![]() Your K-1 will report each type, or character, of income you receive in various boxes of the form. Reading Schedule K-1Īs the trust or estate beneficiary, you must include the amounts reported on your K-1 on your personal income tax return. The trust or estate is responsible for paying the income tax on this income, not the beneficiaries. If the income distribution is discretionary, meaning the trustee or estate administrator has authority to decide whether beneficiaries will receive distributions, any income not distributed isn’t deductible on 1041 and is not reported on Schedule K-1. You must prepare a Schedule B attachment for Form 1041 to take the deduction. Form 1041 allows for an “income distribution deduction” that includes the total income reported on all beneficiary K-1s. Since the trust and estate must report all income, deductions are available for amounts that must be distributed to beneficiaries. You must furnish a copy of each K-1 to the appropriate beneficiary, and attach all copies to Form 1041 when you file the return with the Internal Revenue Service. You must report all dividend income on the 1041, and you report the share of dividend income for each beneficiary on Schedule K-1s. Unless the trust document specifies otherwise, capital gains and losses stay with the trust since they are part of the corpus.įor example, suppose you’re a trustee, and the terms of the trust require all dividend income from a stock portfolio must be distributed equally among the beneficiaries. The 1041 reports income retained by the trust or estate, as well as the income distributed to beneficiaries, but income taxes are only paid by the trust or estate if the distributions are required. ![]() An estate needs to file a return if it has a gross income of $600 or there is a nonresident alien beneficiary. ![]() ![]() The trust needs to file a return if it has a gross income of $600 or more during the trust tax year or there is a nonresident alien beneficiary or if there is any taxable income. ![]()
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