Fillable Form Sc1041 - Fiduciary Income Tax Return

FEDERAL ADJUSTMENTS

Any taxpayer whose income has been adjusted by the Internal Revenue Service should report such adjustments to the SC Department of

Revenue after the federal adjustments are agreed to or become final between the taxpayer and the Internal Revenue Service. Such

adjustment shall be reported by filing an amended return for the applicable taxable year and attaching a copy of the revenue agent's report

detailing such adjustments.

FIDUCIARY REPORTING OBLIGATIONS TO BENEFICIARIES

Fiduciaries must provide to each resident beneficiary the amount of fiduciary adjustment to be used in the preparation of the beneficiary's

South Carolina individual income tax return. (See column 4, Part II, page 2 of SC1041). In addition, fiduciaries must provide to each

nonresident beneficiary the amount of the nonresident beneficiary's share of income and credits from Part IV, page 3 of SC1041. Fiduciary

adjustments and beneficiaries' shares of fiduciary adjustments, and beneficiaries' shares of income and credits are computed in Parts I, II, III,

and IV, pages 2 and 3 of SC1041. The following rules explain which of these parts should be completed.

If a resident estate or trust has only resident beneficiaries, or if no amounts are distributable to nonresident beneficiaries, then it is

necessary to complete only Parts I and II.

If a resident estate or trust has nonresident beneficiaries, then it is generally necessary to complete all parts. However, if amounts

distributed to nonresidents are non-taxable, then Part IV may be omitted.

If all income of a resident estate or trust is taxable to the fiduciary and no distributions are made, or required to be made, then only Part

I must be completed.

If a nonresident estate or trust has resident and/or nonresident beneficiaries, then all parts must be completed. However, if all income

is taxable to the fiduciary, then only Parts III and V are required to be completed.

DEDUCTIBILITY OF EXPENSES OF ADMINISTRATION

Expenses of administering an estate must be deducted in the same manner that they are deducted for federal tax purposes. If these

expenses are deducted on the federal fiduciary Form 1041, they may be deducted only on the SC1041 South Carolina fiduciary return and

may not be deducted for South Carolina estate tax purposes. If these expenses are deducted for federal estate tax purposes they may be

deducted only for South Carolina estate tax purposes and may not be deducted on the SC1041 South Carolina fiduciary return.

EXEMPT TRUST

A trust which by reason of its purpose or activities is exempt from federal income tax is also exempt from South Carolina income tax.

CHARITABLE REMAINDER TRUSTS

Internal Revenue Code Section 664 which prescribes the basic rules for charitable remainder trusts has been adopted by South Carolina for

income tax purposes. Therefore the South Carolina income tax treatment of these trusts is generally the same as for federal income tax.

After preparing the required annual federal filing forms including Form 5227 (Split-Interest Trust Information Return) complete the information

section on Page 1 of SC1041. At the top of page 1, type or print the following statement:

"This is a charitable remainder trust as described in Internal Revenue Code Section 664. See attached Form 5227 for South Carolina

income."

To prepare Form 5227 for South Carolina income, prepare a separate federal Form 5227 taking into account the differences in federal and

state taxable income. For a summary of these differences, see Instructions to SC1041, Part I. Divide the South Carolina taxable income by

the federal taxable income. Use that fraction to prorate the beneficiaries' South Carolina fiduciary adjustment. Indicate the proration on each

SC1041 K-1 form. Attach copies of all federal forms filed in the year to the South Carolina forms.

DECLARATION OF ESTIMATED TAX

Information on which fiduciaries must file a declaration of estimated tax follows the specific line instructions for SC1041.

SPECIFIC LINE INSTRUCTIONS FOR SC1041

Heading - Enter the name, address, federal employer identification number, and county of the estate or trust in the appropriate blanks on

page 1. Answer all questions at the top of the fiduciary form.

Line 1 - Federal Taxable Income of Fiduciary: Enter on line 1 the federal taxable income shown on page 1 of the federal fiduciary return,

Form 1041. Nonresident estates and trusts should enter on line 1 the amount reported on line 22, column D, Part III, page 3 of SC1041.

(See instructions for "Part III - Computation of the Federal Taxable Income of the Estate or Trust from South Carolina Sources.")

Line 2 - Federal Fiduciary Exemption: Enter on line 2 the fiduciary exemption claimed on the federal income tax return to the extent it is

included in the amount reported on line 1. (See federal Form 1041, line 20)

Form Sc1041 - Fiduciary Income Tax Return - 2014 Page 5

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