Form 41 - Schedule K-1 - Fiduciary Income Tax Return

erty owned or business transacted in Alabama. An explanation for

applied to income and deductions determined under Alabama income

the difference in the federal amount of income and the Alabama

tax law.

amount of income must be clearly provided for each source of income.

Tax Exempt Income. Tax exempt interest income for Alabama in-

Any non-Alabama source income must be boldly disclosed as an Ala-

come tax purposes can differ from tax exempt interest income for fed-

bama adjustment arriving at the proper amount of Alabama income.

eral purposes. Interest income from obligations of the United States

Line 9. Enter in each column the sum of the amounts entered in

or its possessions is taxable for federal income tax purposes and is ex-

lines 1 through 8.

empt for Alabama income tax purposes. Interest income from the ob-

Lines 10 through 16 – For the deduction items identified by the

ligations of the State of Alabama and the obligations of Alabama local

line titles: (Do not include net operating losses.)

political subdivisions is exempt for federal income tax purposes, and

is exempt for Alabama income tax purposes. Interest income from

– Enter in column A the amount of deduction claimed on the fed-

non-Alabama state and local government obligations is exempt for

eral Form 1041 return.

federal income tax purposes, but not for Alabama income tax pur-

– Enter in column B the amount the deduction claimed in col-

umn A must be adjusted to result in the deduction claimed in column

poses – see §40-18-14.

C. Increases should be indicated as a positive amount, and de-

Federal Passive Activity Loss Restrictions. Estates and trusts

creases should be shown as a negative amount.

are subject to certain federal passive activity loss restrictions, which

are not applicable in computing Alabama taxable income.

– Enter in column C the amount of deduction allowed in accor-

Capital Gains and Losses. While federal income tax law may

dance with Alabama income tax law.

limit the amount of capital losses that may be claimed by a taxpayer

Federal Estate Tax and Federal Income Tax. Include in the

in a tax year, in computing Alabama taxable income estates and trusts

amount entered on line 11, the deduction for federal estate tax and

shall report gains and losses in accordance with §40-18-8.

federal income tax, and provide supporting documentation disclosing

the amount of each of those federal taxes that are included in line 11.

Net Operating Loss. In computing Alabama taxable income an

Federal income tax must be deducted in accordance with §40-18-15,

estate or trust is only entitled to the net operating loss deduction pro-

vided for individual taxpayers in §40-18-15.2.

and Alabama Income Tax Regulation Number 810-3-15-.20. Gener-

ally, individuals, and estates and trusts, must report the federal in-

a Federal Employment Tax Credit. Certain federal employment tax

come tax deduction on the accrual basis.

Deductions not Claimed on the Federal Return in Order to Take

credits require the wages to be reduced by the amount of the credit

Alabama Adjusted Gross Income. Line 16 refers to a 2% of Ad-

taken – the amount the wages were reduced would be allowed as a

justed Gross Income (AGI) floor. AGI for federal income tax purposes

may differ from the Alabama AGI. Alabama Adjusted Gross Income is

deduction for Alabama income tax purposes.

computed by subtracting from Schedule B, line 9, column C (Total In-

come – Alabama Amount): (1) the administration costs of the estate

Schedule K – Summary of

or trust included in Schedule B, lines 12, 14, and 15, column C; (2) the

Alabama K-1 Information

Alabama Income Distribution Deduction (page 1, line 2); (3) the ex-

Schedule K is a summary of the information reported on the Ala-

emption Allowed the Estate or Trust (page 1, line 3); and, (4) the Ala-

bama Schedule K-1s, which are prepared and filed as a part of the

bama Net Operating Loss Deduction. If Alabama AGI is less than

Alabama Form 41 return. Lines 1 through 13c on Schedule K coincide

zero, use zero in any computations where Alabama AGI is required.

with the lines in Part III (Beneficiary’s Share of Alabama Current Year

Line 17. Enter in each column the sum of the amounts entered in

Income, Deductions, Credits, and Other Items) on the Alabama

lines 10 through 16.

Schedule K-1 (Form 41).

Line 18a. Subtract line 17, column A, (Total Ordinary Deductions)

Character of Income – In accordance with §40-18-25(b), the char-

from line 9, column A (Total Income). The amount entered on line 18a

acter of the income that is reported by the beneficiary or owner of an

must agree with the amount entered on page 1, line 17, of the federal

estate or trust must reflect the same character the income possessed

Form 1041 filed for the estate or trust.

when the income was originally received by the estate or trust.

Line 18b. Subtract line 17, column B from line 9, column B. Enter

the net effect the Alabama adjustments have on the Federal Adjusted

The amount entered in page 1, line 2 must be allocated to the differ-

Allocation of the Alabama Income Distribution Deduction –

Total Income shown on line 18a. Adjustments resulting in an increase

ent classes of income included in the Alabama Distributable Net In-

in Total Income would be reflected in the amount shown on line 18b

come, so that the income reported by the beneficiaries or owners will

as a positive amount, and adjustments resulting in an increase in Total

retain its character. Generally the allocation is completed in accor-

Ordinary Deductions would be reflected in the amount shown on line

dance with Internal Revenue Code §§652 and 662.

18b as a negative amount.

Line 18c. Subtract line 17, column C from line 9, column C. The

Preparation of Alabama

amount entered on line 18c must agree with the amount entered on

Schedule K-1 (For Form 41)

Alabama Fiduciary Income Tax Beneficiary Information. Enter

page 1, line 1, of the Alabama Form 41 filed for the estate or trust.

the tax year information if other than for a calendar year. Also, on the

The amount on line 18c must equal the difference in line 18a and line

upper right area of the form indicate if the Schedule K-1 is a final K-1

18b.

or an amended K-1.

Line 19. Please provide the requested information concerning tax

exempt income. Column C must equal the amount of tax exempt in-

Part I – Information about the Estate or Trust. Enter information

come in accordance with Alabama income tax law. Please also pro-

requested about the entity.

vide a complete explanation for the items reported on this line.

Part II – Information about the Beneficiary. Enter beneficiary

information.

Although Internal Revenue Code Subchapter J has been adopted by

Schedule B – Possible Reasons for an Alabama Adjustment.

Deductions, Credits, and Other Items. Generally, Alabama resident

Alabama income tax law, the computations of Subchapter J will be

Part III – Beneficiary’s Share of Alabama Current Year Income,

Form 41 - Schedule K-1 - Fiduciary Income Tax Return - 2014 Page 3

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