Trusts (ESBTs), earlier, for the special tax computation rules that apply to the portion of an ESBT consisting of stock in one or more S corporations. ESBT Tax Worksheet—Schedule G, Part I, Line 4 ESBT 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 line 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. _____ Line 5—Net Investment Income Tax (NIIT) Enter the amount of NIIT calculated and attach Form 8960. See the Instructions for Form 8960 to calculate the tax, and Net Investment Income Tax (NIIT), later, for more information. Line 6a—Recapture of Investment Credit If the estate or trust disposed of investment credit property or changed its use before the end of the recapture period, see Form 4255, Recapture of Investment Credit, to figure the recapture tax allocable to the estate or trust. Include the tax on line 6a and enter “ICR” on the dotted line to the left of the entry space. Line 6b—Recapture of Low-Income Housing Credit If the estate or trust disposed of property (or there was a reduction in the qualified basis of the property) on which the low-income housing credit was claimed, see Form 8611, Recapture of Low-Income Housing Credit, to figure any recapture tax allocable to the estate or trust. Include the tax on line 6b and enter “LIHCR” on the dotted line to the left of the entry space. Line 6c—Other Recapture Taxes Recapture of qualified electric vehicle credit. If the estate or trust claimed the qualified electric vehicle credit in a prior tax year for a vehicle that ceased to qualify for the credit, part or all of the credit may have to be recaptured. See Regulations section 1.30-1(b) for details. If the estate or trust owes any recapture tax, include it on line 6c and enter “QEVCR” on the dotted line to the left of the entry space. Recapture of the new markets credit. If the estate or trust owes any new markets recapture tax, include it on line 6c and enter “NMCR” on the dotted line to the left of the entry space. For more information, including how to figure the recapture amount, see section 45D(g). Recapture of the credit for employer-provided childcare facilities and services. If the facility ceased to operate as a qualified childcare facility or there was a change in ownership, part or all of the credit may have to be recaptured. See Form 8882, Credit for Employer-Provided Childcare Facilities and Services, for details. If the estate or trust owes any recapture tax, include it on line 6c and enter “ECCFR” on the dotted line to the left of the entry space. Recapture of the alternative motor vehicle credit. See section 30B(h)(8) for details. Include the tax on line 6c and enter “AMVCR” on the dotted line to the left of the entry space. Recapture of the alternative fuel vehicle refueling property credit. See section 30C(e)(5) for details. Include the tax on line 6c and enter “ARPCR” on the dotted line to the left of the entry space. Recapture of the section 45Q carbon oxide sequestration credit. See Form 8933, Part III, line 22. Include the section 45Q recapture amount on line 6c and enter “COSCR” on the dotted line to the left of the entry space. Line 7—Household Employment Taxes If any of the following apply, get Schedule H (Form 1040) and its instructions to see if the estate or trust owes these taxes. The estate or trust paid any one household employee cash wages of $2,600 or more in 2023. Cash wages include wages paid by checks, money orders, etc. When figuring the amount of cash wages paid, combine cash wages paid by the estate or trust with cash wages paid to the household employee in the same calendar year by the household of the decedent or beneficiary for whom the administrator, executor, or trustee of the estate or trust is acting. The estate or trust withheld federal income tax during 2023 at the request of any household employee. The estate or trust paid total cash wages of $1,000 or more in any calendar quarter of 2022 or 2023 to household employees. Enter on line 7 any household employment taxes owed from Schedule H (Form 1040), Part I, line 8d, or Part III, line 26. Note. See Amended Schedule H (Form 1040 ) under F. Initial Return, Amended Return, etc., earlier, for information on filing an amended Schedule H (Form 1040) for a Form 1041. Line 8—Other Taxes and Amounts Due Triggering event under section 965(i). If you had a triggering event under section 965(i) during the year, enter on line 8 the current year tax liability from the triggered deferred net 965 tax liability from Form 965-A, Part IV, column (f). ESBTs. If a triggering event occurred in the S portion of the ESBT, also include on the attachment that shows the amount of the net 965 tax liability attributable to the S portion of the trust the triggered deferred net 965 tax liability from Form 965-A, Part IV, column (f). Interest on deferred tax attributable to installment sales of certain timeshares and residential lots and certain nondealer real property installment obligations. If an obligation arising from the disposition of real property to which section 453(l) or 453A applies is outstanding at the close of the year, the estate or trust must include the interest due under section 453(l)(3)(B) or 453A(c), whichever is applicable, in the amount to be entered on Form 1041, Schedule G, line 8, with the notation “Section 453(l) interest” or “Section 453A(c) interest,” whichever is applicable. Attach a schedule showing the computation. Form 4970, Tax on Accumulation Distribution of Trusts. Include on this line any tax due on an accumulation distribution from a trust. To the left of the entry space, enter “From Form 4970” and the amount of the tax. Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Include the interest due under the look-back method of section 460(b)(2). To the left of the entry space, enter “From Form 8697” and the amount of interest due. Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method. Include the interest due under the look-back method of section 167(g)(2). To the left of the entry space, enter “From Form 8866” and the amount of interest due. Interest on deferral of gain from certain constructive ownership transactions. Include the interest due under section 1260(b) on any deferral of gain from certain constructive ownership transactions. To the left of the entry space, enter “1260(b)” and the amount of interest due. Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. If the estate or trust fails to receive the minimum distribution under section 4974, use Form 5329 to pay the excise tax. To the left of the entry space, enter “From Form 5329” and the amount of the tax. Additional tax on the early disposition of noncash property for which a section 247(g)(3) election was made by an Alaska Native Settlement Trust. This additional 10% tax only should be shown on an amended return filed by a Settlement Trust for the year in which the Settlement Trust received a contribution of noncash property from an Alaska Native Corporation and elected to defer the recognition of income related to such property, but disposed of the property within the first tax year subsequent to the tax year the Settlement Trust received the property. Determine the increase in tax due to the inclusion of the deferred income and include on this line the additional tax due, equal to 10% of the increase in tax due to the inclusion of the deferred income. The increase in tax due to the inclusion of the deferred income, which is the base amount for the computation of the additional 10% tax shown on this line, should be shown elsewhere on Schedule G. If the amended return also shows changes to income, deductions, or credits unrelated to the inclusion of the deferred income, attach a schedule showing the computation of the additional tax due only to the inclusion of the deferred income. To the left of the entry space, enter “Section 247(g)(3) tax.” Form 8978 Worksheet. If you have a negative amount from Form 8978, line 14, that was not used to reduce Schedule G, line 3, to zero, and you have chapter 1 taxes and/or tax and interest from Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, then complete the Form 8978 Worksheet—Schedule G, Part I, Line 8 to figure the amount to enter on line 8. Form 8978 Worksheet—Schedule G, Part I, Line 8 Use this worksheet if (a) Schedule G, line 3, is zero; (b) after line 3 was reduced to zero, you have a negative amount from Form 8978, line 14, that was not used to reduce line 3 to zero; and (c) you have chapter 1 taxes entered on Schedule G, line 4; Schedule G, lines 6a–6c; Schedule G, line 8; and/or tax and interest from Form 8621. 1. Enter the total amount of chapter 1 taxes from Schedule G, line 4; Schedule G, lines 6a–6c; Schedule G, line 8; and tax and interest from Form 8621 1. _____ 2. Enter the negative amount from Form 8978, line 14, that has not already been used to reduce Schedule G, line 3, to zero 2. (_____) 3. Combine line 1 and line 2 3. _____ 4. Enter the amount of non-chapter 1 taxes included on Schedule G, line 8 4. _____ 5. If line 3 is negative, enter as a negative the amount from line 1. Otherwise, enter the amount from line 2 5. (_____) 6. Combine line 4 and line 5. Enter the result on Schedule G, line 8. This amount may be a negative number 6. _____ Line 9—Total Tax Add Schedule G, Part I, lines 3 through 8. Enter the total on Schedule G, Part I, line 9; and page 1 of Form 1041, line 24. Part II—Payments Line 10—2023 Estimated Tax Payments and Amount Applied From 2022 Return Enter the amount of any estimated tax payment you made with Form 1041-ES for 2023 plus the amount of any overpayment from the 2022 return that was applied to the 2023 estimated tax. If the estate or trust is the beneficiary of another trust and received a payment of estimated tax that was credited to the trust (as reflected on the Schedule K-1 issued to the trust), then report this amount separately with the notation “Section 643(g)” in the space next to line 10 and include this amount in the amount entered on line 10. Don't include on Form 1041 estimated tax paid by an individual before death. Instead, include those payments on the decedent's final income tax return. Line 11—Estimated Tax Payments Allocated to Beneficiaries (From Form 1041-T) The trustee (or executor, for the final year of the estate) may elect under section 643(g) to have any portion of its estimated tax treated as a payment of estimated tax made by a beneficiary or beneficiaries. The election is made on Form 1041-T, which must be filed by the 65th day after the close of the trust's tax year. Form 1041-T shows the amounts to be allocated to each beneficiary. This amount is reported in box 13, code A, of the beneficiary's Schedule K-1 (Form 1041). Attach Form 1041-T to your return only if you haven't yet filed it; however, attaching Form 1041-T to Form 1041 doesn't extend the due date for filing Form 1041-T. If you have already filed Form 1041-T, don't attach a copy to your return. Failure to file Form 1041-T by the due date (March 5, 2024, for calendar year estates and trusts) will result in an invalid election. An invalid election will require the filing of an amended Schedule K-1 for each beneficiary who was allocated a payment of estimated tax. Line 13—Tax Paid With Form 7004 If you filed Form 7004 to request an extension of time to file Form 1041, enter the amount that you paid with the extension request. Line 14—Federal Income Tax Withheld Use line 14 to claim a credit for any federal income tax withheld (and not repaid) by (a) an employer on wages and salaries of a decedent received by the decedent's estate; (b) a payer of certain gambling winnings (for example, state lottery winnings); or (c) a payer of distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc., received by a decedent's estate or trust. Attach a copy of Form W-2, Form W-2G, or Form 1099-R to the front of the return. Except for backup withholding (as explained below), withheld income tax can't be passed through to beneficiaries on either Schedule K-1 or Form 1041-T. Backup withholding. If the estate or trust received a 2023 Form 1099 showing federal income tax withheld (that is, backup withholding) on interest income, dividends, or other income, check the box and include the amount withheld on income retained by the estate or trust in the total for line 14. Report in box 13, code B, of Schedule K-1 (Form 1041) any credit for backup withholding on income distributed