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Beneficiary’s Instructions for Schedule K-1 (541)

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2009, and to the California Revenue and Taxation Code (R&TC).

General Information

are not deductible in computing the entity’s

If there is no California form or schedule

taxable income (i.e., distributions of corpus or

on which to compute your passive activity

tax-exempt income) usually are not taxable to

loss adjustment amount on (i.e., rental loss

Purpose

the beneficiary.

from passive activities), you may figure

The estate or trust uses Schedule K-1 (541),

the adjustment amount on the California

Resident beneficiaries are taxed on income

Beneficiary’s Share of Income, Deductions,

Adjustment Worksheets in the instructions

distributed or distributable from all sources.

Credits, etc., to report your share of the estate’s

for form FTB 3801. Enter the total of your

Nonresident beneficiaries are taxed only on

or trust’s income, deductions, credits, etc.

adjustments from these worksheets from

income distributed or distributable that is

Your name, address, and tax identification

all passive activities on Schedule CA (540

derived from sources within California (R&TC

number, as well as the estate’s or trust’s name,

or 540NR), line 17, column B or line 17,

Section 17953).

address, and tax identification number, should

column C, whichever is appropriate.

For purposes of this section, the nonresident

be entered on the Schedule K-1 (541). Keep

Line 1 – Interest

beneficiary is deemed the owner of intangible

Schedule K-1 (541) for your records. Do not file

If you have an amount on Schedule K-1 (541),

personal property from which the income of

it with your tax return. The estate or trust has

line 1, column (c), report this amount on

the estate or trust is derived. Therefore, such

filed a copy with the Franchise Tax Board (FTB).

Schedule CA (540 or 540NR), line 8, column B

income is taxed at the beneficiary’s domicile.

You are subject to tax on your share of the

or column C, whichever is applicable.

The estate or trust will attach a schedule

estate’s or trust’s income, and you must

Line 2 – Dividends

of intangible income, such as income from

include your share on your individual tax

If you have an amount on Schedule K-1

stocks, bonds, bank accounts, and notes,

return.

(541), line 2, column (c), report this amount

whose source is dependent upon the residence

Schedule K-1 (541), column (b) shows

on Schedule CA (540 or 540NR), line 9 (a),

or commercial domicile of the taxpayer. The

amounts from your federal Schedule K-1

column B or column C, whichever is applicable.

income on this schedule is not income from

(Form 1041), Beneficiary’s Share of Income,

California sources for nonresidents but is

Line 3 – Net capital gain or (loss)

Deductions, Credits, etc. Column (c) shows

income sourced at the beneficiary’s state of

If you have an amount on Schedule K-1 (541),

the difference between federal and California

residence or commercial domicile.

line 3, column (d), report this amount on

amounts. Column (d) shows your total

Schedule D (540 or 540NR), California Capital

amounts using California law by combining

Gain or Loss Adjustment, line 2, whichever is

Specific Line Instructions

column (b) and column (c). Column (e) shows

applicable.

your income and loss from California sources.

If you are a nonresident beneficiary, the

If there is an attachment to Schedule K-1

Generally, the amount of loss and deduction

California source amounts in column (e)

(541) that reports the disposition of a

you may claim on your tax return is limited

will help you identify the California source

passive activity, get form FTB 3801 for more

to your share of the estate or trust and the

adjusted gross income that must be reported

information.

amount for which you are considered at-risk.

on your Schedule CA (540NR) California

Line 5 – Other portfolio and nonbusiness

If you have losses, deductions, or credits from

Adjustments — Nonresidents or Part-Year

income

a passive activity, you must also apply the

Residents, column E.

If you have an amount on Schedule K-1

passive activity rules. It is the beneficiary’s

Part-year residents may be required to

(541), line 5, column (c), report this amount

responsibility to consider and apply any

calculate their IRC Section 652 or 662 income

on Schedule CA (540 or 540NR), line 17,

applicable limitations.

in a manner that produces a different result

column B or column C, whichever is applicable.

California law is generally the same as federal

than the amounts shown in column (e) of

Line 6 through Line 8 – Ordinary business,

law with regard to income, the character

this form. For more information, get FTB

net rental real estate, and other rental

of income, allocation of deductions, gifts,

Pub. 1100, Taxation of Nonresidents and

income

and bequests, and past years. Follow

Individuals Who Change Residency.

Read the instructions below before including

the instructions for federal Schedule K-1

Line 3 through Line 12

any amounts shown on Schedule K-1 (541),

(Form 1041) for these items.

You must report the amounts in column (c),

line 6, on Schedule CA (540 or 540NR),

Generally, you must report items shown on

adjustments, that are from nonpassive

line 17.

your Schedule K-1 (541) (and any attached

activities on the appropriate California form or

Passive activities: The deductions on line 6

schedules) the same way that the estate or

schedule as explained in these instructions.

may be subject to the passive loss limitation

trust treated the items on its tax return. If

Report the amounts in column (d), total

rules. In general, losses from passive activities

the treatment on your original or amended

amounts using California law, that are from

are allowed only to the extent of income from

tax return is inconsistent with the estate’s

passive activities on the appropriate California

passive activities.

or trust’s treatment, or if the estate or trust

form or schedule. Get form FTB 3801, Passive

If your passive activity deductions exceed your

was required to but has not filed a tax return,

Activity Loss Limitations, to transfer those

passive activity income, or you have passive

you must attach a statement identifying the

amounts and to figure the amount of your

inconsistency. Beneficiaries may be liable for

activity losses from any other source, you

passive activity loss limitation. Carry the

negligence penalties and penalties relating to

must use form FTB 3801 to figure your losses

passive activity amounts to the California

allowed from all passive activities.

mathematical errors if they cannot demonstrate

form or schedule to figure your California

that their treatment is consistent with the

adjustment amount. Enter this adjustment

estate or trust.

amount on the corresponding line on

Beneficiaries of estates and trusts include

Schedule CA (540 or 540NR) only if there is a

in their gross income their distributive

federal/California difference.

share of the fiduciary’s income distribution

deduction for the taxable year. Amounts that

are distributed by an estate or trust and that

Schedule K-1 (541) Beneficiary Instructions 2013 Page 1

California Schedule K-1 (Form 541) - Beneficiary'S Share Of Income, Deductions, Credits, Etc. - 2013 Page 2

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