Оглавление
Stephen Brooks. Form 1041
Table of Contents
Guide
Pages
FORM 1041: INCOME TAXATION OF ESTATES AND TRUSTS
Notice to readers
Chapter 1 What is a Trust? What is an Estate? Learning objectives
Introduction
What is a trust? Definition of a trust
Terms of the trust
Methods of creating a trust
Requirements to form a valid trust. In general
Age of majority
Capacity
Intention to create a trust
Definite beneficiaries
Duties to perform
Formalities of execution
Trust purpose
The fiduciary duty
Nature and extent of trustee's duties
Investments of the trust
Breach of duty
The tax definition. The regulations
Other entities
Business trusts
Investment trusts
Liquidating trusts
Environmental remediation trusts
Knowledge check
The law governing the trust. In general
Situs
The term of a trust
Rule against perpetuities
Term for tax purposes
The trust agreement
How a trust operates
Example 1-1
Definitions
Knowledge check
Decedent's estates. The probate estate
The administration process. Overview
Executor's duty
Estates for tax purposes
Example 1-2
Definitions
Knowledge check
Notes
Chapter 2 The Fundamentals of Fiduciary Accounting. Learning objectives
Introduction
Example 2-1
Example 2-2
Fiduciary accounting under the UPAIA. Hierarchy under the UPAIA
Distinguishing income from principal under the UPAIA. Defining income and principal
Further distinction
Section 401: Receipts from corporations and other entities
Allocated to income
Allocated to principal. In general
Partial liquidation distributions
Money not in partial liquidation
Section 402: Distribution from trust or estate. Allocated to income
Allocated to principal
Section 403: Business and other activities conducted by trustee
Allocated to principal
Section 404: Principal receipts. Allocated to principal
Section 405: Rental property. Allocated to income
Allocated to principal
Section 406: Obligation to pay money. Allocated to income
Allocated to principal
Section 407: Insurance policies and similar contracts. Allocated to principal
Allocated to income
Section 408: Insubstantial allocations not required. Allocated to principal
Section 409: Deferred compensation, annuities, and similar payments
Allocated to income
Allocated to principal
Section 410: Liquidating asset
Section 411: Minerals, water, and other natural resources
Section 412: Timber
Section 413: Property not productive of income
Section 104 of the UPAIA: The trustee's power to adjust
Knowledge check
Treasury Regulation Section 1.643(b)-1
Example 2-3
Example 2-4
Knowledge check
Definition of income
The allocation of disbursements. Trusts: Disbursements from income and principal
UPAIA Section 501: Disbursements from income
UPAIA Section 502: Disbursements from principal
UPAIA Section 503: Transfers from income to principal for depreciation
UPAIA Section 504: Transfers from income to reimburse principal
UPAIA Section 505: Income taxes
UPAIA Section 506: Adjustments between principal and income because of taxes. Adjustments permitted
Knowledge check
Estate and trust terminating interests: Determination and distribution of net income. Example 2-5
UPAIA Section 201 and Section 202
Income from specific property
Determination of the remaining net income
Pecuniary gifts
Remaining net income
Summary of steps
When an income interest starts and ends. UPAIA Section 301: When right to income begins and ends
UPAIA Section 302: Apportionment of receipts and disbursements when decedent dies or income interest begins
Receipt or disbursement after decedent dies or income interest begins
Due date
UPAIA Section 303: Apportionment when income interest ends. Definition of undistributed income
When mandatory income interest ends
Proration
Practice exercise 2-1
Notes
Chapter 3 Taxation of Trusts and Decedent's Estates: An Overview. Learning objectives
Introduction. Taxed like individuals
Differences from individuals
Knowledge check
Grantor trusts
Form to file
Tax law changes
Tax rates
Ordinary tax rates
Capital gain rates
Surtax on unearned income
AGI
NII
Distributing NII to reduce or eliminate the Medicare surtax
Defining passive income
Trusts that are exempt
The alternative minimum tax
Accounting periods. Estates
Example 3-1
Trusts
Section 645 election
Accounting methods
Estimated tax. In general
Exceptions
Section 643(g) election
Knowledge check
Tax identification number. Estates
Trusts
Notes
Chapter 4 Gross Income for Trusts and Decedent's Estates. Learning objectives
Introduction
Items to include. Interest
Ordinary and qualified dividends
Business income and loss
Capital gain and loss
Rents, royalties, and the estate or trust's share of income from partnerships, S corporations, other estates and trusts, and REMICs
Farm income
IRD
Other income
Treatment of property distributed in-kind. General rule
Example 4-1
Exception for distributions of appreciated property