to the beneficiary. Line 15—Current Net 965 Tax Liability—Eligible for Installment Payment Election If you have a section 965(i) net tax liability for which a triggering event has occurred in the current year and you are making a section 965(h) election with respect to that section 965 net tax liability, enter this amount from Form 965-A, Part I, column (f). Line 16—Credit for Tax Paid on Undistributed Capital Gains Attach Copy B of Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains. Line 17—Credit for Federal Tax on Fuels Enter any credit for federal excise taxes paid on fuels that are ultimately used for nontaxable purposes (for example, an off-highway business use). Attach Form 4136, Credit for Federal Tax Paid on Fuels. See Pub. 510, Excise Taxes, for more information. Line 18a—Elective Payment Election Amount From Form 3800 Enter any elective payment election amount from Form 3800, Part III, line 6, column (i). Line 18b—Other Credits or Payments Enter the refundable portion of the qualified sick and family leave credit from Schedule H (Form 1040), Part I, lines 8e and 8f, on line 18b only if qualified sick and family leave wages were paid in 2023 for leave taken before April 1, 2021, or for leave taken after March 31, 2021, and before October 1, 2021. Net Investment Income Tax (NIIT) Certain estates and trusts may be subject to the NIIT. Estates and trusts use Form 8960 to report their NII and calculate the tax. The amount of NIIT payable by the estate or trust is reported on Form 1041, Schedule G, line 5. The NIIT is imposed on estates and trusts to the extent that they have undistributed NII and AGI exceeding $14,450. See Definitions, earlier, for the calculation of an estate’s or trust’s AGI. The following types of estates and trusts may owe the NIIT in addition to their regular income tax liability. Decedents’ estates. Simple and complex trusts. ESBTs. Pooled income funds. Bankruptcy estates. However, in the case of bankruptcy estates, the AGI threshold is $125,000. Calculation of NII. In general, an estate’s or trust’s NII is calculated in the same way as an individual's. However, there are special rules for the calculation of NII in the case of an ESBT. See the Instructions for Form 8960 and Regulations section 1.1411-3(e) for information on the calculation (and Regulations section 1.1411-3(c)(1) for information on the ESBT calculation). Distributions on NII. The NIIT is imposed on estates and trusts to the extent they have undistributed NII. In order to arrive at the estate’s or trust’s undistributed NII, the estate’s or trust’s NII is reduced for (1) distributions of NII to beneficiaries, and (2) NII allocable to charities when the estate or trust is allowed a deduction under section 642(c). The instructions for Form 8960, line 18b, provide more information on the calculation of undistributed NII. NII allocable to the deduction under section 642(c). An estate’s, trust’s, or pooled income fund’s NII is reduced by the amount of NII allocable to the charitable deduction allowed under section 642(c). In the case of an estate, trust, or pooled income fund that has NII and non-NII income in a year when a section 642(c) deduction is claimed, the amount of the NII deduction allocable to the section 642(c) deduction will be less than the amount reported on Form 1041, Schedule A, line 7 (or on the separate calculation in the case of a pooled income fund). Beneficiary reporting. In general, the amount of the income distribution deduction (from Form 1041, Schedule B, line 15) that reduces the estate’s or trust’s NII will be the amount of NII that will be taxable to the beneficiaries on their Schedules K-1 (Form 1041). The Schedule K-1 has code H in box 14 to report the amount of NII distributed to the beneficiary. The amount reported in code H represents an adjustment (either positive or negative) that the beneficiary must use in completing its Form 8960 (if necessary). In the case where the trust’s income distribution deduction allowed in calculating undistributed NII is less than the amount on Schedule B, line 15, then code H will show a negative number that is the difference between the two amounts. In the case of an estate or trust that issues more than one Schedule K-1 for a year, the sum of the amounts reported in code H on all of the Schedules K-1 will be the difference between Schedule B, line 15, and the amount deducted on Form 8960, line 18b, for amounts of NII distributed to a beneficiary. The beneficiary's NII will equal all taxable amounts reported on the Schedule K-1, adjusted by the amount reported in box 14, code H. The only instance where code H will be a positive number is when: The estate or trust owns directly, or indirectly, an (a) interest in a section 1291 fund, or (b) interest in a controlled foreign corporation or qualified electing fund and no election under Regulations section 1.1411-10(g) has been made with respect to that interest; and The distribution from one of the entities described above is (a) NII to the estate or trust, but not included in its taxable income; and (b) the distributions from the estate or trust to the beneficiary(ies) in the year exceed the amount of the income distribution deduction allowed for regular tax purposes (from Schedule B, line 15). Special rules. In the final year of an estate or trust, deductions in excess of income may be reported to the beneficiary in box 11 of Schedule K-1. These deductions may also be deductible by the beneficiary for NIIT purposes. In this situation, the terminating estate or trust should provide the beneficiary information regarding whether the amounts reported in box 11, codes A through E, include any amounts that are deductible for NIIT purposes. See Regulations section 1.1411-4(g)(4). Other Information Question 1 If the estate or trust received tax-exempt income, figure the allocation of expenses between tax-exempt and taxable income on a separate sheet and attach it to the return. Enter only the deductible amounts on the return. Don't figure the allocation on the return itself. For more information, see Allocation of Deductions for Tax-Exempt Income, earlier. Report the amount of tax-exempt interest income received or accrued in the space provided below Question 1. Also, include any exempt-interest dividends the estate or trust received as a shareholder in a mutual fund or other regulated investment company (RIC). Question 2 All salaries, wages, and other compensation for personal services must be included on the return of the person who earned the income, even if the income was irrevocably assigned to a trust by a contract assignment or similar arrangement. The grantor or person creating the trust is considered the owner if they keep “beneficial enjoyment” of or substantial control over the trust property. The trust's income, deductions, and credits are allocable to the owner. If you checked “Yes” for Question 2, see Special Reporting Instructions, earlier. Question 3 Check the “Yes” box and enter the name of the foreign country if either (1) or (2) below applies. The estate or trust owns more than 50% of the stock in any corporation that owns one or more foreign bank accounts. At any time during the year, the estate or trust had an interest in or signature or other authority over a bank, securities, or other financial account in a foreign country. Exception. Check “No” if either of the following applies to the estate or trust. The combined value of the accounts was $10,000 or less during the whole year. The accounts were with a U.S. military banking facility operated by a U.S. financial institution. If you checked “Yes” for Question 3, electronically file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Department of the Treasury using FinCEN's BSA E-Filing System. Because FinCEN Form 114 isn't a tax form, don't file it with Form 1041. Go to FinCEN.gov for more information. If you are required to file FinCEN Form 114 but don't, you may have to pay a penalty of up to $10,000 (or more in some cases). Question 4 The estate or trust may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, if: It directly or indirectly transferred property or money to a foreign trust—for this purpose, any U.S. person who created a foreign trust is considered a transferor; It is treated as the owner of any part of the assets of a foreign trust under the grantor trust rules; or It received a distribution from a foreign trust. An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A. Question 5 An estate or trust claiming an interest deduction for qualified residence interest (as defined in section 163(h)(3)) on seller-provided financing must include on an attachment to the 2023 Form 1041 the name, address, and TIN of the person to whom the interest was paid or accrued (that is, the seller). If the estate or trust received or accrued such interest, it must provide identical information on the person liable for such interest (that is, the buyer). This information doesn't need to be reported if it duplicates information already reported on Form 1098. Question 6 To make the section 663(b) election to treat any amount paid or credited to a beneficiary within 65 days following the close of the tax year as being paid or credited on the last day of that tax year, check the box. This election can be made by the fiduciary of a complex trust or the executor of a decedent's estate. For the election to be valid, you must file Form 1041 by the due date (including extensions). Once made, the election is irrevocable. Question 7 To make the section 643(e)(3) election to recognize gain on property distributed in kind, check the box and see the Instructions for Schedule D (Form 1041). Question 9 Generally, a beneficiary is a skip person if the beneficiary is in a generation that is 2 or more generations below the generation of the transferor to the trust. To determine if a beneficiary that is a trust is a skip person, and for exceptions to the general rules, see the definition of a skip person in the instructions for Schedule R of Form 706. Question 10 A domestic trust that is a specified domestic entity must file Form 8938 along with Form 1041 for the tax year. Form 8938 must be filed each year the value of the trust's specified foreign financial assets meets or exceeds the reporting threshold. A trust exceeds the threshold amount if the total value of the specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. For more information on domestic trusts that are specified domestic entities, the filing threshold, and the types of foreign financial assets that must be reported, see the Instructions for Form 8938. A domestic trust that is required to file Form 8938 along with Form 1041 for the tax year must check “Yes” to Question 10. Question 11a A distribution of S corporation stock by an estate or trust that results in a change of ownership for federal income tax purposes is a triggering event described in Regulations section 1.965-7(c)(3). If the estate or trust transfers less than all of its shares of stock of the S corporation, the transfer will be a triggering event only with respect to the portion of the estate’s or trust’s section 965(i) net tax liability that is properly allocable to the transferred shares. If the person who received the distribution of S corporation stock is an eligible section 965(i) transferee, the estate or trust may enter into a transfer agreement with the eligible section 965(i) transferee to prevent the assessment of the estate’s or trust’s section 965(i) net tax liability in the tax year that includes the triggering event. The estate or trust must report in Part IV, column (g), of Form 965-A the transfer out of the section 965 tax liability properly allocable to S corporation shares for which the estate or trust entered into a transfer agreement with an eligible section 965(i) transferee. See the Instructions for Form 965-A for additional information. The transfer agreement must be filed within 30 days of the triggering event. See Form 965-D, Transfer Agreement Under Section 965(i)(2), and the related instructions for additional information. Question 11b If the estate or trust distributed S corporation shares and the estate or trust did not enter into a timely transfer agreement for all shares transferred during the tax year, the transfer of shares not covered by a transfer agreement is a triggering event. See Triggering event