This article focuses solely on the entry of the Deduction, Credit and Other Items which are found on Lines 9 through 14 of the Schedule K-1 (Form 1041) For a Beneficiary Filing Form 1040. To enter a K-1 (Form 1041) in the tax program from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - Select 'New' and double-click on Form 1041 K-1 Estate/Trust which will take you to the K-1 Heading Information Entry menu. All information in this menu must be entered to continue. At the bottom of this screen, the user must select if the K-1 is from an Estate or a Trust.
After entering all required information, select ‘OK’ and the K-1 1041 Edit Screen will appear. This K-1 1041 Edit Screen has two distinct sections entitled ‘Heading Information’ and ‘Income, Deductions, Credits, and Other Items.
Set forth below is basic information on the Deductions, Credits and Other Items section of the Schedule K-1 1041 Edit Menu. For additional information regarding the requirements for Schedule K-1 (Form 1041) see: Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filling Form 1040.
Directly Apportioned Deductions
Box 9 can contain directly apportioned deductions for depreciation or depletion allocations in excess of income from the 1041 entity (see Rev. Rul. 74-530, 1974-2 C.B. 188). Depreciation and Depletion deduction must be allocated between a trust and the beneficiaries based on the proportion of net accounting income. If a trustee is required by the terms of the trust instrument or by the state law that has jurisdiction over the trust to allocate depreciation or depletion to the trust, the entire deduction should be allocated to the trust on the Form 1041 and no amount would be found in Box 9 with a code of A or B. In trust situations where neither state law or the trust instrument prohibit such apportionment and in the case of an estate, the depreciation or depletion deduction is apportioned between the trust/estate and the beneficiaries on Form 1041 and the beneficiaries apportionment will be found on Schedule K-1 (Form 1041), Box 9 with a code of A or B.
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, the 1041 entity should have attached a separate schedule to the Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 showing the beneficiary's share of directly apportionable deductions derived from each trade or business, rental real estate, and other rental activity.
Line 9 A – Directly Apportioned Deductions - Depreciation Amount in Box 9, using a code of "A," represents the taxpayer's proportion of the depreciation deduction that was reported by the estate or trust. If the items on this K-1 Entry Menu that were entered for Boxes 6-8 are designated as being passive activities, the amounts entered on this line 9A will automatically flow to Form 8582, Worksheet 3 where, based on other passive items affecting the taxpayer, it will determine if any amount will be allowed on Schedule E (Form1040), line 33, column (c). If the items on the this K-1 Entry Menu that were entered for Boxes 6-8 are designated as non-passive income, then the amounts entered on this line 9A will automatically flow to Schedule E (Form 1040), line 33, column (e).
Line 9 B– Directly Apportioned Deductions - Depletion- Amount in Box 9, using a code of "B," represents the taxpayer's proportion of the depletion deduction that was reported by the estate or trust. If the items on this K-1 Entry Menu that were entered for Boxes 6-8 are designated as being passive activities, the amounts entered on this line 9B will automatically flow to Form 8582, Worksheet 3 where, based on other passive items affecting the taxpayer, it will determine if any amount will be allowed on Schedule E (Form1040), line 33, column (c). If the items on the this K-1 Entry Menu that were entered for Boxes 6-8 are designated as non-passive income, then the amounts entered on this line 9B will automatically flow to Schedule E (Form 1040), line 33, column (e).
Line 9 C – Directly Apportioned Deductions - Amortization- Amount in Box 9, using a code of "C," represents the taxpayer's proportion of the amortization deduction that was reported by the estate or trust. If the items on this K-1 Entry Menu that were entered for Boxes 6-8 are designated as being passive activities, the amounts entered on this line 9C will automatically flow to Form 8582, Worksheet 3 where, based on other passive items affecting the taxpayer, it will determine if any amount will be allowed on Schedule E (Form1040), line 33, column (c). If the items on the this K-1 Entry Menu that were entered for Boxes 6-8 are designated as non-passive income, then the amounts entered on this line 9C will automatically flow to Schedule E (Form 1040), line 33, column (e).
