U.S. Income Tax Return for Electing Alaska Native Settlement Trusts

PAGER/SGML

Userid: ________
Fileid: I1041N.SGM

❏

Leading adjust: 40%

Draft
(Init. & date)

( 7-Jan-2005)

❏

Ok to Print

Filename: D:\USERS\8szbb\documents\Epicfiles\I1041N.SGM

Page 1 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Department of the Treasury
Internal Revenue Service

Instructions for Form 1041-N
(Rev. January 2005)

U.S. Income Tax Return for Electing Alaska Native Settlement Trusts
Section references are to the Internal Revenue Code unless otherwise noted.

General Instructions Tax Treatment of an
Electing ANST
What’s New
This revision reflects the changes
necessary to implement the Jobs and
Growth Tax Relief Reconciliation Act of
2003. Use this revision for tax years
beginning after 2003. The changes are
all on Schedule D and are as follows:
• We deleted column (g) in Part I
and II,
• We deleted 7 lines from Part IV, and
• We removed the lines for the 8%
maximum capital gains tax on qualified
5-year gain, which has been repealed
for sales and other dispositions after
May 5, 2003 (and installment payments
received after that date).

Taxable Income
In general, an electing ANST’s taxable
income is computed in the same
manner as a trust that is taxable under
Subchapter J (which generally is
computed in the same manner as an
individual). However, the electing ANST
is not allowed to take an income
distribution deduction. It can claim an
exemption deduction, the amount of
which depends on the terms of the
trust.
See the Schedule K instructions for
information on the beneficiaries’ tax
treatment of distributions received from
the ANST.

Purpose of Form

Tax

An Alaska Native Settlement Trust
(ANST) may elect under section 646 to
have the special income tax treatment
of that section apply to the trust and its
beneficiaries. This one-time election is
made by filing Form 1041-N and the
form is used by the ANST to report its
income, deductions, gains, losses, etc.,
and to compute and pay any income
tax. Form 1041-N is also used for the
special information reporting
requirements that apply to ANSTs.

An electing ANST pays tax on its
taxable income, other than its net
capital gain, at the lowest rate specified
for single individuals (10%). Net capital
gain (and qualified dividends) is taxed
at the capital gains rate that applies to
a taxpayer subject to the lowest taxable
income rate for a single individual (5%).

Definitions
An Alaska Native Settlement Trust is a
settlement trust within the meaning of
section 3(t) of the Alaska Native Claims
Settlement Act (ANCSA).
An Alaska Native Corporation (ANC)
has the same meaning as the term
‘‘Native Corporation’’ has under section
3(m) of the ANCSA.
A sponsoring Alaska Native
Corporation means the ANC that
transfers assets to an electing
Settlement Trust.
A trustee is a fiduciary of the trust.
Any reference in these instructions to
“you” means the trustee of the trust.

Disqualifying Acts
If, at any time, a beneficial interest in an
ANST may be disposed of to a person
in a manner that is not permitted by
section 7(h) of ANCSA (if the interest
were settlement common stock), then:
• The ANST may not elect the special
tax treatment under section 646 for
itself and its beneficiaries, and
• If the election is in effect at that time:
1. The election will not apply as of
the first day of the tax year in which a
disposition is first allowed,
2. The tax treatment allowed on this
form (section 646) will not apply to the
trust for that tax year and all
subsequent tax years, and
3. The distributable net income of
the trust will be increased by the
current or accumulated earnings and
profits of the sponsoring ANC as of the
close of the tax year after adjustment is
made for all distributions made by the
sponsoring ANC during the tax year.
However, this increase is limited to the
Cat. No. 38105U

fair market value of the trust’s assets as
of the date the beneficial interest of the
trust first becomes disposable.
If stock in the sponsoring ANC may
be disposed of to a person in a manner
that is not allowed by section 7(h) of
ANCSA (if the stock were settlement
common stock) and at any time after
such disposition of stock is first allowed,
the corporation transfers assets to an
ANST, then items 1, 2, and 3 above will
apply to the ANST in the same manner
as if the ANST allowed dispositions of
beneficial interests in the ANST in a
manner not allowed by section 7(h) of
ANCSA.
The surrender of an interest in an
ANC or an ANST by the beneficiary or
stockholder for a whole or partial
redemption or for the whole or partial
liquidation of the trust or corporation will
be considered a transfer allowed by
section 7(h) of the ANCSA.