under section 965(i), earlier. The estate or trust may file a consent agreement under section 965(i)(4)(D) to make the election under section 965(h) to pay in installments the triggered section 965(i) net tax liability. See Form 965-E, Consent Agreement Under Section 965(i)(4)(D), and the related instructions for how to file the consent agreement. See Triggered deferred S corporation-related net 965 tax liability under Part I in the Instructions for Form 965-A for how to make the installment election. The due date of the original Form 965-E is within 30 days of the triggering event. The due date of the election to pay in installments is the due date of the return for the tax year, including extensions. The actual payment of the first installment is due no later than the due date of the return for the tax year without extensions, even if the election is made on a return filed by the extended due date. Question 12 Check the “Yes” box if the estate or trust entered into a transfer agreement as an eligible 965(i) transferee. If, during the tax year, the estate or trust entered into a transfer agreement as an eligible 965(i) transferee, the estate or trust must report the transfer in of that liability on Part IV of Form 965-A. See the Instructions for Form 965-A for additional information. Question 13 Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes. Check the “Yes” box next to the question on digital assets if at any time during 2023, you (a) received (as a reward, award, or payment for property or services); or (b) sold, exchanged, or otherwise disposed of a digital asset (or any financial interest in any digital asset). For example, check “Yes” if at any time during 2023 you: Received digital assets as payment for property or services provided; Received digital assets as a result of a reward or award; Received new digital assets as a result of mining, staking, and similar activities; Received digital assets as a result of a hard fork; Disposed of digital assets in exchange for property or services; Disposed of a digital asset in exchange or trade for another digital asset; Sold a digital asset; or Otherwise disposed of any other financial interest in a digital asset. You have a financial interest in a digital asset if you are the owner of record of a digital asset, or have an ownership stake in an account that holds one or more digital assets, including the rights and obligations to acquire a financial interest, or you own a wallet that holds digital assets. The following actions or transactions in 2023, alone, generally don’t require you to check “Yes”: Holding a digital asset in a wallet or account; Transferring a digital asset from one wallet or account you own or control to another wallet or account that you own or control; or Purchasing digital assets using U.S. or other real currency, including through the use of electronic platforms such as PayPal and Venmo. Do not leave the question unanswered. You must answer “Yes” or “No” checking the appropriate box. For more information, go to IRS.gov/VirtualCurrencyFAQs. How to report digital asset transactions. If, in 2023, you disposed of any digital asset, which you held as a capital asset, through a sale, trade, exchange, payment, or other transfer, check “Yes” and use Form 8949 to calculate your capital gain or loss and report that gain or loss on Schedule D (Form 1041). If you received any digital asset as compensation for services or disposed of any digital asset that you held for sale to customers in a trade or business, you must report the income as you would report other income of the same type. Question 14 If the deemed owner of a grantor portion of the ESBT is a nonresident alien, the items of income, deduction, and credit from that grantor portion must be reallocated to the S portion. See Schedule G, Part I, line 4, Tax on the ESBT Portion of the Trust, earlier, for how to figure the tax on the S portion of the trust. Question 15 The S portion of the ESBT must take into account the qualified items of income, gain, deduction, and loss and other items from any S corporation owned by the ESBT, and any qualified items of income, gain, deduction, and loss and other items reallocated to the S portion. See Question 14, earlier. For purposes of determining whether the taxable income of an ESBT exceeds the threshold amount, the S portion and the non-S portion of an ESBT are treated as a single trust. See Regulations section 1.199A-6(d)(3)(vi). Schedule J (Form 1041)—Accumulation Distribution for Certain Complex Trusts General Instructions Use Schedule J (Form 1041) to report an accumulation distribution for a domestic complex trust that was: Previously treated at any time as a foreign trust (unless an exception is provided in future regulations); or Created before March 1, 1984, unless that trust would not be aggregated with other trusts under the rules of section 643(f) if that section applied to the trust. An accumulation distribution is the excess of amounts properly paid, credited, or required to be distributed (other than income required to be distributed currently) over the DNI of the trust reduced by income required to be distributed currently. To have an accumulation distribution, the distribution must exceed the accounting income of the trust. Specific Instructions Part I—Accumulation Distribution in 2023 Line 1—Distribution Under Section 661(a)(2) Enter the amount from Form 1041, Schedule B, line 10, for 2023. This is the amount properly paid, credited, or required to be distributed other than the amount of income for the current tax year required to be distributed currently. Line 2—Distributable Net Income Enter the amount from Form 1041, Schedule B, line 7, for 2023. This is the amount of DNI for the current tax year determined under section 643(a). Line 3—Distribution Under Section 661(a)(1) Enter the amount from Form 1041, Schedule B, line 9, for 2023. This is the amount of income for the current tax year required to be distributed currently. Line 5—Accumulation Distribution If line 11 of Form 1041, Schedule B, is more than line 8 of Form 1041, Schedule B, complete the rest of Schedule J and file it with Form 1041, unless the trust has no previously accumulated income. Generally, amounts accumulated before a beneficiary reaches age 21 may be excluded by the beneficiary. See sections 665 and 667(c) for exceptions relating to multiple trusts. The trustee reports to the IRS the total amount of the accumulation distribution before any reduction for income accumulated before the beneficiary reaches age 21. If the multiple trust rules don't apply, the beneficiary claims the exclusion when filing Form 4970, as you may not be aware that the beneficiary may be a beneficiary of other trusts with other trustees. For examples of accumulation distributions that include payments from one trust to another trust, and amounts distributed for a dependent's support, see Regulations section 1.665(b)-1A(b). Part II—Ordinary Income Accumulation Distribution Enter the applicable year at the top of each column for each throwback year. Line 6—DNI for Earlier Years Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1977 Form 1041, Schedule C, line 5 1978–1979 Form 1041, line 61 1980 Form 1041, line 60 1981–1982 Form 1041, line 58 1983–1996 Form 1041, Schedule B, line 9 1997–2022 Form 1041, Schedule B, line 7 For information about throwback years, see the instructions for line 13. For purposes of line 6, in figuring the DNI of the trust for a throwback year, subtract any estate tax deduction for IRD if the income is includible in figuring the DNI of the trust for that year. Line 7—Distributions Made During Earlier Years Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1977 Form 1041, Schedule C, line 8 1978 Form 1041, line 64 1979 Form 1041, line 65 1980 Form 1041, line 64 1981–1982 Form 1041, line 62 1983–1996 Form 1041, Schedule B, line 13 1997–2022 Form 1041, Schedule B, line 11 Line 11—Prior Accumulation Distribution Thrown Back to Any Throwback Year Enter the amount of prior accumulation distributions thrown back to the throwback years. Don't enter distributions excluded under section 663(a)(1) for gifts, bequests, etc. Line 13—Throwback Years Allocate the amount on line 5 that is an accumulation distribution to the earliest applicable year first, but don't allocate more than the amount on line 12 for any throwback year. An accumulation distribution is thrown back first to the earliest preceding tax year in which there is undistributed net income (UNI). Then, it is thrown back beginning with the next earliest year to any remaining preceding tax years of the trust. The portion of the accumulation distribution allocated to the earliest preceding tax year is the amount of the UNI for that year. The portion of the accumulation distribution allocated to any remaining preceding tax year is the amount by which the accumulation distribution is larger than the total of the UNI for all earlier preceding tax years. A tax year of a trust during which the trust was a simple trust for the entire year isn't a preceding tax year unless (a) during that year, the trust received outside income; or (b) the trustee didn't distribute all of the trust's income that was required to be distributed currently for that year. In this case, UNI for that year must not be more than the greater of the outside income or income not distributed during that year. The term “outside income” means amounts that are included in the DNI of the trust for that year but that aren't “income” of the trust as defined in Regulations section 1.643(b)-1. Some examples of outside income are (a) income taxable to the trust under section 691, (b) unrealized accounts receivable that were assigned to the trust, and (c) distributions from another trust that include the DNI or UNI of the other trust. Line 16—Tax-Exempt Interest Included on Line 13 For each throwback year, divide line 15 by line 6 and multiply the result by the following: Throwback year(s) Amount from line 1969–1977 Form 1041, Schedule C, line 2(a) 1978–1979 Form 1041, line 58(a) 1980 Form 1041, line 57(a) 1981–1982 Form 1041, line 55(a) 1983–2022 Form 1041, Schedule B, line 2 Part III—Taxes Imposed on Undistributed Net Income For the regular tax computation, if there is a capital gain, complete lines 18 through 25 for each throwback year. If the trustee elected the alternative tax on capital gains, complete lines 26 through 31 instead of lines 18 through 25 for each applicable year. If there is no capital gain for any year, or there is a capital loss for every year, enter on Part II, line 9, the amount of the tax for each year identified in the instruction for line 18 and don't complete Part III. If the trust received an accumulation distribution from another trust, see Regulations section 1.665(b)-1A. Note. The alternative tax on capital gains was repealed for tax years beginning after December 31, 1978. The maximum rate on net capital gain for 1981, 1987, and 1991 through 2022 isn't an alternative tax for this purpose. Line 18—Regular Tax Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1976 Form 1041, page 1, line 24 1977 Form 1041, page 1, line 26 1978–1979 Form 1041, line 27 1980–1984 Form 1041, line 26c 1985–1986 Form 1041, line 25c 1987 Form 1041, line 22c 1988–2022 Form 1041, Schedule G, line 1a Line 19—Trust's Share of Net Short-Term Gain For each throwback year, enter the smaller of the capital gain from the two lines indicated. If there is a capital loss or a zero on either or both of the two lines indicated, enter zero on line 19. Throwback year(s) Amount from line 1969–1970 Schedule D, line 10, column 2, or Schedule D, line 12, column 2 1971–1978 Schedule D, line 14, column 2, or Schedule D, line 16, column 2 1979 Schedule D, line 18, column (b), or Schedule D, line 20, column (b) 1980–1981 Schedule D, line 14, column (b), or Schedule D, line 16, column (b) 1982 Schedule D, line 16, column (b), or Schedule D, line 18, column (b) 1983–1996 Schedule D, line 15, column (b), or Schedule D, line 17, column (b) 1997–2002 Schedule D, line 14, column (2), or Schedule D, line 16, column (2) 2003 Schedule D, line 14a, column (2), or Schedule D, line 16a, column (2) 2004–2012 Schedule D, line 13, column (2), or Schedule D, line 15, column (2) 2013–2022 Schedule D, line 17, column (2), or Schedule D, line 19, column (2) Line 20—Trust's Share of Net Long-Term