Estate Tax Deductions
Line 10 –Estate Tax Deduction - If any Income in Respect of a Decedent (IRD) was included in the Income Distribution Deduction taken by the entity that issued the K-1 (Form 1041) on that entity's Form 1041, and that estate or trust was also allowed a deduction under section 691(c) for any estate tax paid that is attributable to such income, then the beneficiary is allowed an estate tax deduction in proportion to his or her share of any distribution that consists of such income. Common examples of Income in Respect to a Decedent (IRD) are lump sum payments from an IRA that were made directly to an estate or trust and not directly to a beneficiary, a decedent's deferred compensation payments made to an estate or interest on a U.S. Savings Bond. See: Instructions for Form 1041 - U.S. Income Tax Return for Estates or Trusts.
The amount in Box 10 if the Schedule K-1 (Form 1041) consists of the estate tax that was paid on the beneficiary's proportion share of the IRD. Amounts entered on this line will automatically flow to Schedule A (Form 1040) Line 28 as a Miscellaneous Deduction with a notation referencing "ESTATE TAX DEDUCTION FORM K-1" and the amount on Box 10. Because this item is entered on Schedule A (Form 1040) Line 28 as a Miscellaneous Deduction, it is not subject to the limitation that the expense must exceed 2% of the amount on Form 1040, line 38 (Adjusted Gross Income).
Final Year Deductions
Line 11 A – Final year Deductions - Excess Deductions – Amount in Box 11, using a code of "A," represents the taxpayer's proportion of excess deductions that are reported by the estate or trust. 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 the entity exemption amount claimed on Form 1041) are greater than the gross income during that tax year. Prior to 2018, amounts entered on this line will automatically flow to Schedule A (Form 1040), Line 23 as a Miscellaneous Deduction as an Other Expense with a notation referencing the amount on Box 11, that it comes from a "TERMINATION DEDUCTION K-1." As a Miscellaneous Deduction claimed on Schedule A (Form 1040) Line 23, the taxpayer can only deduct the part of these expenses that exceeds 2% of the amount on Form 1040, line 38 (Adjusted Gross Income).
Starting with 2018 tax returns, amounts entered in Box 11 with a Code of 'A' are for information purposes only. Taxpayers can no longer claim as a Miscellaneous Deductions subject to 2% of Adjusted Gross Income any such deduction, including excess deductions allowed a beneficiary on termination of an estate or trust. Publication 529 - Miscellaneous Deduction.
Line 11 C – Final year Deductions - Short-term 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 (subject to the Capital Loss Carryover Worksheet in the Instruction's for Schedule D (Form 1041)). Amounts reported in Box 11B represent the entity's Short term capital loss carryover and this amount will automatically flow to Schedule D (Form 1040), Line 5.
Line 11 D– Final year Deductions - Long-term 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 (subject to the Capital Loss Carryover Worksheet in the Instruction's for Schedule D (Form 1041)). Amounts reported in Box 11B represent the entity's Long term capital loss carryover and this amount will automatically flow to Schedule D (Form 1040), Line 12.
Line 11 E – Final year Deductions - Net operation loss carryover - regular tax – Upon termination of a trust or decedent's estate, a beneficiary succeeding to its property is allowed to deduct any unused NOL (and any ATNOL) 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. Amounts reported in Box 11, using code D represents the unused NOL carryover amounts for any property which the beneficiary has received, and this amount will automatically flow to Form 1040, Schedule 1, Line 21 with a notation of "NOL" listed.
Line 11 F – Final year Deductions - Alternative Tax NOL – Similar to 11 E but for AMT purposes, the amount reported in Box 11 using code F represent the Alternative Minimum Tax Net Operating Loss carryover amounts for any property that the beneficiary received. This amount does NOT carry to the tax return but should be entered on Form 6251, Part I, Line 11 which is accessed from the Main Menu of the tax program by selecting, Other Taxes Menu, Alternative Minimum Tax (6251), Alternative Tax Net Operating Deduction.
