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

Line 13. Subtract the line 12 from line 11.

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

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

Line 14. Subtract line 5 from line 7. Enter zero if equal to zero or

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

less.

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

Line 15. Enter the smallest of the amounts entered on lines 13 or

exemption Allowed the Estate or Trust (page 1, line 3); and, (4) the

14, but not less than zero.

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

Schedule B – Computation of Alabama

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

Adjusted Total Income.

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

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

Lines 1 through 8 – For the income items identified by the line

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

titles: (Do not include net operating losses.)

Form 1041 filed for the estate or trust.

– Enter in column A the amount of income reported on the fed-

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

eral Form 1041 return.

the net effect the Alabama adjustments have on the Federal Adjusted

– Enter in column B the amount the income reported in column

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

A must be adjusted to result in the income reported in column C. In-

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

creases should be indicated as a positive amount, and decreases

a positive amount, and adjustments resulting in an increase in Total Or-

should be shown as a negative amount.

dinary Deductions would be reflected in the amount shown on line 18b

– Enter in column C the amount of income to be reported in ac-

as a negative amount.

cordance with Alabama income tax law.

Net Alabama Capital Gain or (Loss). Line 4, column C, must

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

equal the net Alabama capital gain or (loss) for the tax year, computed

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

in accordance with §§40-18-6, 7, and 8. Please provide a complete

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

explanation and computation for the total amount of gains and losses

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

reported on this line – specifically identify those amounts not allocated

18b.

to trust corpus. Summaries of the transactions can be provided if a

Line 19. Please provide the requested information concerning tax

complete listing of the transactions would result in a large and bulky

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

attachment – but the complete listings must be promptly provided per

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

written request by The Alabama Department of Revenue.

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

Non-Alabama Source Income. Nonresident estates or trusts

Schedule B – Possible Reasons for an Alabama Adjustment.

must report as Alabama source income that income earned from prop-

Although Internal Revenue Code Subchapter J has been adopted by

erty owned or business transacted in Alabama. An explanation for the

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

difference in the federal amount of income and the Alabama amount

plied to income and deductions determined under Alabama income

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

tax law.

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

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

adjustment arriving at the proper amount of Alabama income.

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

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

eral purposes. Interest income from obligations of the United States

lines 1 through 8.

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

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

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

titles: (Do not include net operating losses.)

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

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

political subdivisions is exempt for federal income tax purposes, and

federal Form 1041 return.

is exempt for Alabama income tax purposes. Interest income from

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

non-Alabama state and local government obligations is exempt for fed-

A must be adjusted to result in the deduction claimed in column C. In-

eral income tax purposes, but not for Alabama income tax purposes

creases should be indicated as a positive amount, and decreases

– see §40-18-14.

should be shown as a negative amount.

Federal Passive Activity Loss Restrictions. Estates and trusts

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

are subject to certain federal passive activity loss restrictions, which

dance with Alabama income tax law.

are not applicable in computing Alabama taxable income.

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

Capital Gains and Losses. While federal income tax law may limit

lines 10 through 16.

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

Federal Estate Tax and Federal Income Tax. Include in the

year, in computing Alabama taxable income estates and trusts shall re-

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

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

federal income tax, and provide supporting documentation disclosing

Net Operating Loss. In computing Alabama taxable income an

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

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

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

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 income

Deductions not Claimed on the Federal Return in Order to Take

tax deduction on the accrual basis.

a Federal Employment Tax Credit. Certain federal employment tax

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

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

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

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

may differ from the Alabama AGI. Alabama Adjusted Gross Income

deduction for Alabama income tax purposes.

Form 41 - Schedule K-1 Fiduciary Income Tax Return Instructions - 2013 Page 3

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