Gain Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1970 50% of Schedule D, line 13(e) 1971–1977 50% of Schedule D, line 17(e) 1978 Schedule D, line 17(e) or line 31, whichever is applicable, less Form 1041, line 23 1979 Schedule D, line 25 or line 27, whichever is applicable, less Form 1041, line 23 1980–1981 Schedule D, line 21, less Schedule D, line 22 1982 Schedule D, line 23, less Schedule D, line 24 1983–1986 Schedule D, line 22, less Schedule D, line 23 1987–1996 Schedule D, the smaller of any gain on line 16 or line 17, column (b) 1997–2001 Schedule D, the smaller of any gain on line 15c or line 16, column (2) 2002 Schedule D, the smaller of any gain on line 15a or line 16, column (2) 2003 Schedule D, the smaller of any gain on line 15a or line 16a, column (2) 2004–2012 Schedule D, the smaller of any gain on line 14a or line 15, column (2) 2013–2022 Schedule D, the smaller of any gain on line 18a or line 19, column (2) Line 22—Taxable Income Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1976 Form 1041, page 1, line 23 1977 Form 1041, page 1, line 25 1978–1979 Form 1041, line 26 1980–1984 Form 1041, line 25 1985–1986 Form 1041, line 24 1987 Form 1041, line 21 1988–1996 Form 1041, line 22 1997 Form 1041, line 23 1998–2018 Form 1041, line 22 2019–2022 Form 1041, line 23 Line 26—Tax on Income Other Than Long-Term Capital Gain Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969 Schedule D, line 20 1970 Schedule D, line 19 1971 Schedule D, line 50 1972–1975 Schedule D, line 48 1976–1978 Schedule D, line 27 Line 27—Trust's Share of Net Short-Term Gain If there is a loss on any of the following lines, enter zero on line 27 for the applicable throwback year. Otherwise, enter the applicable amounts as follows: Throwback year(s) Amount from line 1969–1970 Schedule D, line 10, column 2 1971–1978 Schedule D, line 14, column 2 Line 28—Trust's Share of Taxable Income Less Section 1202 Deduction Enter the applicable amounts as follows: Throwback year(s) Amount from line 1969 Schedule D, line 19 1970 Schedule D, line 18 1971 Schedule D, line 38 1972–1975 Schedule D, line 39 1976–1978 Schedule D, line 21 Part IV—Allocation to Beneficiary Complete Part IV for each beneficiary. If the accumulation distribution is allocated to more than one beneficiary, attach an additional copy of Schedule J with Part IV completed for each additional beneficiary. Give each beneficiary a copy of their respective Part IV information. If more than 5 throwback years are involved, use another Schedule J, completing Parts II and III for each additional throwback year. If the beneficiary is a nonresident alien individual or a foreign corporation, see section 667(e) about retaining the character of the amounts distributed to determine the amount of the U.S. withholding tax. The beneficiary uses Form 4970 to figure the tax on the distribution. The beneficiary also uses Form 4970 for the section 667(b)(6) tax adjustment if an accumulation distribution is subject to estate or GST tax. This is because the trustee can't be the estate or GST tax return filer. Schedule K-1 (Form 1041)—Beneficiary's Share of Income, Deductions, Credits, etc. General Instructions Use Schedule K-1 (Form 1041) to report the beneficiary's share of income, deductions, and credits from a trust or a decedent's estate. Grantor type trusts don't use Schedule K-1 (Form 1041) to report the income, deductions, or credits of the grantor (or other person treated as owner). See Grantor Type Trusts, earlier. Who Must File The fiduciary (or one of the joint fiduciaries) must file Schedule K-1. A copy of each beneficiary's Schedule K-1 is attached to the Form 1041 filed with the IRS, and each beneficiary is given a copy of their respective Schedule K-1. One copy of each Schedule K-1 must be retained for the fiduciary's records. Beneficiary's Identifying Number As a payer of income, you are required to request and provide a proper identifying number for each recipient of income. Enter the beneficiary's number on the respective Schedule K-1 when you file Form 1041. Individuals and business recipients are responsible for giving you their TINs upon request. You may use Form W-9 to request the beneficiary's identifying number. Penalty. You may be charged a $50 penalty for each failure to provide a required TIN, unless reasonable cause is established for not providing it. Explain any reasonable cause in a signed affidavit and attach it to this return. Truncating recipient's identification number on beneficiary's statement. The estate or trust can truncate a beneficiary’s identifying number on the Schedule K-1 the estate or trust sends to the beneficiary. Truncation isn't allowed on the Schedule K-1 the estate or trust files with the IRS. Also, the estate or trust can't truncate its own identification number on any form. To truncate, where allowed, replace the first five digits of the nine-digit number with asterisks (*) or Xs (for example, an SSN xxx-xx-xxxx would appear as ***-**-xxxx or XXX-XX-xxxx). For more information, see Regulations section 301.6109-4. Substitute Forms You don't need IRS approval to use a substitute Schedule K-1 if it is an exact copy of the IRS schedule. The boxes must use the same numbers and titles and must be in the same order and format as on the comparable IRS Schedule K-1. The substitute schedule must include the OMB number and the six-digit form ID code in the upper right-hand corner of the schedule. You must provide each beneficiary with the Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 or 1040-SR, or other prepared specific instructions for each item reported on the beneficiary's Schedule K-1. Inclusion of Amounts in Beneficiaries' Income Simple trust. The beneficiary of a simple trust must include in their gross income the amount of the income required to be distributed currently, whether or not distributed, or if the income required to be distributed currently to all beneficiaries exceeds the DNI, their proportionate share of the DNI. The determination of whether trust income is required to be distributed currently depends on the terms of the trust instrument and applicable local law. See Regulations section 1.652(c)-4 for a comprehensive example. Estates and complex trusts. The beneficiary of a decedent's estate or complex trust must include in their gross income the sum of: The amount of the income required to be distributed currently, or if the income required to be distributed currently to all beneficiaries exceeds the DNI (figured without taking into account the charitable deduction), their proportionate share of the DNI (as so figured); and All other amounts properly paid, credited, or required to be distributed, or if the sum of the income required to be distributed currently and other amounts properly paid, credited, or required to be distributed to all beneficiaries exceeds the DNI, their proportionate share of the excess of DNI over the income required to be distributed currently. See Regulations section 1.662(c)-4 for a comprehensive example. For complex trusts that have more than one beneficiary, and if different beneficiaries have substantially separate and independent shares, their shares are treated as separate trusts for the sole purpose of determining the amount of DNI allocable to the respective beneficiaries. A similar rule applies to treat substantially separate and independent shares of different beneficiaries of an estate as separate estates. For examples of the application of the separate share rule, see the regulations under section 663(c). Gifts and bequests. Don't include in the beneficiary's income any gifts or bequests of a specific sum of money or of specific property under the terms of the governing instrument that are paid or credited in three installments or less. Amounts that can be paid or credited only from income of the estate or trust don't qualify as a gift or bequest of a specific sum of money. Past years. Don't include in the beneficiary's income any amounts deducted on Form 1041 for an earlier year that were credited or required to be distributed in that earlier year. Character of income. The beneficiary's income is considered to have the same proportion of each class of items entering into the computation of DNI that the total of each class has to the DNI (for example, half dividends and half interest if the income of the estate or trust is half dividends and half interest). Allocation of deductions. Generally, items of deduction that enter into the computation of DNI are allocated among the items of income to the extent such allocation isn't inconsistent with the rules set out in section 469 and its regulations, relating to passive activity loss limitations, in the following order. First, all deductions directly attributable to a specific class of income are deducted from that income. For example, rental expenses, to the extent allowable, are deducted from rental income. Second, deductions that aren't directly attributable to a specific class of income may generally be allocated to any class of income, as long as a reasonable portion is allocated to any tax-exempt income. Deductions considered not directly attributable to a specific class of income under this rule include fiduciary fees, and state income and personal property taxes. The charitable deduction, however, must be ratably apportioned among each class of income included in DNI. Finally, any excess deductions that are directly attributable to a class of income may be allocated to another class of income. However, in no case can excess deductions from a passive activity be allocated to income from a nonpassive activity, or to portfolio income earned by the estate or trust. Excess deductions attributable to tax-exempt income can't offset any other class of income. In no case can deductions be allocated to an item of income that isn't included in the computation of DNI, or attributable to corpus. You can't show any negative amounts for any class of income shown in boxes 1 through 8 of Schedule K-1. However, for the final year of the estate or trust, certain deductions or losses can be passed through to the beneficiary(ies). See the instructions for box 11 for more information on these deductions and losses. Also, the beneficiary's share of depreciation and depletion is apportioned separately. These deductions may be allocated to the beneficiary(ies) in amounts greater than their income. See Depreciation, Depletion, and Amortization, earlier, and Rev. Rul. 74-530, 1974-2 C.B. 188. Beneficiary's Tax Year The beneficiary's income from the estate or trust must be included in the beneficiary's tax year during which the tax year of the estate or trust ends. See Pub. 559 for more information, including the effect of the death of a beneficiary during the tax year of the estate or trust. General Reporting Information If the return is for a fiscal year or a short tax year, fill in the tax year space at the top of each Schedule K-1. On each Schedule K-1, enter the information about the estate or trust and the beneficiary in Parts I and II (items A through H). In Part III, enter the beneficiary's share of each item of income, deduction, credit, and any other information the beneficiary needs to file their income tax return. Codes. In box 9 and boxes 11 through 14, identify each item by entering a code in the column to the left of the entry space for the dollar amount. These codes are identified in these instructions and on the back of the Schedule K-1. Attached statements. Enter an asterisk (*) after the code, if any, in the column to the left of the dollar amount entry space for each item for which you have attached a statement providing additional information. For those informational items that can't be reported as a single dollar amount, enter the code and asterisk (*) in the left-hand column and enter “STMT” in the entry space to the right to indicate that the information is provided on an attached statement. More than one attached statement can be placed on the same sheet of paper and should be identified in alphanumeric order by box number followed by the letter code (if any). For example: “Box 9, Code A—Depreciation” (followed by the information the beneficiary needs). Too few entry spaces on Schedule K-1? If the estate or trust has more coded items than the number of spaces in box 9 or boxes 11 through 14, don't enter a code or dollar amount in the last entry