Alternative Minimum Tax (AMT)
The information contained in Box 12, codes A though I of the Schedule K-1 (Form 1041) For a Beneficiary Filing Form 1040 is used by the taxpayer/beneficiary to prepare Form 6251. For detailed information on each of these items contained in Box 12, see the instructions to the beneficiary provided by the estate or trust and the Instruction for Form 6251.
Line 12 A – Adjustment for Minimum Tax Purposes – Amount in Box 12, using a code of "A," represents the taxpayer's proportion of total AMT adjustments that are reported by the estate or trust for dividends, capital gains and other gains. Amounts entered on this line will automatically flow to Form 6251, Line 15.
Line 12 B – AMT Adjustment Attributable to Qualified Dividends – Amount in Box 12, using a code of "B," represents the taxpayer's proportion of total AMT adjustments that were reported by the estate or trust in Box 12, using a code of "B" for qualified dividends. Amount contained in Box 12, using a code of "B" are not normally separately entered on Form 6251, Line 15 since they are normally included in the amount entered under Line 12A - Adjustments for Minimum Tax Purpose.
Line 12 C – AMT Adjustment Attributable to Short-Term Capital Gain – Amount in Box 12, using a code of "C," represents the taxpayer's proportion of total AMT adjustments that were reported by the estate or trust in Box 12, using a code of "C" for short-term capital gains. Amount contained in Box 12, using a code of "C" are not normally separately entered on Form 6251, Line 15 since they are normally included in the amount entered under Line 12A - Adjustments for Minimum Tax Purpose.
Line 12 D – AMT Adjustment Attributable to Long-Term Capital Gain – Amount in Box 12, using a code of "D," represents the taxpayer's proportion of total AMT adjustments that were reported by the estate or trust in Box 12, using a code of "D" for long-term capital gains. Amount contained in Box 12, using a code of "D" are not normally separately entered on Form 6251, Line 15 since they are normally included in the amount entered under Line 12A - Adjustments for Minimum Tax Purpose.
Line 12 E – AMT Adjustment Attributable to Unrecaptured Section 1250 Gain – Amount in Box 12, using a code of "E," represents the taxpayer's proportion of total AMT adjustments that were reported by the estate or trust in Box 12, using a code of "A" for Section 1250 Gains. Amount contained in Box 12, using a code of "E" are not normally separately entered on Form 6251, Line 15 since they are normally included in the amount entered under Line 12A - Adjustments for Minimum Tax Purpose.
Line 12 F – AMT Adjustment Attributable to 28% Rate Gain – Amount in Box 12, using a code of "F," represents the taxpayer's proportion of total AMT adjustments that were reported by the estate or trust in Box 12, using a code of "A" for 28% Rate Gains. Amount contained in Box 12, using a code of "F are not normally separately entered on Form 6251, Line 15 since they are normally included in the amount entered under Line 12A - Adjustments for Minimum Tax Purpose.
Credits
Line 13 A – Credit for Estimated Taxes - The beneficiary treats this amount as a payment of estimated tax. Form 1041-T must be timely filed by the fiduciary of the estate or trust for the beneficiary to get credit for these tax payments. Amounts reported in Box 13, with a code of "A" will automatically flow to Form 1040, Line 65 as Estimated Tax Payments.
Line 13 B – Backup Withholdings - Amounts reported in Box 13, with a code of "B" will automatically flow to Form 1040, Line 64 as part of the Federal Income Tax Withheld. When an amount is included in Box 13, with a code of B, the taxpayer must attach a copy of this Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 with the Form 1040. To attach a copy of the Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 when electronically filing the return, save the document in a PDF format to your system and then from the Main Menu of the 1040, go to Personal Information, then Other Categories and attach PDF Document.
Line 13 C - Low-income housing credit - The fiduciary should provide the taxpayer with a statement showing the amount to report on lines 4 and 11 of Form 8586. If the taxpayer's only source for the credit is from a pass-through entity, such as an estate or trust, the taxpayer can report the amounts from lines 4 and 11 on Form 8586 directly on Form 3800, Part III, lines 1d and 4d, respectively. Amounts contained on Box 13 with a code "C" do not automatically carry to the Form 1040. Instead, Form 8586 and Form 3800 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8586, Part I - Buildings Placed in Service Before 01/01/2008, Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8586 - Low-Income Housing Credit.
