Reporting Tax Info on Schedule K-1

• Author: Margaret A. Munro, Kathryn A. Murphy
• Profession: Has more than 30 years' experience in trusts, estates, family tax, and small businesses/Attorney with more than 20 years' experience administering estates and trusts and preparing estate and gift tax returns
• Pages: 331-341

CHAPTER 20 Reporting Tax Info onSchedule K-1 331

Chapter20

Reporting Tax Info

onSchedule K-1

Looking for hard-and-fast rules for almost anything is human nature. You

stop at red lights and go when they turn green, but yellow lights seem to

confuse people. Figuring out who gets to pay the income tax on income

earned in a trust or estate is something like a yellow light: Sometimes the trust or

estate pays it, and other times the beneciary does.

In this chapter, we focus on Schedule K-1, Beneciary’s Share of Income,

Deductions, Credits, etc. You see what’s included on it and what’s not. You also

discover the formula necessary to calculate each of the numbers. Finally, you nd

out how to report income to a beneciary when you don’t have to le Form 1041.

Understanding Schedule K-1

A trust or estate that makes distributions to beneciaries receives an income tax

deduction for the exact amount of taxable income that’s been distributed (and

income always comes out of the trust or estate rst, before the rst penny of prin-

cipal is distributed). This is the so-called income distribution deduction, or IDD, which

IN THIS CHAPTER

»

Exploring Form 1041, Schedule K-1

»

Assigning types of income to

Schedule K-1

»

Adding additional information to help

estate and trust beneciaries

»

Figuring out nominee Form 1099