space of the box. In the last entry space, enter an asterisk (*) in the left column and enter “STMT” in the entry space to the right. Report the additional items on an attached statement and provide the box number, code, description, and dollar amount or information for each additional item. For example: “Box 13, Code H—Biofuel Producer Credit, $500.00.” Specific Instructions Part I. Information About the Estate or Trust On each Schedule K-1, enter the name, address, and identifying number of the estate or trust. Also, enter the name and address of the fiduciary. Item D If the fiduciary of a trust or decedent's estate filed Form 1041-T, you must check this box and enter the date it was filed. Item E If this is the final year of the estate or trust, you must check this box. Note. If this is the final K-1 for the beneficiary, check the “Final K-1” box at the top of Schedule K-1. Part II. Information About the Beneficiary Complete a Schedule K-1 for each beneficiary. On each Schedule K-1, enter the beneficiary's name, address, and identifying number. Item H Check the “Foreign beneficiary” box if the beneficiary is a nonresident alien individual, a foreign corporation, or a foreign estate or trust. Otherwise, check the “Domestic beneficiary” box. Part III. Beneficiary's Share of Current Year Income, Deductions, Credits, and Other Items Box 1—Interest Enter the beneficiary's share of the taxable interest income minus allocable deductions. Box 2a—Total Ordinary Dividends Enter the beneficiary's share of ordinary dividends minus allocable deductions. Box 2b—Total Qualified Dividends Enter the beneficiary's share of qualified dividends minus allocable deductions. Box 3—Net Short-Term Capital Gain Enter the beneficiary's share of the net short-term capital gain from Schedule D (Form 1041), line 17, column (1), minus allocable deductions. Don't enter a loss in box 3. If, for the final year of the estate or trust, there is a capital loss carryover, enter in box 11, code C, the beneficiary's share of short-term capital loss carryover. However, if the beneficiary is a corporation, enter in box 11, code C, the beneficiary's share of all short- and long-term capital loss carryovers as a single item. See section 642(h) and related regulations for more information. Boxes 4a Through 4c—Net Long-Term Capital Gain Enter the beneficiary's share of the net long-term capital gain from Schedule D (Form 1041), lines 18a through 18c, column (1), minus allocable deductions. Don't enter a loss in boxes 4a through 4c. If, for the final year of the estate or trust, there is a capital loss carryover, enter in box 11, code D, the beneficiary's share of the long-term capital loss carryover. (If the beneficiary is a corporation, see the instructions for box 3.) See section 642(h) and related regulations for more information. Gains or losses from the complete or partial disposition of a rental, rental real estate, or trade or business activity that is a passive activity must be shown on an attachment to Schedule K-1. Box 5—Other Portfolio and Nonbusiness Income Enter the beneficiary's share of annuities, royalties, or any other income, minus allocable deductions (other than directly apportionable deductions), that isn't subject to any passive activity loss limitation rules at the beneficiary level. Use boxes 6 through 8 to report income items subject to the passive activity rules at the beneficiary's level. Boxes 6 Through 8—Ordinary Business Income, Rental Real Estate, and Other Rental Income Enter the beneficiary's share of trade or business, rental real estate, and other rental income, minus allocable deductions (other than directly apportionable deductions). To assist the beneficiary in figuring any applicable passive activity loss limitations, also attach a separate schedule showing the beneficiary's share of income derived from each trade or business, rental real estate, and other rental activity. Box 9—Directly Apportioned Deductions The limitations on passive activity losses and credits under section 469 apply to estates and trusts. Estates and trusts that distribute income to beneficiaries are allowed to apportion depreciation, depletion, and amortization deductions to the beneficiaries. These deductions are referred to as “directly apportionable deductions.” Rules for treating a beneficiary's income and directly apportionable deductions from an estate or trust and other rules for applying the passive loss and credit limitations to beneficiaries of estates and trusts haven't yet been issued. Any directly apportionable deduction, such as depreciation, is treated by the beneficiary as having been incurred in the same activity as incurred by the estate or trust. However, the character of such deduction may be determined as if the beneficiary incurred the deduction directly. To assist the beneficiary in figuring any applicable passive activity loss limitations, also attach a separate schedule showing the beneficiary's share of directly apportionable deductions derived from each trade or business, rental real estate, and other rental activity. Enter the beneficiary's share of directly apportioned deductions using codes A through C. Depreciation (code A). Enter the beneficiary's share of the depreciation deductions directly apportioned to each activity reported in boxes 5 through 8. See Depreciation, Depletion, and Amortization, earlier, for a discussion of how the depreciation deduction is apportioned between the beneficiaries and the estate or trust. Report any AMT adjustment or tax preference item attributable to depreciation separately in box 12, using code G. Note. An estate or trust can't make an election under section 179 to expense certain depreciable business assets. Depletion (code B). Enter the beneficiary's share of the depletion deduction under section 611 directly apportioned to each activity reported in boxes 5 through 8. See Depreciation, Depletion, and Amortization, earlier, for a discussion of how the depletion deduction is apportioned between the beneficiaries and the estate or trust. Report any tax preference item attributable to depletion separately in box 12, using code H. Amortization (code C). Itemize the beneficiary's share of the amortization deductions directly apportioned to each activity reported in boxes 5 through 8. Apportion the amortization deductions between the estate or trust and the beneficiaries in the same way that the depreciation and depletion deductions are divided. Report any AMT adjustment attributable to amortization separately in box 12, using code I. Box 10—Estate Tax Deduction (Including Certain Generation-Skipping Transfer Taxes) If the distribution deduction consists of any IRD, and the estate or trust was allowed a deduction under section 691(c) for the estate tax paid attributable to such income (see the line 19 instructions), then the beneficiary is allowed an estate tax deduction in proportion to their share of the distribution that consists of such income. For an example of the computation, see Regulations section 1.691(c)-2. Figure the computation on a separate sheet and attach it to the return. Box 11, Code A—Excess Deductions on Termination—Section 67(e) Expenses If this is the final return of the estate or trust, and there are excess deductions on termination (see the instructions for line 23), enter the beneficiary's share of excess deductions for section 67(e) expenses (amounts allowed in arriving at AGI) in box 11, using code A. See Final Regulations - TD9918 for examples of allowable excess deductions on termination of an estate or trust. Note. The beneficiary may deduct the excess deductions shown in box 11, code A, as an adjustment to income on Schedule 1 (Form 1040), Part II, line 24k. Excess deductions on termination occur only during the last tax year of the trust or decedent's estate when the total deductions (excluding the charitable deduction and exemption) are greater than the gross income during that tax year. Generally, a deduction based on an NOL carryover isn't available to a beneficiary as an excess deduction. However, if the last tax year of the estate or trust is also the last year in which an NOL carryover may be taken (see section 172(b)), the NOL carryover is considered an excess deduction on the termination of the estate or trust to the extent it isn't absorbed by the estate or trust during its final tax year. For more information, see Regulations section 1.642(h)-4 for a discussion of the allocation of the carryover among the beneficiaries. Only the beneficiary of an estate or trust that succeeds to its property is allowed to deduct that entity's excess deductions on termination. A beneficiary who doesn't have enough income in that year to absorb the entire deduction can't carry the balance over to any succeeding year. Box 11, Code B—Excess Deductions on Termination—Non-Miscellaneous Itemized Deductions If this is the final return of the estate or trust, and there are excess deductions on termination (see the instructions for line 23), enter the beneficiary's share of excess deductions for non-miscellaneous itemized deductions in box 11, using code B. Figure the deductions on a separate sheet and attach it to the return. An individual beneficiary must be able to itemize deductions in order to claim excess deductions that are non-miscellaneous itemized deductions in determining taxable income. Note. Section 67(g) suspends miscellaneous itemized deductions subject to the 2% floor for tax years 2018 through 2025. Therefore, miscellaneous itemized deductions are not deductible as excess deductions on termination of an estate or trust. Consult your state taxing authority for information about deducting miscellaneous itemized deductions on your state tax return. Box 11, Codes C and D—Unused Capital Loss Carryover Upon termination of the trust or decedent's estate, the beneficiary succeeding to the property is allowed as a deduction any unused capital loss carryover under section 1212. If the estate or trust incurs capital losses in the final year, use the Capital Loss Carryover Worksheet in the Instructions for Schedule D (Form 1041) to figure the amount of capital loss carryover to be allocated to the beneficiary. Box 11, Codes E and F—NOL Carryover Upon termination of a trust or decedent's estate, a beneficiary succeeding to its property is allowed to deduct any unused NOL (and any alternative tax net operating loss) carryover for regular and AMT purposes if the carryover would be allowable to the estate or trust in a later tax year but for the termination. Enter in box 11, using codes E and F, the unused carryover amounts. Box 12—AMT Items Adjustment for minimum tax purposes (code A). Enter the beneficiary's share of the adjustment for minimum tax purposes. To figure the adjustment, subtract the beneficiary's share of the income distribution deduction figured on Schedule B, line 15, from the beneficiary's share of the income distribution deduction on a minimum tax basis figured on Schedule I (Form 1041), line 42. The difference is the beneficiary's share of the adjustment for minimum tax purposes. Note. Schedule B, line 15, equals the sum of boxes 1, 2a, 3, 4a, 5, 6, 7, and 8 of all Schedules K-1. AMT adjustment attributable to qualified dividends, net short-term capital gains, or net long-term capital gains (codes B through D). If any part of the amount reported in box 12, code A, is attributable to qualified dividends (code B), net short-term capital gain (code C), or net long-term capital gain (code D), enter that part using the applicable code. AMT adjustment attributable to unrecaptured section 1250 gain or 28% rate gain (codes E and F). Enter the beneficiary's distributive share of any AMT adjustments to the unrecaptured section 1250 gain (code E) or 28% rate gain (code F), whichever is applicable, in box 12. Accelerated depreciation, depletion, and amortization (codes G through I). Enter any adjustments or tax preference items attributable to accelerated depreciation (code G), depletion (code H), or amortization (code I) that were directly apportioned to the beneficiary. For property placed in service before 1987, report separately the accelerated depreciation of real and leased personal property. Exclusion items (code J). Enter the beneficiary's share of the adjustment for minimum tax purposes from box 12, code A, of Schedule K-1 that is attributable to exclusion items (Schedule I (Form 1041), lines 2, 3, 4, 5, and 7). Box 13—Credits and Credit Recapture Enter each beneficiary's share of the credits and credit recapture using the applicable codes. Listed below are the credits that can be allocated to the beneficiary(ies). Attach a statement if additional information must be provided to the beneficiary as explained below. Credit for estimated taxes (code A). Payment of estimated tax to be credited to the beneficiary (section 643(g)). See the instructions for Schedule G, Part II, line 11, before you make an entry to allocate any estimated tax payments to a beneficiary. If the fiduciary doesn't make a valid election, then the IRS will disallow the estimated tax payment that is reported on Schedule K-1 and claimed on the beneficiary's return. Credit for backup withholding (code B). Income tax withheld on wages can't be distributed to the beneficiary. The low-income housing credit (code C). Attach a statement that shows the beneficiary's share of the amount, if any, entered on line 6 of Form 8586, Low-Income Housing Credit, with instructions to report that amount on Form 8586, line 4, or Form 3800, Part III, line 4d, if the beneficiary's only source for the credit is a pass-through entity. Advanced manufacturing production credit (code D). Attach a statement showing the amount of the credit the beneficiary must report on line 7 of Form 7207, with instructions to report the amount directly on Form 3800, Part III, line 1b, if the beneficiary's only source for the credit is a pass-through entity. Work opportunity credit (code F). Credit for small employer health insurance premiums (code G). Biofuel producer credit (code H). Credit for increasing research activities (code I). Renewable electricity production credit (code J). Attach a statement that shows separately the amount of the credit the beneficiary must report on line 14 of Form 8835, including the allocation of the credit for production during the 4-year period beginning on the date the facility was placed in service and for production after that period. Empowerment zone employment credit (code K). Orphan drug credit (code M). Credit for employer-provided childcare facilities and services (code N). Biodiesel, renewable diesel, or sustainable aviation fuels credit (code O). If the credit includes the small agri-biodiesel credit, attach a statement that shows the beneficiary's share of the small agri-biodiesel credit, the number of gallons claimed for the small agri-biodiesel credit, and the estate's or trust's productive capacity for agri-biodiesel. Credit to holders of tax credit bonds (code P). Credit for employer differential wage payments (code Q). Recapture of credits (code R). On an attached statement to Schedule K-1, provide any information the beneficiary will need to report recapture of credits. Other credits (code ZZ). This code is used to report the beneficiary's share of all other credits. Box 14—Other Information Enter the dollar amounts and applicable codes for the items listed under Other information. Foreign taxes (code B). Enter the beneficiary's allocable share of taxes paid or accrued to a foreign country. Attach a statement reporting the beneficiary's share of foreign tax (paid or accrued) and income by category including interest, dividends, rents and royalties, and other income. See Form 1116 and Pub. 514 for more information. Qualified rehabilitation expenditures (code C). Provide the beneficiary with a statement of their share of qualified rehabilitation expenditures and other information needed to complete Part VII of Form 3468, Investment Credit. If there are expenditures and other information from more than one activity, the attached statement will separately identify the expenditures and other information for each property. See the instructions for Form 3468, Part VII, for details. Note. Expenditures related to rental real estate activities are subject to different passive activity limitation rules than other qualified rehabilitation expenditures. See the Instructions for Form 8582-CR for details. Basis of energy property (code D). Provide the beneficiary with a statement with the distributive share of amounts needed to complete Form 3468, Part VI. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part VI, for details. Foreign trading gross receipts (code G). Enter the beneficiary's share, if any, of foreign trading gross receipts. See Form 8873 for more information. NIIT (code H). Use code H to identify the amount of the beneficiary's adjustment for section 1411 NII or deductions. See the Instructions for Form 8960. An attachment may be provided with the Schedule K-1 informing the beneficiary of the detailed items to be reported on Form 1040 or 1040-SR. See Net Investment Income Tax (NIIT), earlier, for more information on these amounts. Section 199A information (code I). In the case of a trust or estate, the QBI deduction, also known as the section 199A deduction, is determined at the beneficiary level for the portions of QBI, qualified REIT dividends, and qualified PTP items apportioned to the beneficiaries. To allow beneficiaries to correctly figure their QBI deduction, the trust or estate must enter an asterisk (*) on each beneficiary’s Schedule K-1 next to code I and enter “STMT” in the right column to indicate that the information is provided on an attached statement. Do not add amounts into a single number and report it on Schedule K-1. The information must be separately identified for each trade or business the trust or estate directly conducts, including specified service trades or businesses (SSTBs). The trust or estate must attach the statement to each Schedule K-1, separately identifying the beneficiary’s allocable share of: Qualified items of income, gain, deduction, and loss; W-2 wages; UBIA of qualified property; Qualified PTP items; and Section 199A dividends, also known as qualified REIT dividends. The trust or estate must make an initial determination of which items are qualified items of income, gain, deduction, and loss at its level and report to each beneficiary their share of all items that may be qualified items at the beneficiary level. See Determining the trust’s or estate’s QBI or qualified PTP items, later. The beneficiary must then determine whether each item is includible in QBI. In addition, the trust or estate must also report on whether any of its trades or businesses are SSTBs and identify on the statement any trades or businesses that are aggregated. Trusts and estates should use Statement A—QBI Pass-Through Entity Reporting, in these instructions, or a substantially similar statement, to report each beneficiary’s allocable information from each trade or business, including QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends by attaching the completed statement(s) to each beneficiary’s Schedule K-1. The trust or estate should also use Statement A—QBI Pass-Through Entity Reporting to report each beneficiary’s share of QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends reported to the trust or estate by another entity. Note. The estate or trust must report each beneficiary's share of qualified items of income, gain, deduction, and loss from a PTP. The PTP component is not limited by the W-2 wages and UBIA of qualified property limitations. Therefore, neither the PTP nor its owners (including estates and trusts) are required to report W-2 wages or UBIA of qualified property amounts related to a trade or business operated by a PTP. Trusts and estates should use Statement B—QBI Pass-Through Entity Aggregation Election(s), in these instructions, or a substantially similar statement, to report aggregated trades or businesses and provide supporting information to beneficiaries on each Schedule K-1. Trusts and estates should use Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives, in these instructions, or a substantially similar statement, to report allocable QBI and W-2 wages allocable to qualified payments from a specified agricultural or horticultural cooperative for each trade or business. This statement should also be used to report each beneficiary’s allocable section 199A(g) deduction reported to the trust or estate by the specified cooperative. Determining the trust’s or estate’s qualified trades or businesses. The trust’s or estate’s qualified trades or businesses include its section 162 trades or businesses, except for SSTBs, or the trade or business of providing services as an employee. A section 162 trade or business generally includes any activity carried on to make a profit and with considerable, regular, and continuous activity. For more information on what qualifies as a trade or business for purposes of section 199A, see the instructions for Form 8995 or Form 8995-A. Rental real estate. Rental real estate may constitute a trade or business for purposes of the QBI deduction if the rental real estate: Rises to the level of a trade or business under section 162; Satisfies the requirements for the rental real estate safe harbor in Rev. Proc. 2019-38, 2019-42 I.R.B. 942; or Meets the self-rental exception (that is, the rental or licensing of property to a commonly controlled trade or business conducted by an individual or relevant pass-through entity (RPE)) in Regulations section 1.199A-1(b)(14). The determination of whether rental real estate constitutes a trade or business for purposes of the QBI deduction is made by the trust or estate. The trust or estate must first make this determination and then only include the allocable share of rental real estate items of income, gain, loss, and deduction on the statement provided to beneficiaries. Rental real estate that does not meet one of the three conditions noted above does not constitute a trade or business for purposes of the QBI deduction and must not be included in the QBI information provided to beneficiaries. SSTBs excluded from qualified trades or businesses. SSTBs are generally excluded from the definition of a qualified trade or business. An SSTB is any trade or business providing services in the field of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing in securities, trust or estate interests, or commodities or any other trade or business where the principal asset is the reputation or skill of one or more of its employees or owners. The term “any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners” means any trade or business that consists of any of the following: (a) a trade or business in which a person receives fees, compensation, or other income for endorsing products or services; (b) a trade or business in which a person licenses or receives fees, compensation, or other income for the use of an individual’s image, likeness, name, signature, voice, trademark, or any other symbols associated with the individual’s identity; or (c) receiving fees, compensation, or other income for appearing at an event or on radio, television, or another media format. Exception. If the beneficiary’s taxable income is equal to or less than the threshold for the reporting 2023 tax year, $182,100 ($364,200 if married filing jointly), the QBI from the SSTB may be used by the beneficiary to compute their QBI deduction. If the beneficiary’s taxable income is within the phase-in range, the threshold amount plus $50,000 ($100,000 if married filing jointly), an applicable percentage of the QBI, W-2 wages, and UBIA of qualified property from an SSTB may be used by the beneficiary to compute their QBI deduction. Therefore, the statement attached to the Schedule K-1 issued to each beneficiary must identify any items relating to SSTBs. Aggregation. A trust or estate engaged in more than one trade or business may choose to aggregate multiple trades or businesses into a single trade or business for purposes of section 199A if it meets the following requirements. The same person, or group of persons, either directly or through attribution, owns 50% or more of each trade or business for a majority of the tax year, including the last day of the tax year, and all trades or businesses use the same tax year-end. None of the trades or businesses are SSTBs. The trades or businesses to be aggregated meet at least two of the following three factors. They provide products, property, or services that are the same or that are customarily offered together. They share facilities or share significant centralized business