Line 13 D - Advanced Manufacturing Production Credit - Amounts reported in Box 13, Code D represent a taxpayer's share of the qualified Advanced Manufacturing Production Credit and other information. The taxpayer needs to complete Form 7207 related to rental real estate activities using code D. If the estate or trust is reporting expenditures from more than one activity, the attached statement will separately identify the expenditure. Form 7207can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 7207. See: Instructions for Form 7207 - Advanced Manufacturing Production Credit
Line 13 F - Work opportunity credit - Amounts reported in Box 13, Code F represent a taxpayer's share of the work opportunity credit. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 5884, Line 3. Form 5884 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 5884, Work Opportunity Credit from a Pass-Through Entities, select New and complete the menu. See: Instructions for Form 5884 - Work Opportunity Credit.
Line 13 G - Credit for small business insurance premiums - Amounts reported in Box 13, Code G represent a taxpayer's share of the credit for small business insurance premiums paid by the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8941. Form 8941 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8941 then Credit from Pass-Through Entities. See: Instructions for Form 8941 - Credit for Small Employer Health Insurance Premium.
Line 13 H - Biofuel producer credit - Amounts reported in Box 13, Code H represent a taxpayer's share of the Biofuel Producer Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 6478. Form 6478 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 6478, then Credit from Pass-Through Entities. See: Instructions for Form 6478 - Biofuel Producer Credit.
Line 13 I - Credit for increasing research activities - Amounts reported in Box 13, Code I represent a taxpayer's share of the Credit for Increasing Research Activities for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 6765. Form 6745 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 6745, then Credit from Pass-Through Entities, select New and complete the menu. See: Instructions for Form 6765 - Credit for Increasing Research Activities.
Line 13 J - Renewable Electricity and Indian Coal Production Credit - Amounts reported in Box 13, Code J represent the taxpayer's share of the Renewable electricity, refined coal, and Indian coal production credit that was taken by the estate or trust. The entity (trust or estate) should provide a statement with the Schedule K-1 (Form 1041) For a Beneficiary Filing Form 1040 that shows separately the amount of the credit the taxpayer/beneficiary must report on line 19 of Form 8835, including the allocation of the Part II credit for production during the 4-year period beginning on the date the facility was placed in service and for production after that period. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8835. Form 8835 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits then Form 8835. The amounts on the statement provided by the fiduciary for production during the 4-year period beginning on the date the facility was placed in service and for production after that period should be entered on the appropriate entry menus designated "Pass-Through Entity Credits during 4-Year Period or Indian Coal" or "All Other Credits From Pass-Through Entities." See: Instructions for Form 8835 - Renewable Electricity and Indian Coal Production Credit.
Line 13 K - Empowerment Zone Community Employment Credit - Amounts reported in Box 13, Code K represent a taxpayer's share of the Empowerment Zone Community Employment Credit which is reported on Form 8844. Form 8844 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8844, then Form 8844 Credit from Pass-Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See Instructions for Form 8844 - Empowerment Zone Employment Credit.
Line 13 L - Indian Employment Credit - Amounts reported in Box 13, Code L represent a taxpayer's share of the Indian Employment Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8845. Form 8845 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8845 then Credit from Pass-Through Entities, select New and complete the menu. See: Form 8845 - Instructions for Indian Employment Credit.
Line 13 M - Orphan Drug Credit - Amounts reported in Box 13, Code M represent a taxpayer's share of the Orphan Drug Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8820. Form 8820 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8820 then Credit from Pass-Through Entities, select New and complete the menu. See: Form 8820 - Orphan Drug Credit Instructions.
Line 13 N - Credit for Employer-provided Child Care and Facilities - Amounts reported in Box 13, Code N represent a taxpayer's share of the Employer Provided Child Care and Facilities Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8882. Form 8882 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8882 then Credit from Pass-Through Entities, select New and complete the menu. See: Form 8882 - Credit for Employer Provided Child Care and Facilities - General Instructions.
