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15678: PA - RK1/NRK1 Income


Pennsylvania

Why does my Pennsylvania RK1/NRK1 list my entire trust income on one line?
 
Why doesn’t the PA K1 list the income separately and report interest income on the interest income line? 



The Fiduciary’s total income should be reported entirely on one line.  The type of income is irrelevant for Pennsylvania Fiduciary purposes. Its total, irrespective of its Pennsylvania defined income classes, is reported on line 6 (if an RK1 is received) or line 8 (if an NRK1 is received). This arrangement can be supported with the following information.

The Pennsylvania NRK1 and RK1s dedicate a line for Estate or Trust income. The reasons for this stem from information covered in Chapter 8 of the PA PIT Guide

 

The Pennsylvania Income Guide Chapter 8: Estates, Trusts and Decedents delineates that an estate or trust’s income is a distinct income class and, as such, income earned from different classes should be grouped into a single class of income, otherwise known as Estate and Trust income. This PIT guide also states that income earned by an estate (all of which forms a single class) differs from income received from a Partnership or S-corporation (entities that classify their income separately). This is the reason that a NR and RK1 offers several lines based on income class, but reports Estate or Trust income on one line. 

This law is reflected by the Pennsylvania income tax schedules (eg the Pennsylvania Schedules A, B etc) which backs out Partnership and S-Corporation income but ignores Estate or Trust income. These schedules ignore the Fiduciary income completely, because unlike a Partnership or S-Corporation, income earned by the Fiduciary does not make it to these schedules, as its entire income is reported as one line on the NR/RK1 and the Pennsylvania schedule J instead of by its class (ie interest income, dividend income etc).

Finally, the PA-41-k1 Instructions indirectly mention that a beneficiary’s income should be reported on one line, the other lines on the PA K1 pertain to either a Partnership or S-Corporation.



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