Information Reporting
Requirements
Electing ANSTs must complete
Schedule K and file it with Form
1041-N. The ANST must also provide a
copy of Schedule K to the sponsoring
ANC by the date Form 1041-N is
required to be filed with the IRS. The
ANST is not required to provide
information to the beneficiaries on
distributions made to them. The
sponsoring ANC will provide the
beneficiaries with any required
information.

Who Must File
The trustee of any electing ANST
having any taxable income, or having
gross income of at least $600 for the
tax year, must file Form 1041-N for that
year.

Making the Election
The trustee of an ANST must
make this election by the due
CAUTION date (including extensions) for
filing the ANST’s tax return for its first
tax year.
The trustee makes the election for
the ANST by signing Form 1041-N in

!

Page 2 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

the signature block on page 1. The
return must be filed by its due date
(including extensions) for filing the
ANST’s tax return for its first tax year.
Once the election is made, it applies to
all subsequent years and may not be
revoked.

When To File
ANSTs file Form 1041-N by the 15th
day of the 4th month following the close
of the tax year. If the due date falls on a
Saturday, Sunday, or a legal holiday,
file on the next business day.

Private Delivery Services
You can use certain private delivery
services designated by the IRS to meet
the ‘‘timely mailing as timely filing/
paying’’ rule for tax returns and
payments. These private delivery
services include only the following.
• DHL Express (DHL): DHL Same Day
Service, DHL Next Day 10:30 am, DHL
Next Day 12:00 pm, DHL Next Day
3:00 pm, and DHL 2nd Day Service.
• Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, FedEx
International First.
• United Parcel Service (UPS): UPS
Next Day Air, UPS Next Day Air Saver,
UPS 2nd Day Air, UPS 2nd Day Air
A.M., UPS Worldwide Express Plus,
UPS Worldwide Express.
The private delivery service can tell
you how to get written proof of the
mailing date.
Any changes to this list will be
published in the Internal Revenue
Bulletin.

Extension of Time To
File
Use Form 8736, Application for
Automatic Extension of Time To File
U.S. Return for a Partnership, REMIC,
or for Certain Trusts, to request an
automatic 3-month extension of time to
file.
If more time is needed, file Form
8800, Application for Additional
Extension of Time To File U.S. Return
for a Partnership, REMIC, or for Certain
Trusts, for an additional extension of up
to 3 months. To obtain this additional
extension of time to file, you must show
reasonable cause for the additional
time you are requesting. Form 8800
must be filed by the extended due date
for Form 1041-N.
An extension of time to file does not
extend the time to pay the tax.

Where To File

Accounting Methods

File Form 1041-N with the Internal
Revenue Service Center, Ogden, UT
84201.

Figure taxable income using the
method of accounting regularly used in
keeping the ANST’s books and records.
Generally, permissible methods include
the cash method, the accrual method,
or any other method authorized by the
Internal Revenue Code. In all cases,
the method used must clearly reflect
income.
Generally, the ANST may change its
accounting method (for income as a
whole or for any material item) only by
getting consent on Form 3115,
Application for Change in Accounting
Method. For more information, see Pub.
538, Accounting Periods and Methods.

Who Must Sign
The trustee or an authorized
representative must sign Form 1041-N.

Paid Preparer
Generally, anyone who is paid to
prepare a tax return must sign the
return and fill in the other blanks in the
Paid Preparer’s Use Only area of the
return. The person required to sign the
return must complete the required
preparer information and:
• Sign it in the space provided for the
preparer’s signature, and
• Give you a copy of the return in
addition to the copy to be filed with the
IRS.

Paid Preparer Authorization
If the trustee wants to allow the IRS to
discuss the ANST’s tax return with the
paid preparer who signed it, check the
“Yes” box in the signature area of the
return. This authorization applies only
to the individual whose signature
appears in the “Paid Preparer’s Use
Only” section of the ANST’s return. It
does not apply to the firm, if any, shown
in that section.
If the “Yes” box is checked, the
trustee is authorizing the IRS to call the
paid preparer to answer any questions
that may arise during the processing of
the ANST’s return. The trustee is also
authorizing the paid preparer to:
• Give the IRS any information that is
missing from the ANST’s return,
• Call the IRS for information about the
processing of the ANST’s return or the
status of its refund or payment(s), and
• Respond to certain IRS notices that
the trustee has shared with the
preparer about math errors, offsets, and
return preparation. The notices will not
be sent to the preparer.
The trustee is not authorizing the
paid preparer to receive any refund
check, bind the ANST to anything
(including any additional tax liability), or
otherwise represent the ANST before
the IRS. If the trustee wants to expand
the paid preparer’s authorization, see
Pub. 947, Practice Before the IRS and
Power of Attorney.
The authorization cannot be
revoked. However, the authorization will
automatically end no later than the due
date (without regard to extensions) for
filing the ANST’s next tax return.