Line 13 O - Biodiesel and Renewable Diesel Fuel Credit - Amounts reported in Box 13, Code O represent a taxpayer's share of the Biodiesel and Renewable Fuel Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8864. Form 8864 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8864 then Credit from Pass-Through Entities, select New and complete the menu. See: - Instructions for Form 8864 - Biodiesel and Renewable Fuel Credit.
Line 13 P - Credit to Holders of Tax Credit Bonds - Amounts reported in Box 13, Code P represent a taxpayer's share of the Credit to Holders of Tax Credit Bonds for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8912. Form 8912 can be accessed from the Main Menu of the tax program by selecting, Credits, then Credit to Holders of Tax Credit Bonds (8912). See - Instructions for Form 8912 - Credit to Holders of Tax Credit Bonds.
Line 13 Q - Credits for Employer Differential Wage Payments - Amounts reported in Box 13, Code Q represent a taxpayer's share of the Employer Differential Wage Payment Credit for the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. This amount should be entered on Form 8932. Form 8932 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 8932 then Credit from Pass-Through Entities, select New and complete the menu. See: Form 8932 - Credit for Employer Differential Wage Payments - General Instructions.
Line 13 R - Recapture of Credits - Amounts reported in Box 13, Code R represents information concerning any credit that the taxpayer/beneficiary may be required to recapture. The fiduciary for the entity that issued the Schedule K-1 (Form 1041) For a Beneficiary Filing Form 1040 should provide the beneficiary a statement with the information needed to determine any credit recapture.
Line 13 Z - Other Credits - Use this code to report the beneficiary's share of all other credits.
Other Information
Line 14 A - Tax-Exempt Interest - Amounts reported in Box 14, Code A represents the taxpayer's share of tax-exempt interest. This amount will automatically pull to Form 1040, line 2b.
Line 14 B - Foreign Taxes - Amounts reported in Box 14, Code B represent a taxpayer's share of the Foreign Taxes paid by the estate or trust. Any amount entered here will not carry to any form or schedule on the Form 1040. The taxpayer should enter this amount as an itemized deduction on Form 1040, Schedule A, Line 6 or you may be able to take a credit for the foreign tax on Form 1040, Schedule 3, line 48.
Schedule A, Line 6 can be accessed from the Main Menu of the tax program by selecting, Itemized Deduction Menu, Taxes You Paid, Other Taxes and then select F10 to enter Foreign Taxes Paid as the description and the amount. Form 1040, Schedule 3, Line 48 can be accessed from the Main Menu of the tax program by selecting, Credits, then Foreign Tax Credit.
Line 14 C - Qualified rehabilitation expenditures - Amounts reported on Box 14, Code C represent the taxpayers share of qualified rehabilitation expenditures. The fiduciary will provide you with a statement with your share of qualified rehabilitation expenditures and other information. If there are expenditures and other information from more than one activity, the attached statement will separately identify the expenditures and other information from each property. See: Instructions for Form 3468, Part VII, for details.
Line 14 D - Basis of energy property -Amounts reported in Box 14, Code D represent the distributive share of the beneficiary amounts that are needed to complete Form 3468, Part VI. If there is information for more than one property, an attached statement will separately identify the information for each property. See: Instructions for Form 3468, Part VI, for details.
Line 14 E - Net Investment Income - The amount reported in Box 14, Code E is the taxpayer's share of investment income (interest, dividends, etc.) from the trust or estate. This income should have been recognized elsewhere on this K-1 in the Income items. The amount in Box 14, code E is provided for informational reasons only. No amount entered in this field will flow to Form 4952 or to Form 1040, Schedule B. However, the amounts entered elsewhere for interest, dividends, etc., will flow to Form 4952.
