Instructions For Schedule P (Form 541) - 2016 (Page 2 of 7) in pdf

F Optional Write-off for Certain Adjustments

Proportionate interest means:

1. In the case of a pass-through entity which reports a profit for the

and Tax Preferences

taxable year, your profit interest in the entity is reported as of the end

Under IRC Section 59(e), the estate or trust may elect to deduct certain

of your taxable year.

adjustments and tax preferences ratably over a period of time. If this

2. In the case of a pass-through entity which reports a loss for the

election is made, the optional write-off period is used for regular tax and

taxable year, your loss interest in the entity is reported as of the end

there is no AMT adjustment on Schedule P (541). The items for which

of your taxable year.

this election can be made are:

3. In the case of a pass-through entity which is sold or liquidates during

• Circulation expenditures under IRC Section 173(a).

the taxable year, your capital account interest in the entity is reported

as of the time of the sale or liquidation.

• Research and experimental expenditures under IRC Section 174(a).

• Intangible drilling and developmental expenditures under

Proportionate interest includes an interest in a pass-through entity

IRC Section 263(c).

including a S corporation, partnership, RIC, REIT, or REMIC.

• Development expenditures for mines and natural deposits under

Eligibility

IRC Section 616(a).

The AMTI exclusion is only available for the AMTI of the estate or trust.

• Mining and exploration expenditures under IRC Section 617(a).

The exclusion may not be passed through to beneficiaries. Therefore,

• Grapevines replanted as a result of phylloxera infestation or

if the estate or trust qualifies for this exclusion, it must complete two

Pierce’s Disease.

Schedules P (541): one for the estate’s or trust’s computation of AMTI

The estate or trust may elect to deduct circulation expenditures over

and AMT, and one for the computation of AMTI, adjustments and

three years and intangible drilling and developmental expenditures over

preference items on Schedule K-1 (541).

60 months. The estate or trust may elect to deduct the remaining items

The fiduciary should complete the first Schedule P (541) for the estate

over 10 years. For intangible drilling and developmental expenditures,

or trust as follows:

the write-off period begins with the month the expenditure was paid or

1. Make no entry for AMT adjustments and tax preferences attributable

incurred.

to any trade or business of the estate or trust (line 4 items).

The election must be made in the year of the expenditure and may be

2. Enter all taxable income attributable to any trade or business of the

revoked only with the consent of the Franchise Tax Board. If the estate

estate or trust on line 7b.

or trust made the election for any of the above items, do not adjust

The fiduciary should complete the second Schedule P (541) for the

for those items on this schedule. See IRC Section 59(e) for more

beneficiary as follows:

information.

1. Enter the AMT adjustments and tax preferences attributable to any

Additional information

trade or business of the estate or trust on the appropriate lines

For more information, get federal Schedule I (Form 1041), Alternative

(line 4 items).

Minimum Tax – Estates and Trusts.

2. Make no entry on line 7b.

G Alternative Minimum Taxable Income (AMTI)

See second Schedule P (541) when entering AMTI and adjustments and

Exclusion

taxable preference items on Schedule K-1 (541), line 12. The estate or

trust should also have completed a second Schedule P (541) for the

A qualified taxpayer shall exclude income, positive and negative

prior taxable year, and refer to it to compute the amount for Schedule

adjustments, and preference items attributable to any trade or business

K-1 (541), line 11(d), if applicable.

when figuring AMTI. These adjustments and preference items must

also be excluded when calculating any deductions that may result in

H Internet Access

AMT carryovers. You are a qualified taxpayer if you meet both of the

You can download, view, and print California tax forms and publications

following:

at ftb.ca.gov.

• Own or have an ownership interest in a trade or business.

Access other California state agency websites at ca.gov.

• Have aggregate gross receipts, (less returns and allowances)

during the taxable year of less than $1,000,000 from all trades

Specific Line Instructions

or businesses for which you are the owner or have an ownership

interest. Gross receipts may include, but are not limited to, items

reported on federal Schedule C (Form 1040), Profit or Loss from

Part I – Fiduciary’s Share of Alternative Minimum Taxable

Business; Schedule D (Form 1040), Capital Gains and Loss;

Income (AMTI)

Schedule E (Form 1040), Supplemental Income and Loss (other

Line 2 – Net Operating Loss (NOL) Deduction

than income from a trust); or Schedule F (Form 1040), Profit or

For more information, see form FTB 3805V.

Loss from Farming; and from federal Form 4797, Sales of Business

Line 4 – For line 4a through line 4s, enter each adjustment as a positive

Property, (figured in accordance with California law) or California

Schedule D-1, Sales of Business Property, (if required to complete it)

amount unless instructed otherwise.

that are associated with a trade or business. In the case of an

Line 4a – Interest

ownership interest, you include only the proportional share of gross

In determining the AMTI, qualified residence interest, other than

receipts of any trade or business from a S corporation, partnership,

qualified housing interest defined in IRC Section 56(e), is not allowed

regulated investment company (RIC), a real estate investment trust

as a deduction. Only home mortgage interest that meets the definition

(REIT), or real estate mortgage investment conduit (REMIC) in

of “qualified housing interest” is deductible for AMT purposes. The AMT

accordance with your ownership interest in the enterprise.

adjustment is that portion of home mortgage interest deductible for

regular tax purposes that is not qualified housing interest.

Aggregate gross receipts, less returns and allowances means the sum

of the gross receipts of the trades or businesses which you own and the

Qualified housing interest. Qualified housing interest is interest paid

proportionate interest of the gross receipts of the trades or businesses

or accrued by the trust or estate on debt incurred to acquire, construct,

which you own and of pass-through entities in which you hold an

or substantially rehabilitate a residence held by the estate or trust that

interest.

secures the debt and is utilized by a beneficiary of the estate or trust as

Gross receipts, less returns and allowances means the sum of the

his or her primary residence or second home. The beneficiary must also

gross receipts from the production of business income, as defined in

have a present interest or an interest in the residuary of the estate or

trust.

R&TC Section 25120(a), and the gross receipts from the production of

nonbusiness income, as defined in R&TC Section 25120(d).

Page 2 Schedule P (541) Instructions 2016

Instructions For Schedule P (Form 541) - 2016 Page 2

Related Articles

Related forms

Related Categories