-2-

Accounting Periods
All electing ANSTs must adopt a
calendar year.

Rounding Off to Whole
Dollars
You may round off cents to whole
dollars on the ANST’s return and
schedules. If you do round to whole
dollars, you must round all amounts. To
round, drop amounts under 50 cents
and increase amounts from 50 to 99
cents to the next dollar. For example,
$1.39 becomes $1 and $2.50
becomes $3.
If you have to add two or more
amounts to figure the amount to enter
on a line, include cents when adding
the amounts and round off only the
total.

Estimated Tax
Generally, an ANST must pay
estimated income tax if it expects to
owe, after subtracting withholding and
credits, at least $1,000 in tax. For
details and exceptions, see Form
1041-ES, Estimated Income Tax for
Estates and Trusts.

Interest and Penalties
Interest
Interest is charged on taxes not paid by
the due date, even if an extension of
time to file is granted. Interest is also
charged on the failure-to-file penalty,
the accuracy-related penalty, and the
fraud penalty. The interest charge is
figured at a rate determined under
section 6621.

Late Filing of Return
The law provides a penalty of 5% of the
tax due for each month, or part of a
month, the return is not filed up to a
maximum of 25% of the tax due. If the

Page 3 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

return is more than 60 days late, the
minimum penalty is the smaller of $100
or the tax due. The penalty will not be
imposed if you can show that the failure
to file on time is due to reasonable
cause. If the failure is due to
reasonable cause, attach an
explanation to the return.

Late Payment of Tax
Generally, the penalty for not paying
the tax when due is 1/2 of 1% of the
unpaid amount for each month or part
of a month it remains unpaid. The
maximum penalty is 25% of the unpaid
amount. The penalty is imposed on the
net amount due. Any penalty is in
addition to interest charges on late
payments.
If you include interest or either
of these penalties with your
CAUTION payment, identify and enter
these amounts in the bottom margin of
Form 1041-N. Do not include the
interest or penalty amount in the
balance of tax due on line 18.

!

Underpaid Estimated Tax
If the trustee underpaid estimated tax,
use Form 2210, Underpayment of
Estimated Tax by Individuals, Estates,
and Trusts, to figure any penalty. Enter
the amount of any penalty in the bottom
margin of Form 1041-N. Do not include
it in the balance of tax due on line 18.

Other Penalties
Other penalties can be imposed for
negligence, substantial understatement
of tax, and fraud. See Pub. 17, Your
Federal Income Tax, for details on
these penalties.

Specific Instructions
Part I — General
Information
Enter the year (or period) for which you
are filing for the electing ANST.

Line 1—Name of Trust
Copy the exact name from the Form
SS-4 used to apply for the employer
identification number you are using to
file Form 1041-N.

Line 3a—Name and Title of
Trustee
Enter the name and title (if any) of the
trustee. If a fiduciary relationship was
created or terminated, be sure to file
Form 56, Notice Concerning Fiduciary
Relationship.

If a fiduciary relationship was not
created or terminated but the fiduciary
had a change in name or another
fiduciary’s name was entered, be sure
to check the “Change in fiduciary’s
name” box on line 6.

Line 3b—Address
Include the suite, room, or other unit
number after the street address. If the
Post Office does not deliver mail to the
street address and you have a P.O.
box, show the box number instead of
the street address.
If you change your address after
filing Form 1041-N, use Form 8822,
Change of Address, to notify the IRS.
If a different address from the prior
year was entered and Form 8822 was
not filed, be sure to check the box on
line 6 for “Change in fiduciary’s
address.”

Line 6
Be sure to check all the boxes that
apply. Also, see the line 3a and 3b
instructions above for information
regarding a change in the fiduciary’s
name and for information on changes
to the fiduciary’s address.

Part II — Tax
Computation
Income
Line 2a—Total Ordinary
Dividends
Report the total of all ordinary dividends
received during the tax year.

