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Note. An estate or trust cannot make

the termination of the estate or trust to

capital gains (codes B through D). If

an election under section 179 to

the extent it is not absorbed by the

any part of the amount reported in box

expense certain tangible property.

estate or trust during its final tax year.

12, code A, is attributable to qualified

For more information, see Regulations

dividends (code B), net short-term

Depletion (code B). Enter the

section 1.642(h)-4 for a discussion of

capital gain (code C), or net long-term

beneficiary’s share of the depletion

the allocation of the carryover among

capital gain (code D), enter that part

deduction under section 611 directly

the beneficiaries.

using the applicable code.

apportioned to each activity reported in

AMT adjustment attributable to

Only the beneficiary of an estate or

boxes 5 through 8. See the instructions

unrecaptured section 1250 gain or

trust that succeeds to its property is

on page 18 for a discussion of how the

28% rate gain (codes E and F). Enter

allowed to deduct that entity’s excess

depletion deduction is apportioned

the beneficiary’s distributive share of

deductions on termination. A

between the beneficiaries and the

any AMT adjustments to the

beneficiary who does not have enough

estate or trust. Report any tax

unrecaptured section 1250 gain (code

income in that year to absorb the entire

preference item attributable to depletion

E) or 28% rate gain (code F),

deduction may not carry the balance

separately in box 12, using code H.

whichever is applicable, in box 12.

over to any succeeding year. An

Amortization (code C). Itemize the

individual beneficiary must be able to

Accelerated depreciation, depletion,

beneficiary’s share of the amortization

itemize deductions in order to claim the

and amortization (codes G through

deductions directly apportioned to each

excess deductions in determining

I). Enter any adjustments or tax

activity reported in boxes 5 through 8.

taxable income.

preference items attributable to

Apportion the amortization deductions

depreciation, depletion, or amortization

between the estate or trust and the

Box 11, Codes B and C—

that were directly apportioned to the

beneficiaries in the same way that the

Unused Capital Loss Carryover

beneficiary. For property placed in

depreciation and depletion deductions

Upon termination of the trust or

service before 1987, report separately

are divided. Report any AMT

decedent’s estate, the beneficiary

the accelerated depreciation of real and

adjustment attributable to amortization

succeeding to the property is allowed

leased personal property.

separately in box 12, using code I.

as a deduction any unused capital loss

Exclusion items (code J). Enter the

Box 10—Estate Tax Deduction

carryover under section 1212. If the

beneficiary’s share of the adjustment

(Including Certain

estate or trust incurs capital losses in

for minimum tax purposes from

the final year, use the Capital Loss

Generation-Skipping Transfer

Schedule K-1, box 12, code A, that is

Carryover Worksheet on page 42 to

Taxes)

attributable to exclusion items

figure the amount of capital loss

(Schedule I, lines 2 through 6 and 8).

If the distribution deduction consists of

carryover to be allocated to the

any IRD, and the estate or trust was

Box 13—Credits and Credit

beneficiary.

allowed a deduction under section

Recapture

Box 11, Codes D and E—Net

691(c) for the estate tax paid

Enter each beneficiary’s share of the

Operating Loss (NOL)

attributable to such income (see the

credits and credit recapture using the

line 19 instructions on page 22), then

Carryover

applicable codes. Listed below are the

the beneficiary is allowed an estate tax

Upon termination of a trust or

credits that can be allocated to the

deduction in proportion to his or her

decedent’s estate, a beneficiary

beneficiary(ies). Attach a statement if

share of the distribution that consists of

succeeding to its property is allowed to

additional information must be provided

such income. For an example of the

deduct any unused NOL (and any

to the beneficiary as explained below.

computation, see Regulations section

ATNOL) carryover for regular and AMT

•

1.691(c)-2. Figure the computation on a

Credit for estimated taxes (code A) —

purposes if the carryover would be

separate sheet and attach it to the

Payment of estimated tax to be credited

allowable to the estate or trust in a later

return.

to the beneficiary (section 643(g)).

tax year but for the termination. Enter in

Box 11, Code A—Excess

box 11, using codes D and E, the

See the instructions for line 24b

unused carryover amounts.

on page 23 before you make an

Deductions on Termination

entry to allocate any estimated

CAUTION

Box 12—Alternative Minimum

If this is the final return of the estate or

tax payments to a beneficiary. If the

trust, and there are excess deductions

Tax Items

fiduciary does not make a valid

on termination (see the instructions for

election, then the IRS will disallow the

Adjustment for minimum tax

line 22 on page 23), enter the

estimated tax payment that is reported

purposes (code A). Enter the

beneficiary’s share of the excess

on Schedule K-1 and claimed on the

beneficiary’s share of the adjustment

deductions in box 11, using code A.

beneficiary’s return.

for minimum tax purposes.

Figure the deductions on a separate

•

Credit for backup withholding (code

sheet and attach it to the return.

To figure the adjustment, subtract

B).

the beneficiary’s share of the income

•

Excess deductions on termination

The low-income housing credit

distribution deduction figured on

occur only during the last tax year of

(code C).

Schedule B, line 15, from the

•

the trust or decedent’s estate when the

Qualified rehabilitation expenditures

beneficiary’s share of the income

total deductions (excluding the

(code D). Attach a statement that

distribution deduction on a minimum tax

charitable deduction and exemption)

shows the amount and corresponding

basis figured on Schedule I, line 44.

are greater than the gross income

line on Form 3468 for reporting each

The difference is the beneficiary’s share

during that tax year.

type of expenditure.

of the adjustment for minimum tax

•

Generally, a deduction based on an

Basis of other investment credit

purposes.

NOL carryover is not available to a

property (code E). Attach a statement

Note. Schedule B, line 15 equals the

beneficiary as an excess deduction.

that shows the basis of and

sum of all Schedule K-1s, box 1, 2a, 3,

However, if the last tax year of the

corresponding lines for reporting

4a, 5, 6, 7, and 8.

estate or trust is also the last year in

property qualifying for the energy credit,

which an NOL carryover may be taken

AMT adjustment attributable to

qualifying advanced coal project credit,

(see section 172(b)), the NOL carryover

qualified dividends, net short-term

and qualifying gasification project

is considered an excess deduction on

capital gains, or net long-term

credit. If the statement shows an

-49-

Instructions For Beneficiary Filing Form 1040 - Internal Revenue Service, Tax Products Coordinating Committee Of Washington - 2007 Page 6

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