Estate & Trust Administration For Dummies, 2nd Edition

Chapter 20

Reporting Tax Info on Schedule K-1

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 beneficiaries

Figuring out nominee Form 1099

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 beneficiary does.

In this chapter, we focus on Schedule K-1, Beneficiary’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 find out how to report income to a beneficiary when you don’t have to file Form 1041.

Understanding Schedule K-1

A trust or estate that makes distributions to beneficiaries receives an income tax deduction for the exact amount of taxable income that’s been distributed ...