Line 2b—Qualified Dividends
Enter the ANST’s total qualified
dividends on line 2b and use Part IV of
Schedule D to figure the ANST’s tax.
Qualified dividends are eligible for a
lower tax rate than other ordinary
income. Generally, these dividends are
shown in box 1b of Form(s) 1099-DIV.
See Pub. 550 for the definition of
qualified dividends if you received
dividends not reported on Form
1099-DIV.
Exception. Some dividends may be
reported as qualified dividends in box
1b of Form 1099-DIV but are not
qualified dividends. These include:
• Dividends received on any share of
stock that the ANST held for less than
61 days during the 121-day period that
began 60 days before the ex-dividend
date. The ex-dividend date is the first
date following the declaration of a
dividend on which the purchaser of a
stock is not entitled to receive the next
dividend payment. When counting the

-3-

number of days the ANST held the
stock, include the day you disposed of
the stock but not the day you acquired
it.
• Dividends attributable to periods
totaling more than 366 days that the
ANST received on any share of
preferred stock held for less than 91
days during the 181-day period that
began 90 days before the ex-dividend
date. Preferred dividends attributable to
periods totaling less than 367 days are
subject to the 61-day holding period
rule above.
• Dividends on any share of stock to
the extent that the ANST under an
obligation (including a short sale) to
make related payments with respect to
positions in substantially similar or
related property.
• Payments in lieu of dividends, but
only if you know or have reason to
know that the payments are not
qualified dividends.

Line 3—Capital Gain or (Loss)
Enter the gain from Schedule D, line
11; or the loss from Schedule D,
line 12.
Note: Report capital gain distributions
on Schedule D (Form 1041-N), line 7.

Line 4—Other Income
List the type and amount of income not
included on lines 1a through 3. List the
type and amount on an attached
schedule if the ANST has more than
one item.

Deductions
Allocation of Deductions for
Tax-Exempt Income
Generally, no deduction that would
otherwise be allowable is allowed for
any expense that is allocable to
tax-exempt income, such as interest on
state or local bonds.
Exception. State income taxes and
business expenses that are allocable to
tax-exempt interest are deductible.
Expenses that are directly allocable
to tax-exempt income are allocable only
to tax-exempt income. A reasonable
proportion of expenses indirectly
allocable to both tax-exempt income
and other income must be allocated to
each class of income.

Limitations on Deductions
Generally, the amount an ANST has ‘‘at
risk’’ limits the loss it can deduct in any
tax year. Also, section 469 and its
regulations generally limit losses from
passive activities to the amount of
income derived from all passive
activities. Similarly, credits from passive

Page 4 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

activities are generally limited to the tax
attributable to such activities.
For details on these and other
limitations on deductions, see
Deductions in the Instructions for Form
1041.

Line 9—Other Deductions Not
Subject to the 2% Floor
Attach a schedule listing by type and
amount all allowable deductions that
are not deductible elsewhere on the
form. No deduction is allowed for
distributions to beneficiaries.

Line 10—Allowable
Miscellaneous Itemized
Deductions Subject to the 2%
Floor
These are deductible only to the extent
that the aggregate amount of such
deductions exceeds 2% of adjusted
gross income (AGI).
Among the miscellaneous itemized
deductions that must be included on
line 10 are expenses for the production
or collection of income, such as
investment advisory fees.
AGI is figured by subtracting from
total income on line 5 the total of the
administration costs on lines 7 through
9 (to the extent they are costs incurred
in the administration of the ANST that
would not have been incurred if the
property were not held by the ANST)
and line 11.

Line 11—Exemption
A trust whose governing instrument
requires all income to be distributed
currently is allowed a $300 exemption,
even if it distributed amounts other than
income during the tax year. All other
trusts are allowed a $100 exemption.

Tax and Payments
Line 14—Tax
If the ANST does not have a net capital
gain or qualified dividends and has an
amount greater than zero on line 13,
check the first box on line 14, multiply
the amount on line 13 by 10%, and
enter the result on line 14.
Schedule D. If the ANST had net
capital gain (or qualified dividends) and
any taxable income, complete Part IV
of Schedule D (Form 1041-N), enter the
tax from line 30 of Schedule D on line
14, and check the “Schedule D” box.

Line 15—Credits
Specify the type of credit being claimed
or form number and attach any required
credit forms. If you are claiming more
than one type of credit, attach a
schedule listing the type and amount of
each credit claimed. See the

Instructions for Form 1041 for details on
the credits that may be claimed.

