1041 - Final Return

[TB12]

I am completing the final return for a complex trust. The trust does not require that current income be distributed - the purpose of the trust was for the principal to grow and be used for higher education expense. Since inception, all income (interest & dividends) has been reported and taxed through the trust. All assets (mutual fund investments) were liquidated and distributed to beneficiary in 2012. Here is my issue: For the 2012 tax return, the Trust will show a small capital loss PLUS there is a Capital Loss Carryover of $3,461. Does this get transferred to the Beneficiary via the K-1? Where does the final distribution get recorded as all is see for distributions is "Schedule B" for income distributions?

Thank you!!

[Burke]

Did you complete the DNI section on Page 2 of 1041? This should take care of it, and if you mark it "final" return on Page 1.

[TB12]

Not yet . . .

Did you complete the DNI section on Page 2 of 1041? This should take care of it, and if you mark it "final" return on Page 1.

. . . that's where I'm having a hard time. Since all the income has been taxed through the Trust, I'm thinking I put all the dollars on line 10? But that seems too easy! And where does this line flow to on the K-1? I read somewhere (can't remember where I've been searching so much on this topic) that it actually doesn't flow through to the K-1. Then, I still have the issue of the Trust's capital loss carryover from 2011 - I don't see a spot for it in the distribution area, but my thought is it should be a benefit to the beneficiary as the Trust didn't get to use it. I didn't think completing these Trust tax returns were all that bad until now )

[Burke]

The total amount distributed to the beneficiary for the final year of the trust return goes on Line 10, Schedule B of Form 1041. Look at Page 2 of Schedule D at the top. Where is the capital loss showing? In Box 1 or Box 2? Is there a capital loss carryover worksheet? Did you check "final" on Page 1 of 1041? Are you using software?

[TB12]

Schedule D

The total amount distributed to the beneficiary for the final year of the trust return goes on Line 10, Schedule B of Form 1041. Look at Page 2 of Schedule D at the top. Where is the capital loss showing? In Box 1 or Box 2? Is there a capital loss carryover worksheet? Did you check "final" on Page 1 of 1041? Are you using software?

Thanks for confirming the Line 10 Schedule B ) There is a capital loss carryover worksheet that I completed last year and the prior year - the loss stems from 2010. The carryover amount in 2010 was $3825; a portion was used in 2011 so now have $3,461 carryover which will go in Box 2 on the top of page 2 of Schedule D for 2012. I have checked Final on page 1. I'm not using any software . . . just paper & pen (actually, fill-in pdf's on the IRS web site).

[S T]

The capiital loss has been allocated to Trust/Estate in the past, amount being allocated to the Estate or Trust is released to the Beneficiary via K-1 -On Final Return of the Estate or Trusts -

See Sched D (1041) page 2 , Part III - you will see a section for Beneficiary and one for Trust - Final year-termination then is allocated to Beneficiaries and will flow through to the Schedule K-1 - Box 11 Code B or C depending on short term or long term c/l

TTB - see the section on Estates and Trust starting at 21-1 Small Business, etc

Just am completing one

Sandy

[TB12]

Thank you!!

The capiital loss has been allocated to Trust/Estate in the past, amount being allocated to the Estate or Trust is released to the Beneficiary via K-1 -On Final Return of the Estate or Trusts -

See Sched D (1041) page 2 , Part III - you will see a section for Beneficiary and one for Trust - Final year-termination then is allocated to Beneficiaries and will flow through to the Schedule K-1 - Box 11 Code B or C depending on short term or long term c/l

TTB - see the section on Estates and Trust starting at 21-1 Small Business, etc

Just am completing one

Sandy

Hi Sandy,

Thank you for your input - that makes soooo much sense! I was looking at the K-1 yesterday and kept focusing on line 14 for "Other Information" . . . and the answer was just a little higher. And there it is - right on page 21-15 - panic sets in and I can't even see the information right in front of me ) Again, thank you for pointing me in the right direction! I don't do many Trust returns - this is one of three and they're all the same in that they're for the purpose of building value for paying educational expenses.

[Roland Slugg]

this is one of three and they're all the same in that they're for the purpose of building value for paying educational expenses.

When those trusts were first established, I wonder if the grantor was aware of 529 plans. They have been around for quite a while ... since the mid-1990s, I believe.

[Burke]

Hi Sandy,

Thank you for your input - that makes soooo much sense! I was looking at the K-1 yesterday and kept focusing on line 14 for "Other Information" . . . and the answer was just a little higher. And there it is - right on page 21-15 - panic sets in and I can't even see the information right in front of me ) Again, thank you for pointing me in the right direction! I don't do many Trust returns - this is one of three and they're all the same in that they're for the purpose of building value for paying educational expenses.

This information is also on the Instructions for K-1 which can be downloaded from the IRS website. It covers C/O losses and excess deductions on final termination. See paragraph for completion of Box 11. I thought you might not be using software because it would have handled all these things automatically. If you are doing "two or three" trust returns, I would download these and the instructions for Form 1041 and get real familiar with them over the summer. It's complicated.

[TB12]

Thank you!

This information is also on the Instructions for K-1 which can be downloaded from the IRS website. It covers C/O losses and excess deductions on final termination. See paragraph for completion of Box 11. I thought you might not be using software because it would have handled all these things automatically. If you are doing "two or three" trust returns, I would download these and the instructions for Form 1041 and get real familiar with them over the summer. It's complicated.

I will do that - I've been trying to finish up the return today and am still a little "stuck" with the details. The big picture makes sense, but all those little details are frustrating when my experience in the Trust area is so limited. Thankfully, this is my last year as I plan to "hang my hat up".

[TB12]

Good Observation

When those trusts were first established, I wonder if the grantor was aware of 529 plans. They have been around for quite a while ... since the mid-1990s, I believe.

The Trusts were established in 2004 so the 529's were out there although I'm not sure the person that wanted the trusts set up was aware of the option. I've looked at them a bit in recent years - maybe set something up for the grandkids )

[S T]

TB - Best wishes for completing your Form 1041 forms without Software, don't know that I could do that as Burke pointed out without Software - instructions are complicated.

I actually could not have provided some of the info to you, if it had not been for Burke - as he has been so gracious in sharing information and guidance on Trusts/Estates

So I just want to give appreciation where appreciation is due. It really wasn't my guidance but was via Burke in other prior posts.

Sandy

[TB12]

TB - Best wishes for completing your Form 1041 forms without Software, don't know that I could do that as Burke pointed out without Software - instructions are complicated.

I actually could not have provided some of the info to you, if it had not been for Burke - as he has been so gracious in sharing information and guidance on Trusts/Estates

So I just want to give appreciation where appreciation is due. It really wasn't my guidance but was via Burke in other prior posts.

Sandy

I agree - Burke has been great with providing very useful information and guidance! I would definitely be struggling withoug it )