Example 4-2
Section 643(e)(3) election
Knowledge check
Notes
Chapter 5 Ordinary Deductions and Credits. Learning objectives
Introduction
Trade or business expense
Income-producing activities
Interest. Interest deduction in general
Investment interest
Taxes. Deductible taxes
2017 Tax Act changes
Nondeductible taxes
Losses and bad debts. In general
Property losses
Activity losses
The net operating loss deduction
At-risk limitations
Passive activity loss rules
Related party rules
Depreciation, amortization, and depletion. Overview
Depreciation
Example 5-1
Example 5-2
Knowledge check
Depletion
Amortization
Section 179
Deductions and credits in respect of a decedent: Section 691(b)
Knowledge check
Deduction for estate taxes paid: Section 691(c)
Knowledge check
Deductions that may be allowable for estate tax purposes
Qualified business income deduction for trusts and estates. Tax reform
Charitable contribution deductions. Charitable deduction rules
Amounts paid. General rule
No restriction for domestic charities
Election to treat contributions as paid in the preceding taxable year
Amounts permanently set aside
Adjustments and other special rules for determining unlimited charitable contributions deduction. IRD
Tax-exempt income
Disallowance if allocable to unrelated business income
Certain private foundations and trusts
Tax reform
Suspension of miscellaneous itemized deductions subject to the two-percent floor. Tax reform
Deduction in lieu of exemption. Simple trusts
Complex trusts
Estates
Tax reform
Tax credits
Notes
Chapter 6 The Income Distribution Deduction. Learning objectives
Introduction
Defining DNI. Definition of DNI — Section 643(a)
Knowledge check
Foreign trust
Knowledge check
Distinguishing simple trusts from complex trusts
Example 6-1
Example 6-2
Section 651(a): Deduction for distributions to beneficiaries of a simple trust. In general
Example 6-3
Example 6-4
Income required to be distributed currently. Determination
Reserve for depreciation
Distributions after the close of the tax year
Example 6-5
Sprinkle powers
Example 6-6
Accumulation of income in one year
Example 6-7
Distributions in-kind
Distribution of amounts other than income. In general
Example 6-8
Corpus distributions made upon specified events
Charitable purposes
Section 661(a): Deduction for distributions of complex trusts and decedent's estates. Deduction allowed
Defining income required to be distributed currently
Defining any other amounts properly paid, credited, or required to be distributed. In general
Also included
Not included
Knowledge check
Example 6-9
Example 6-10
Example 6-11
Knowledge check
Character of amounts distributed
Limitation on deduction
Example 6-12
Practice exercises. Practice exercise 6-1
Practice exercise 6-2
Practice exercise 6-3
Notes
Chapter 7 How Beneficiaries are Taxed. Learning objectives
Introduction
The taxation of a simple trust beneficiary. Overview
Example 7-1
Character and allocation of amounts included in gross income. In general
Allocation of income items. General rule
Example 7-2
Terms of the trust
Example 7-3
Example 7-4
Allocation of deductions
Items directly attributable
Excess items directly attributable
Example 7-5
Items not directly attributable
Knowledge check
Different taxable years
Death of an individual beneficiary
The taxation of complex trust and estate beneficiaries. In general
Amounts “required to be distributed currently” In general
Excess amounts
Definition of “required to be distributed currently”
Example 7-6
Example 7-7
Other amounts distributed
Excess payments
Example 7-8
Amounts used in discharge of a legal obligation
Character of amounts. In general
Character of amounts when charitable contributions are made
Example 7-9
Example 7-10
Different taxable years
Death of individual beneficiary
Knowledge check
Practice exercises35. Practice exercise 7-1
Practice exercise 7-2
Practice exercise 7-3
Notes
Chapter 8 Special Rules Round-Up. Learning objectives
Unused deductions passed through to beneficiaries upon termination of an estate or trust
The throwback rules. In general
Accumulation distributions
The throw back rules
Taxation
Knowledge check
Special rules applicable to Sections 661 and 662. The 65-day rule
Example 8-1
Separate shares treated as separate trusts. In general
Sole purpose of the rule
The rule is not elective
Applicability of the separate share rule to certain trusts. In general
Powers to distribute
More than one beneficiary
Applicability of separate share rule to estates and QRTs. In general
Special rule for certain types of beneficial interests
Shares with multiple beneficiaries and beneficiaries of multiple shares
Knowledge check
Practice exercise 8-1
Notes
Chapter 9 The Tax Treatment of Grantor Trusts. Learning objectives
Introduction
Who is considered a grantor?
