Schedule B

Schedule B is used to determine the estate’s or trust’s income distribution deduction. The amount for line 18 (“Income distribution deduction”) on page 1 of the 1041 return flows from line 15 of Schedule B. Entries to Schedule B can be made on screen 4.

Adjusted Tax-Exempt Interest

Adjusted tax-exempt interest is a calculated amount (based on entries made elsewhere in the program, such as screens INT and DIV) that flows to line 2 of Schedule B. The calculated amount can be overridden with an entry on line 1 (“Charitable contributions allocable to tax-exempt income”) in the WK_TAXEX section of screen 3. The calculations are shown on worksheet “Wks TAXEX” in View/Print mode.

Schedule A, Line 4 Adjustment

Line 4 (“Adjustments for Schedule A, line 4”) in the Schedule B section of screen 4 is an adjustment field; an amount entered here is combined with the amount entered on line 4 of the Schedule A section of screen 4. (This pertains only to trusts other than simple trusts.)

For an estate or trust other than a simple trust or full grantor type trust, amounts must be entered on line 9 (and 10, if applicable) of screen 4 in order for the income distribution deduction to be calculated correctly.

Total Distributions

Line 11 (“Total distributions”) of Schedule B is calculated automatically by the program when the return is generated. If the calculated amount is greater than the amount on line 8 of Schedule B, and your client is filing for a complex trust that has previously accumulated income, Schedule J (Accumulation Distribution for Certain Complex Trusts) may be required. Use screen J to complete Schedule J in Drake Tax.

Schedule K-1

Schedule K-1 (Form 1041) is used to report a beneficiary’s share of income, deductions, and credits from either a trust or a decedent’s estate. In Drake Tax, many of the amounts generated on Schedule K-1 flow from elsewhere in the program. Use the override fields on the K1 screen to override program calculations. All income (the total of lines 1-8, excluding 2b, on the K1 screens) on all K-1s should agree with line 18, “Income distribution deduction,” of Form 1041. To see the formula used for calculating the amount for Schedule K-1, see worksheet “Wks Sch K-1” in View/Print mode.

Part I

Part I of the Schedule K-1 (Information About the Estate or Trust), is completed automatically based on the information entered on screen 1 of Drake Tax.

Part II

The following beneficiary information must be entered directly on screen K1:

• ID number — Enter the beneficiary’s SSN (for individuals) or entity’s ID number (for an entity). Mark the Form 1042S check box if this K-1 is for a Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. (Form 1042-S does not require an ID number.)

• Rounding Beneficiary — Mark this check box to indicate a rounding beneficiary. That beneficiary will be the one who receives any balancing amount on Schedule K-1 when the return is calculated.

• Name and Address

• Resident state (if different from address)

• Percentages — Use the Fed % and State % fields to indicate the percentage of income, deductions, or credits that the beneficiary received. For instance, to divide the income, deductions, or credits equally among four federal K-1s, enter 25—for 25 percent—in each beneficiary’s Fed % field.

• Foreign beneficiary — Mark the Foreign beneficiary box to indicate that the beneficiary is a nonresident alien individual, a foreign corporation, or a foreign estate or trust.

The K1 screen also has check boxes for indicating an Amended K-1 and a Final K-1.​​ From the K1 screen, press PAGE DOWN to create additional K-1 schedules.

Part III

Part III, “Beneficiary’s Share of Current Year Income, Deductions, Credits, and Other Items,” of Schedule K-1 is completed automatically by the program based on information entered elsewhere in the program. Use the corresponding fields on screen K1 only if you want to override program calculations for a particular item. For instance, if you place an entry in the override field of line 2a, “Ordinary dividends,” the program accepts this amount (up to the amount in column A of the “Wks Sch K-1” worksheet in View/Print mode); otherwise the program uses the amount calculated on the “Wks Sch K-1” worksheet multiplied by the beneficiary’s percentage.

Flow of Depreciation

To have the applicable amount of depreciation, depletion, and amortization flow to Schedules C, E, or F rather than to line 9 of the beneficiary’s Schedule K-1, go to screen 1 and mark the box that states Carry the applicable amount... under the Other Information section. (The trust instrument, state law, or federal law should provide guidance.) Note that an estate or trust cannot make an election under section 179 to expense certain tangible property.