Tax and Payments
Line 22 - Taxable Income
Net operating loss. If line 22 is a loss, the estate or trust may have a net operating loss (NOL). Do not include the deductions claimed on lines 13, 18, and 20 when figuring the amount of the NOL.
Generally, an NOL arising in a tax year ending in 2001 or 2002 may be carried back to the 5 prior tax years and forward to the 20 following tax years. A specified liability loss may be carried back to the 10 prior tax years and forward to the following 20 tax years. However, an estate or trust may elect a loss carryback period of 2 years (3 years to the extent the loss is an eligible loss; 5 years to the extent the loss is a farming loss) instead of carrying back the entire loss 5 years.
An estate, whose tax year ends in 2003, generally may carry an NOL back to the prior 2 tax years (3 years to the extent the loss is an eligible loss; 5 years to the extent the loss is a farming loss). An estate or trust may also elect to carry an NOL forward only, instead of first carrying it back. For more information, see the Instructions for Form 1045.
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 details, see Pub. 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.
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 Schedule K-1, lines 13d and 13e.
Excess deductions on termination. If the estate or trust has for its final year deductions (excluding the charitable deduction and exemption) in excess of its gross income, the excess is allowed as an itemized deduction to the beneficiaries succeeding to the property of the estate or trust.
In general, an unused NOL carryover that is allowed to beneficiaries (as explained above) cannot 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 Schedule K-1, line 13a.
Line 24a - 2002 Estimated Tax Payments and Amount Applied From 2001 Return
Enter the amount of any estimated tax payment you made with Form 1041-ES for 2002 plus the amount of any overpayment from the 2001 return that was applied to the 2002 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 24a.
Do not include on Form 1041 estimated tax paid by an individual before death. Instead, include the payments on the decedent's final income tax return.
Line 24b - Estimated Tax Payments Allocated to Beneficiaries
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, Allocation of Estimated Tax Payments to Beneficiaries, 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 on the beneficiary's Schedule K-1, line 14a.
Attach Form 1041-T to your return only if you have not yet filed it; however, attaching Form 1041-T to Form 1041 does not extend the due date for filing Form 1041-T. If you have already filed Form 1041-T, do not attach a copy to your return.
Failure to file Form 1041-T by the due date (March 6, 2003, for calendar year estates and trusts) will result in an invalid election. An invalid election will require the filing of amended Schedules K-1 for each beneficiary who was allocated a payment of estimated tax.
Line 24d - Tax Paid With Extension of Time To File
If you filed either Form 2758 (for estates only), Form 8736, or Form 8800 to request an extension of time to file Form 1041, enter the amount that you paid with the extension request and check the appropriate box(es).
Line 24e - Federal Income Tax Withheld
Use line 24e 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 (e.g., 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 may not be passed through to beneficiaries on either Schedule K-1 or Form 1041-T.
Backup withholding. If the estate or trust received a 2002 Form 1099 showing Federal income tax withheld (i.e., 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 24e.
Report on Schedule K-1 (Form 1041), line 14, any credit for backup withholding on income distributed to the beneficiary.
Line 24f - Credit For Tax Paid on Undistributed Capital Gains
Attach copy B of Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains.
Line 24g - Credit for Federal Tax on Fuels
Enter any credit for Federal excise taxes paid on fuels that are ultimately used for nontaxable purposes (e.g., an off-highway business use). Attach Form 4136, Credit for Federal Tax Paid on Fuels. See Pub. 378, Fuel Tax Credits and Refunds, for more information.
Line 26 - Estimated Tax Penalty
If line 27 is at least $1,000 and more than 10% of the tax shown on Form 1041, or the estate or trust underpaid its 2002 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 under certain conditions. See Pub. 505, Tax Withholding and Estimated Tax, for details.
Line 27 - Tax Due
You must pay the tax in full when the return is filed. Make the check or money order payable to the United States Treasury. Write the EIN and 2002 Form 1041 on the payment. Enclose, but do not attach, the payment with Form 1041.
You may use EFTPS to pay the tax due for a trust. See Electronic Deposits on page 7.
Line 29a - Credited to 2003 Estimated Tax
Enter the amount from line 28 that you want applied to the estate's or trust's 2003 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 is not necessary that the charitable organization be created or organized in the United States.
A pooled income fund , a nonexempt charitable trust treated as a private foundation, or a trust with unrelated business income should 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 that claim a charitable deduction must also file Form 1041-A. See Form 1041-A for 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, 2003, from income earned in 2002 or prior, then the fiduciary can elect to treat the contribution as paid in 2002.
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). Write 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 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).
Do not 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. Do not 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 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. However, if you are filing for a pooled income fund , do not complete Schedule B. Instead, attach a statement to support the computation of the income distribution deduction.
Note: Use Schedule I to compute the DNI and income distribution deduction on a minimum tax basis.
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 is not available to any other share of the same trust or estate.
For more information, see section 663(c) and related regulations.
Specific Instructions
Line 1 - Adjusted Total Income
Generally, enter on line 1, Schedule B, 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 line 1, Schedule B, the smaller of those losses. If line 4 is zero or a gain and line 17 is a loss, enter zero on line 1, 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:
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 in column (1), line 16 of Schedule D (Form 1041)), 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 16, column (1) is a net loss, enter zero.
If the exclusion of gain from the sale or exchange of qualified small business stock was claimed, do not 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 (i.e., 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. Do not 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
Do not include any:
- Amounts deducted on prior year's return that were required to be distributed in the prior year.
- Amount that is properly paid or credited as a gift or bequest of a specific amount of money or specific property. (To qualify as a gift or bequest, the amount must be paid in three or fewer installments.) An amount that can be paid or credited only from income is not considered a gift or bequest.
- Amount paid or permanently set aside for charitable purposes or otherwise qualifying for the charitable deduction.
Line 9 - Income Required To Be Distributed Currently
Line 9 is to be completed by all simple trusts as well as complex trusts and decedent's 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 his or her income to the extent of his or her 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 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 fair market value (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 the instructions for Question 6 on page 23.
The beneficiary includes the amounts on line 10 in his or her income only to the extent of his or her 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 on page 36 to see if you must complete Schedule J (Form 1041).
Line 12 - Adjustment for Tax-Exempt Income
In figuring the income distribution deduction, the estate or trust is not allowed a deduction for any item of the DNI that is not 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 (i.e., 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 and
- 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.
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