When is a grantor treated as an owner? Grantor treated as owner
Other persons treated as the owner
Power or interest held by spouse of the grantor
Foreign trusts with beneficiaries in the United States
Attribution of income, deductions, and credits
Grantor treated as owner of the entire trust
Grantor treated as owning an undivided fractional share
Grantor treated as owning a specific trust property
Definitions
Rule in which power is subject to condition precedent
Rules for determining when the grantor or another person is treated as the owner
Reversionary interests. General rule
Example 9-1
Exception to general rule
Example 9-2
Postponement of reversionary interest
Power to control beneficial enjoyment. General rule
Example 9-3
Exceptions for certain powers
Power to apply income in support of a dependent
Power affecting beneficial enjoyment only after occurrence of event
Example 9-4
Power exercisable only by will
Power to allocate among charitable beneficiaries
Power to distribute corpus
Power to withhold income temporarily
Power to withhold income during disability of a beneficiary
Power to allocate between corpus and income
Exception for certain powers of independent trustees
Power to add beneficiaries
Power to allocate income if limited by a standard
Knowledge check
Retention of administrative powers. In general
The circumstances
Power to deal for less than adequate and full consideration
Power to borrow without adequate interest or security
Borrowing of the trust funds
General powers of administration
Knowledge check
Power to revoke. General rule
Power affecting beneficial enjoyment only after occurrence of event
Income for benefit of grantor. General rule
Obligations of support
Knowledge check
Person other than grantor treated as substantial owner. General rule
Exception where grantor is taxable
Obligations of support
Effect of renunciation or disclaimer
Foreign trusts having one or more U.S. beneficiaries. U.S. transferor treated as owner
Definitions
Defining transfers under Section 679(a)(1) In general
Transfers by certain trusts
Example 9-5
Indirect transfers
Trusts treated as having a U.S. beneficiary. In general
Contingent interests
Attribution of ownership
Certain U.S. beneficiaries disregarded
Special rule in case of discretion to identify beneficiaries
Certain agreements and understandings treated as terms of the trust
Uncompensated use of trust property treated as a payment
Presumption that a foreign trust has a U.S. beneficiary
Exceptions
Special rules applicable to foreign grantor who later becomes a U.S. person. In general
Treatment of undistributed income
Outbound trust migrations
Notes
Chapter 10 Taxation of Special Trusts. Learning objectives
Introduction
Pooled income funds. Overview
Requirements for qualification as a pooled income fund
Contribution of remainder interest to charity
Creation of life income interest
Commingling of property required
Prohibition against exempt securities
Maintenance by charitable organization required
Prohibition against donor or beneficiary serving as trustee
Income of beneficiary to be based on rate of return of fund
Termination of life income interest
Taxation of pooled income fund and its beneficiaries. Tax status of fund and its beneficiaries
Distribution and taxation of income
Knowledge check
Electing small business trusts. In general
Knowledge check
Taxation of ESBTs
Definitions
Taxation of grantor portion
Taxation of S portion. In general
Section 1366 amounts. In general
Special rule for charitable contributions
Multiple S corporations
Gains and losses on disposition of S stock. In general
Installment method
Distributions in excess of basis
State and local income taxes and administrative expenses. In general
Special rule for certain interest
Tax rates and exemption of S portion. Income tax rate
Alternative minimum tax exemption