elements, such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources. They are operated in coordination with, or reliance upon, one or more of the businesses in the aggregated group. If the trust or estate chooses to aggregate multiple trades or businesses, it must report the aggregation on Statement B, or a substantially similar statement, and attach it to each Schedule K-1. The statement must provide the information necessary to identify each separate trade or business included in each aggregation, 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. The aggregation statement must be completed each year to show the trust’s or estate's trade or business aggregations. Failure to disclose the aggregations may cause them to be disaggregated. The trust’s or estate's aggregations must be reported consistently for all subsequent years, unless there is a change in facts and circumstances that changes or disqualifies the aggregation. The trust or estate must provide a written explanation for any changes to prior year aggregations that describes the change in facts and circumstances. If the trust or estate directly or indirectly owns an interest in an RPE that aggregates multiple trades or businesses, it must attach a copy of the RPE’s aggregation to each Schedule K-1. The trust or estate cannot break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the requirements above are satisfied. Determining the trust’s or estate’s QBI or qualified PTP items. The trust’s or estate’s items of QBI that must be reported to beneficiaries include the allocated amounts of qualified items of income, gain, deduction, and loss from the trust’s or estate’s trades or businesses that are effectively connected with the conduct of a trade or business within the United States. This may include, but is not limited to, items such as ordinary business income or (losses), section 1231 gains or (losses), section 179 deductions, and interest from debt-financed distributions. QBI may also include rental income (losses) or royalty income, if the activity rises to the level of a trade or business; and gambling gains or (losses), but only if the trust or estate is engaged in the trade or business of gambling. Whether an activity rises to the level of a trade or business must be determined at the entity level and, once made, is binding on beneficiaries. Qualified PTP items that must be reported to the beneficiaries include the allocated amounts of the trust’s or estate’s share of qualified items of income, gain, deduction, and loss from a PTP and may also include gain or loss recognized on the disposition of the trust’s or estate’s partnership interest that is not treated as a capital gain or loss. However, QBI and qualified PTP items don’t include any of the following. Items that are treated as capital gain or loss under any provision of the Code. Dividends or dividend equivalents, including qualified REIT dividends. Interest income (unless received in connection with the trade or business). Wage income. Income that is not effectively connected with the conduct of a trade or business within the United States (for more information, go to IRS.gov and type in the key word “effectively connected income”). Commodities transactions, or foreign currency gains or losses described in section 954(c)(1)(C) or (D). Income, loss, or deductions from notional principal contracts under section 954(c)(1)(F). Annuities (unless received in connection with the trade or business). Guaranteed payments described in section 707(c) received by the entity for services rendered to a partnership. Payments described in section 707(a) received by the entity for services rendered to a partnership. QBI Flowchart. Trusts or estates may use the QBI Flowchart to help them determine if an allocated item of income, gain, deduction, or loss is includible in QBI reportable to beneficiaries. QBI Flowchart Questions Yes No Is the item effectively connected with the conduct of a trade or business within the United States? Continue Stop, this item isn’t QBI. Is the item attributable to a trade or business (this may include section 1231 gain (loss), 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 the 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. Continue Stop, this item isn’t QBI. Is the item treated as a capital gain or loss under any provision of the Internal Revenue Code or is it a dividend or dividend equivalent? Stop, this item isn’t QBI. Continue Is the item interest income other than interest income properly allocable to a trade or 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.) Stop, this item isn’t QBI. Continue 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 described in section 954(c)(1)(C) or (D)? Stop, this item isn’t QBI. Continue 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 PTP? This item is a qualified PTP item. Report this item as qualified PTP income or loss, subject to beneficiary-specific determinations, and check the “PTP” box. This item is QBI. Report this item as QBI subject to beneficiary-specific determinations. Specific Instructions for Statement A—QBI Pass-Through Entity Reporting. QBI or qualified PTP items. The trust or estate must first determine if it is engaged in one or more trades or businesses. It must then determine if any of its trades or businesses are SSTBs. The trust or estate must also determine whether it has qualified PTP items from an interest in a PTP. The trust or estate must indicate the status on the appropriate checkboxes for each trade or business (or aggregated trade or business) or PTP interest reported. Note. SSTBs and PTPs cannot be aggregated with any other trade or business. So, if the aggregation box is checked, the “SSTB” and “PTP” boxes for that specific aggregated trade or business should not be checked. Next, the trust or estate must report to each beneficiary their allocable share of all apportioned items that are QBI or qualified PTP items for each trade or business the trust or estate owns directly or indirectly. Use the QBI Flowchart to determine if an allocated item is reportable as a QBI item or qualified PTP item subject to beneficiary-specific determinations. Each item included under “Other” must be stated separately, identifying the nature and amount of each item. W-2 wages and UBIA of qualified property. The trust or estate must determine the W-2 wages and UBIA of qualified property properly allocable to QBI for each qualified trade or business and report the allocable share to each beneficiary on Statement A, or a substantially similar statement, attached to Schedule K-1. This includes the allocable share of W-2 wages and UBIA of qualified property reported to the trust or estate from any qualified trades or businesses of an RPE the trust or estate owns directly or indirectly. However, trusts or estates that own a direct or indirect interest in a PTP may not include any amounts for W-2 wages or UBIA of qualified property from the PTP, as the W-2 wages and UBIA of qualified property from a PTP are not allowed in computing the W-2 wage and UBIA limitations. The W-2 wages are amounts paid to employees described in sections 6051(a)(3) and (8). If the trust or estate conducts more than one trade or business, it must allocate the W-2 wages among its trades or businesses. See Rev. Proc. 2019-11, 2019-09 I.R.B. 742, for more information. The unadjusted basis of qualified property is figured by adding the unadjusted basis of all qualified assets immediately after acquisition. Qualified property includes all tangible property subject to depreciation under section 167 for which the depreciable period hasn't ended that is held and used for the production of QBI by the trade or business during the tax year and held on the last day of the tax year. The depreciable period ends on the later of 10 years after the property is placed in service or the last day of the full year for the applicable recovery period under section 168. Section 199A dividends. The trust or estate must report the apportioned allocable share of any REIT dividends to each beneficiary on Statement A, or a substantially similar statement, attached to Schedule K-1. Section 199A dividends do not have to be reported by trade or business and can be reported as a single amount to beneficiaries. Section 199A dividends include dividends the trust or estate receives from a REIT held for more than 45 days, for which the payment is not obligated to someone else, is not a capital gain dividend under section 857(b)(3), and is not a qualified dividend under section 1(h)(11), plus any apportioned qualified REIT dividends received from a RIC. Fiscal year trusts and estates. For purposes of determining the QBI or qualified PTP items, UBIA of qualified property, and the aggregate amount of qualified section 199A dividends, fiscal year trusts or estates include all items from the fiscal tax year. For purposes of determining W-2 wages, fiscal year trusts or estates include apportioned amounts paid to employees under sections 6051(a)(3) and (8) for the calendar year ended with or within the trust’s or estate’s tax year. If the trust or estate conducts more than one trade or business, it must allocate W-2 wages among its trades or businesses. See Rev. Proc. 2019-11 for more information. Note. The trust or estate must report each beneficiary’s share of qualified items of income, gain, deduction, and loss from a PTP, but the W-2 wages and UBIA of qualified property from the PTP should not be reported, as the beneficiary cannot use that information 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: Beneficiary’s identifying number: Beneficiary's Share of: ❑ PTP ❑ Aggregated ❑ SSTB ❑ PTP ❑ Aggregated ❑ SSTB ❑ PTP ❑ Aggregated ❑ 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 B—QBI Pass-Through Entity Aggregation Election(s). If the trust or estate elects to aggregate more than one trade or business that meet all the requirements to aggregate, the trust or estate must report the aggregation to beneficiaries on Statement B, or a substantially similar statement, and attach it to each Schedule K-1. The trust or estate must indicate trades or businesses that were aggregated by checking the appropriate box for each aggregated trade or business. The trust or estate must also provide a description of the aggregated trade or business and an explanation of the factors met that allow the aggregation. The aggregation statement must be completed each year to show the trust’s or estate’s trade or business aggregations. Failure to disclose the aggregations may cause them to be disaggregated. The trust’s or estate’s aggregations must be reported consistently for all subsequent years, unless there is a change in facts and circumstances that changes or disqualifies the aggregation. The trust or estate must provide a written explanation for any changes to prior year aggregations that describes the change in facts and circumstances. If the trust or estate holds a direct or indirect interest in an RPE that aggregates multiple trades or businesses, the trust or estate must also include a copy of the RPE’s aggregations with each beneficiary’s Schedule K-1. The trust or estate cannot break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the aggregation requirements are satisfied. 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 C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives. QBI items and wages allocable to qualified payments. If the trust or estate is a patron of a specified agricultural or horticultural cooperative, the trust or estate must provide the allocable share of QBI items and W-2 wages allocable to qualified payments from each trade or business to each of its beneficiaries on Statement C, or a substantially similar statement, and attach it to Schedule K-1 so each beneficiary can compute their patron reduction under section 199A(b)(7). QBI items and W-2 wages allocable to qualified payments include apportioned QBI items included on Statement A that are allocable to the qualified payments reported to the trust or estate on Form 1099-PATR from the cooperative. Section 199A(g) deduction. The trust or estate must report to its beneficiaries their allocable shares of any apportioned section 199A(g) deduction passed through the cooperative, as reported on Form 1099-PATR. Section 199A(g) deductions do not have to be reported by trade or business and can 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: Beneficiary’s Share of: ❑ PTP ❑ Aggregated ❑ SSTB ❑ PTP ❑ Aggregated ❑ SSTB ❑ PTP ❑ Aggregated ❑ SSTB QBI Items Allocable to Qualified Payments Subject to Beneficiary-Specific Determinations TB1 TB2 TB3 Ordinary business income Rental income Other W-2 Wages Allocable to Qualified Payments Section 199A(g) Deduction Code J. Qualifying advanced coal project property and qualifying gasification project property. Provide the beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form 3468, Part II, Sections A and B. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part II, Sections A and B, for details. Code K. Qualifying advanced energy project property. Provide the beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form 3468, Part III. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part III, for details. Code L. Advanced manufacturing investment property. Provide the beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form 3468, Part IV. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part IV, for details. Other information (code ZZ). List on a separate sheet the tax information the beneficiary will need to complete their return that isn't entered elsewhere on Schedule K-1. For example, if the estate or trust participates in a transaction that must be disclosed on Form 8886 (see earlier), both the estate or trust and its beneficiaries may be required to file Form 8886. The estate or trust must determine if any of its beneficiaries are required to disclose the transaction and provide those beneficiaries with information they will need to file Form 8886. This determination is based on the category(ies) under which a transaction qualified for disclosure. See the Instructions for Form 8886 for details. In addition, if the beneficiary is a “covered person” in connection with a foreign tax credit splitter arrangement under section 909, attach a statement that identifies the arrangement including the foreign taxes paid or accrued. Inclusion of global intangible low-taxed income (GILTI). Section 951A requires U.S. shareholders of controlled foreign corporations to report their ratable share of GILTI in taxable income. If applicable, provide the information necessary to figure the GILTI inclusion to each beneficiary. See the Instructions for Form 8992 for details. Foreign-derived intangible income (FDII). Public Law 115-97 enacted section 250, which allows a domestic corporation a deduction for the eligible percentage of FDII and GILTI. Section 250 is effective for tax years beginning after 2017. If applicable, provide the necessary information to each domestic corporate beneficiary for its calculation of FDII benefit. See section 250 for more information. See the Instructions for Form 8993 for details. Limitation on business interest expense. If an estate or trust is required to file Form 8990, the adjusted taxable income of an estate or trust beneficiary is reduced by any income (including any DNI) received from the estate or trust by the beneficiary to the extent such income supported a deduction for business interest expense under section 163(j)(1)(B) in computing the estate's or trust's taxable income. If applicable, provide the beneficiary the necessary information to calculate this amount in an attachment to Schedule K-1. See Form 8990 and the Instructions for Form 8990 for additional information. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Notices 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., 49min. 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. . . . 16 hr., 21min. 3 hr., 38 min. 4 hr., 22 min. 1 hr., 27 min. 35 min. - - - - Preparing the form. . . . 31 hr., 27min. 4 hr., 58 min. 4 hr., 51 min. 2 hr., 37 min. 43 min. - - - - Copying, assembling, and sending the form to the IRS. . . . 4 hr., 01min. 16 min. - - - - 16 min. - - - - - - - - Comments and suggestions. We welcome your comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler. You can send us comments through IRS.gov/FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Although we can't respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don't send Form 1041 to this address. Instead, see Where To File, earlier. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 - Additional Material Index A Accounting income, Income Taxation of Trusts and Decedents' Estates Adjusted gross income (AGI), Excess deductions on termination., Electing small business trust (ESBT)., Estimated Tax, Tax computation attachment., Administrative expenses., Excess deductions on termination., Net Investment Income Tax (NIIT), Box 11, Code A—Excess Deductions on Termination—Section 67(e) Expenses Alaska Native Settlement Trusts, Alaska Native Settlement Trusts Amended return, Amended Return Amounts paid or permanently set aside, Line 1—Amounts Paid or Permanently Set Aside for Charitable Purposes From Gross Income Assembly, Assembly and Attachments Attachments, Attachments B Bankruptcy estate, Bankruptcy Estate, Bankruptcy Estates, Bankruptcy Estate Bankruptcy information, Bankruptcy Estates Beneficiary, Beneficiary. Allocation of estimated tax payment, Section 643(g) Election Complex trust, Estates and complex trusts. Estate, Estates and complex trusts. Simple trust, Simple trust. Tax year for inclusion, Beneficiary's Tax Year Withholding on foreign person, Withholding of tax on foreign persons. Blind trust, Special Rule for Blind Trust C Cemetery perpetual care fund, Cemetery perpetual care fund. Charitable deduction, Schedule A—Charitable Deduction Charitable remainder trusts, Other returns that must be filed. Common trust fund, Common Trust Funds D Decedent's Estate, Decedent's estate. Definitions Accumulation distribution, General Instructions Adjusted gross income (AGI), Adjusted gross income (AGI). Beneficiary, Beneficiary. Complex trust, Complex Trust Decedent's Estate, Decedent's estate. Decedent's estate, Decedent's Estate DNI, Distributable net income (DNI). Fiduciary, Fiduciary. Grantor trusts, Grantor Type Trust IRD, Income in respect of a decedent (IRD). Outside income, Line 13—Throwback Years Pooled income fund, Pooled Income Fund Revocable Living Trust, Revocable living trust. Simple trust, Simple Trust Trust, Trust. Trusts, Revocable living trust. Distributable net income, Distributable net income (DNI). DNI, Distributable net income (DNI)., General Instructions E Electing small business trusts, Electing Small Business Trusts (ESBTs) ESBT (S portion only), ESBT (S Portion Only) S portion, Electing Small Business Trusts (ESBTs) Elections Section 643(e)(3), Line 10—Other Amounts Paid, Credited, or Otherwise Required To Be Distributed Section 643(g), Section 643(g) Election Section 645, Special Rule for Certain Revocable Trusts Special rule for qualified revocable trusts, Special Rule for Certain Revocable Trusts Treating contributions as paid in prior tax year, Election to treat contributions as paid in the prior tax year. Electronic deposits, Electronic Deposits ESBTs, Electing Small Business Trusts (ESBTs) Estate, Decedent's Estate, Estates and complex trusts. Bankruptcy, Bankruptcy Estate, Bankruptcy Estate Exemption for, Decedents' estates. Foreign, Decedent's Estate Who must file, Decedent's Estate Estate tax deduction, Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes Estimated tax, Estimated Tax, Line 30a—Credited to 2024 Estimated Tax Allocation of payments to beneficiaries, Estimated Tax Penalty, Line 27—Estimated Tax Penalty Exemption, Line 21—Exemption Extraterritorial income exclusion, Extraterritorial Income Exclusion F Fiduciary, Income required to be distributed currently., Fiduciary., Decedent's Estate, Trust, Fiduciary Fiduciary accounting income (FAI), Income Taxation of Trusts and Decedents' Estates Final return, Final Return First-tier distributions, Line 9—Income Required To Be Distributed Currently Foreign tax credit, Line 2a—Foreign Tax Credit Form 1041-T, Section 643(g) Election Form 8855, Special Rule for Certain Revocable Trusts Form 8886, Other Forms That May Be Required, Other information (code ZZ). G General business credit, Line 2b—General Business Credit Grantor trusts, Income Taxation of Trusts and Decedents' Estates, Grantor Type Trusts, Grantor Type Trusts, Grantor Type Trust Backup withholding, Backup withholding. Nonqualified deferred compensation plans, Nonqualified deferred compensation plans. Optional filing methods, Optional Filing Methods for Certain Grantor Type Trusts Pre-need funeral trusts, Pre-need funeral trusts. Special filing instructions, Grantor Type Trusts GST tax deduction, Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes I Income distribution deduction, Income Taxation of Trusts and Decedents' Estates, Line 18—Income Distribution Deduction, Schedule B—Income Distribution Deduction Inter vivos, Income Taxation of Trusts and Decedents' Estates, Trust. Interest income, Line 1—Interest Income IRD Deduction, Line 19—Estate Tax Deduction Including Certain Generation-Skipping Transfer Taxes M Minimum taxable income, Minimum taxable income. N Net investment income tax, Net Investment Income Tax (NIIT) Net operating loss, Net operating loss (NOL). Nonexempt charitable deduction, Not a Private Foundation Nonexempt charitable trust, Section 4947(a)(1) Trust, General Instructions Nonqualified deferred compensation plans, Nonqualified deferred compensation plans. P Paid preparer, Paid Preparer Paid preparer authorization, Paid Preparer Authorization Penalties Estimated tax, Line 27—Estimated Tax Penalty Failure to provide a required TIN, Penalty. Failure to provide information timely, Failure To Provide Information Timely Late filing of return, Late Filing of Return Late payment of tax, Late Payment of Tax Other, Other Penalties Trust fund recovery, Trust Fund Recovery Penalty Underpaid estimated tax, Underpaid Estimated Tax Pooled income funds, Pooled Income Funds, Pooled Income Fund, General Instructions, Pooled income funds. Pre-need funeral trusts, Pre-need funeral trusts. Q Qualified business income deduction, Line 20—Qualified Business Income Deduction Qualified disability trust, Qualified disability trusts. Qualified revocable trust, Special Rule for Certain Revocable Trusts, Qualified revocable trusts (QRTs). Qualified settlement funds, Qualified Settlement Funds Qualified small business stock, Line 3 Qualified subchapter S trust (QSST), Qualified subchapter S trusts (QSSTs)., QSSTs., Exceptions., QSSTs. R Returns Amended, Amended Return Common trust fund, Common Trust Funds Electronic and magnetic media, Electronic Filing Final, Final Return Nonexempt charitable trust, Nonexempt charitable trust treated as a private foundation., Other returns that must be filed. Qualified settlement funds, Qualified Settlement Funds Split-interest trust, Other returns that must be filed. When to file, When To File Who must file, Who Must File Revocable Living Trusts Section 645 Election, G. Section 645 Election S Second-tier distributions, Complex trusts. Separate share rule, Separate share rule. Special filing instructions Bankruptcy estates, Special Filing Instructions for Bankruptcy Estates Electing small business trusts, Electing Small Business Trusts (ESBTs) Grantor trusts, Grantor Type Trusts Pooled income funds, Pooled Income Funds Split-interest trust, Section 4947(a)(2) Trust Substitute forms, Substitute Forms T Taxable income, Line 23—Taxable Income Throwback years, Line 13—Throwback Years Trusts, Trust. Alaska Native Settlement, Alaska Native Settlement Trusts Blind, Special Rule for Blind Trust Common trust fund, Common Trust Funds Complex, Estates and complex trusts. Domestic, Trust Exemption for, Trusts required to distribute all income currently. Foreign, Question 4 Grantor, Income Taxation of Trusts and Decedents' Estates Inter vivos, Income Taxation of Trusts and Decedents' Estates, Trust. Nonexempt charitable, Section 4947(a)(1) Trust, Not a Private Foundation, General Instructions Pre-need funeral, Pre-need funeral trusts. Qualified disability, Qualified disability trusts. Qualified revocable, Qualified revocable trusts (QRTs). Simple, Simple trust. Split-interest, Section 4947(a)(2) Trust Testamentary, Income Taxation of Trusts and Decedents' Estates, Trust. Who must file, Trust, Who Must File W Who must file Decedent's estate, Decedent's Estate Trust, Trust Withholding on foreign person, Withholding of tax on foreign persons.