Line 14 F - Gross Farming and Fishing Income - The amount reported in Box 14, Code F is the taxpayer's share of farming and fishing income that was included in Box 6. This income is separately stated to determine if the taxpayer is subject to a penalty for underpayment of estimated tax. This amount is automatically carried as gross farming and fishing income from a Form K-1 to Schedule E (Form 1040), Supplemental Income and Loss, line 42.
Line 14 G - Foreign Trading Gross Receipts - Amounts reported in Box 14, Code G represent the taxpayer's share of the estate or trust's foreign trading gross receipts (FTGR) derived from certain activities in connection with qualifying trade property. This amount should be considered part of the taxpayer's FTGR and entered on Form 8873 to determine any extraterritorial income exclusion. Any amount entered here will not carry to any form or schedule on the Form 1040. Currently, the tax program does not support Form 8873; however upon completing Form 8873 any exclusion from income would be entered on the "Other deduction" or "Other expense" line of the tax return or schedule. If the taxpayer is filing a Schedule C (Form 1040), enter "Extraterritorial income exclusion from Form 8873" and the amount in Part V of Schedule C. If the taxpayer is filing a Schedule E (Form 1040), enter "Form 8873" and the amount on the "other" line under Expenses in Part I. See: Instructions for Form 8873 - Extraterritorial Income Exclusion.
Line 14 H - Adjustment for section 1411 investment income- Amounts reported in Box 14, Code H represent the taxpayer's share of any adjustments to the net investment income of the trust or estate that occurs as a result of an election under section 1411 (Regulation section 1.1411-10(g)) to exclude certain income derived from the ownership of stock in a Controlled Foreign Corporation (CFC) or a Qualified Electing Fund (QEF). This amount is entered on Form 8960, Line 7. See: Instructions for Form 8960 - Net Investment Tax - Individuals, Estates and Trusts.
Line 14 I - Qualified Business Income Deduction - Amounts reported in Box 14, Code I, represent a taxpayer's portion of the Section 199A items that have been allocated to this beneficiary/taxpayer by the estate or trust. The taxpayer should receive a breakdown of Section 199A items necessary to calculate any qualified business income deduction. Upon entering the Line 14, Code I menu in the tax program, the user will be provided an menu to enter Section 199A income, Section 199A W-2 wages, Section 199A unadjusted basis, Section 199A REIT dividends and Section 199A PTP income, which should correspond to the information provided by the estate or trust. The amounts entered will automatically pull to the applicable Qualified Business Income Deduction (‘QBID’) worksheet under the Tax Computation Menu and used to calculate any QBID.
Line 14 J- Qualified Advanced Coal Project Property -
This code is used to report the amounts the fiduciary provided the taxpayer with the distributive share of amounts that are needed 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: Instructions for Form 3468, Part II, Sections A and B, for details.
Line 14 K- Qualified Advanced Energy Project Property -
The fiduciary will provide you with a statement with the distributive share of amounts that you 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: Instructions for Form 3468, Part III, for details.
Line 14 L- Advanced Manufacturing Investment Property - This code is used to report the qualified investment for figuring the qualifying advanced coal project credit, the qualifying gasification project credit, and the qualifying advanced energy project credit. The fiduciary must provide the taxpayer with a statement that shows the information you will need and where to report it on Form 3468. Form 3468 can be accessed from the Main Menu of the tax program by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 3468. See: Instructions for Form 3468 - Investment Credit.
Line 14 Z - Other Information - Amounts reported in Box 14, Code Z represent a taxpayer's portion of other items of information not found elsewhere on the Schedule K-1 (Form 1041) Beneficiary's Share of Income, Deductions, Credits, etc. The taxpayer should receive instructions from the trust or estate needed to address the items contained in this box.
NOTE: This is a guide on entering the Deduction items from Schedule K-1 (Form 1041) into the tax program. This is not intended as tax advice.
Additional Resources:
Instructions for Schedule K-1 (1041) for a Beneficiary Filing a Form 1040
Instructions for Form 1041 - U.S. Income Tax Return for Estates or Trusts
Schedule K-1 (Form 1041) – Overview
Schedule K-1 (Form 1041) - Heading Information
Schedule K-1 (Form 1041) - Income Items
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