Adjustments to basis of stock in the S portion under Section 1367
Taxation of non-S portion. In general
Dividend income under Section 1368(c)(2)
Interest on installment obligations
Charitable deduction
Allocation of state and local income taxes and administration expenses
Treatment of distributions from the trust
Termination or revocation of ESBT election
Example 10-1
Bankruptcy estates. Income, deductions, and credits
Administrative expenses
Administrative expense loss
Carryback of NOLs and credits
Exemption
Standard deduction
Discharge of indebtedness
Transfer of tax attributes from the individual debtor to the bankruptcy estate
Special rule for certain revocable trusts: Section 645
Notes
Chapter 11 Filing Form 1041: U.S. Income Tax Return for Estates and Trusts. Learning objectives
Introduction
Who must file. Decedent's estate
Trusts
Grantor type trusts
Qualified subchapter S trusts (QSSTs)
Special rule for certain revocable trusts
Method of reporting for grantor trusts. In general
Grantor type trusts not using an optional filing method. How to report
Attachment
Optional filing methods for certain grantor trusts. Overview
Exceptions
Optional Method 1
Optional Method 2
Optional Method 3
Changing filing methods
Pooled income funds
Electing small business trust. Special rules apply
Tax computation attachment
Other information
TCJA changes
Knowledge check
Bankruptcy estate
Who must file
Tax identification number
Accounting period
When to file
Knowledge check
Tax rate schedule
Other types of trusts. Alaska Native Settlement Trusts
Charitable remainder trusts
Common trust funds
When to file. In general
Extension of time to file
Bankruptcy estate
Who must sign
Interest and penalties. Interest
Penalties. Late filing of return
Late payment of tax
Failure to provide information in a timely manner
Underpaid estimated tax
Notes
Appendix A. FORM 1041: U.S. INCOME TAX RETURN FOR ESTATES AND TRUSTS. Form 1041: U.S. Income Tax Return for Estates and Trusts
Form 1041 and related forms and schedules
Tax Glossary
Index
Solutions. Chapter 1. Knowledge check solutions
Chapter 2. Practice exercise solution. Practice exercise 2-1
Knowledge check solutions
Chapter 3. Knowledge check solutions
Chapter 4. Knowledge check solution
Chapter 5. Knowledge check solutions
Chapter 6. Practice exercise solutions. Practice exercise 6-1. Determination of fiduciary income
Determination of DNI
Determination of character of amounts distributed
The deduction under Section 651(a)
Practice exercise 6-2. Determination of fiduciary income
Determination of DNI
Determination of character of amounts distributed
Determination of deduction under Section 661(a)
Practice exercise 6-3. Determination of fiduciary income
Determination of DNI
Determination of character of amounts distributed
Determination of deduction under Section 661(a)
Knowledge check solutions
Chapter 7. Practice exercise solutions. Practice exercise 7-1. Determination of the taxable income of the trust
Practice exercise 7-2. Computing the taxable income
Practice exercise 7-3. Computing the taxable income
Determining Willa's gross income
Knowledge check solutions
Chapter 8. Practice exercise solution. Practice exercise 8-1. Net operating loss
Excess deductions
Capital loss carryover
Carryovers and excess deductions
Knowledge check solutions
Chapter 9. Knowledge check solutions
Chapter 10. Knowledge check solutions
Chapter 11. Knowledge check solutions
Learn More. Continuing Professional Education
Get your CPE when and where you want
Take control of your career development
Visit www.AICPAStore.com to browse our CPE selections. CPExpress® online learning. Just-in-time learning at your fingertips 24/7
Quantity Purchases for Firm or Corporate Accounts
To subscribe, visit www.AICPAStore.com/cpexpress
Your strategic learning partner. Let us help prepare your staff for the future
WILEY END USER LICENSE AGREEMENT