Line 16—Net Tax
If the ANST owes any additional taxes
(e.g., recapture taxes, etc.), include
these taxes on line 16. To the left of the
entry space, write the type and amount
of the tax. Also attach to Form 1041-N
any forms required to figure these
taxes. See the Instructions for Form
1041 for more details on additional
taxes that may apply.

Line 17—Payments
Include on line 17 any:
• Estimated tax payments made for the
tax year,
• Tax paid with a request for an
extension of time to file,
• Federal income tax withheld (e.g.,
backup withholding), and
• Credit for tax paid on undistributed
capital gains. Also attach copy B of
Form 2439, Notice to Shareholder of
Undistributed Long-Term Capital Gains.

Line 18—Tax Due
You must pay the tax in full when the
return is filed to avoid interest charges
and possible penalties. Make the check
or money order payable to “United
States Treasury.” Write the EIN, the tax
year, and Form 1041-N on the
payment. Enclose, but do not attach,
the payment with Form 1041-N.

Part III — Other
Information
Question 1
If you answered “Yes” to this question,
attach a schedule with the following
information for each asset received
from the sponsoring ANC:
• A description of the asset,
• The date the asset was distributed to
the ANST, and
• The asset’s fair market value on that
date.

Question 2
The ANST may be required to file Form
3520, Annual Return To Report
Transactions With Foreign Trusts and
Receipt of Certain Foreign Gifts, if:
• It directly or indirectly transferred
property or money to a foreign trust.
For this purpose, any U.S. person who
created a foreign trust is considered a
transferor.
• It is treated as the owner of any part
of the assets of a foreign trust under
the grantor trust rules.
• It received a distribution from a
foreign trust.
Note: An owner of a foreign trust must
ensure that the trust files an annual

-4-

information return on Form 3520-A,
Annual Information Return of Foreign
Trust With a U.S. Owner.

Question 3
Check the “Yes” box and enter the
name of the foreign country if either 1
or 2 below applies.
1. At any time during the year the
ANST had an interest in or signature or
other authority over a bank, securities,
or other financial account in a foreign
country.
Exception. Check “No” if either of
the following applies to the ANST:
• The combined value of the
accounts was $10,000 or less during
the whole year, or
• The accounts were with a U.S.
military banking facility operated by a
U.S. financial institution.
2. The ANST owns more than 50%
of the stock in any corporation that
owns one or more foreign bank
accounts.
Get Form TD F 90-22.1, Report of
Foreign Bank and Financial Accounts,
to see if the ANST is considered to
have an interest in or signature or other
authority over a bank, securities, or
other financial account in a foreign
country.
If you checked “Yes” for Question 3,
file Form TD F 90-22.1 by June 30 of
the year following the ANST’s tax year
with the Department of the Treasury at
the address shown on the form.
Form TD F 90-22.1 is not a tax
return, so do not file it with Form
1041-N. You may order Form TD F
90-22.1 by calling 1-800-829-3676
(1-800-TAX-FORM).

Question 4
To make the section 643(e)(3) election
to recognize gain on property
distributed in kind, check the box and
see Section 643(e)(3) Election on
page 5.

Schedule D—Capital
Gains and Losses
General Instructions
Purpose of Schedule
Use Schedule D to report gains and
losses from the sale or exchange of
capital assets by an ANST.
To report the sale or exchange of
property used in a trade or business,
involuntary conversions (other than
casualties and thefts), and certain

Page 5 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

ordinary gains and losses, see Form
4797 and related instructions.

of Assets, and Pub. 551, Basis of
Assets.

Specific Instructions

If property is involuntarily converted
because of a casualty or theft, use
Form 4684.

Short-Term or Long-Term

Column (d)—Sales Price

Separate the capital gains and losses
according to how long the ANST held
or owned the property. The holding
period for short-term capital gains and
losses is 1 year or less. The holding
period for long-term gains and losses is
more than 1 year.
When you figure the length of the
period the ANST held property, begin
counting on the day after the ANST
acquired the property and include the
day the ANST disposed of it. Use the
trade dates for the date of acquisition
and sale of stocks and bonds traded on
an exchange or over-the-counter
market.

Enter either the gross sales price or the
net sales price from the sale. On sales
of stocks and bonds, report the gross
amount as reported to the ANST on
Form 1099-B or similar statement.
However, if the ANST was advised that
gross proceeds less commissions and
option premiums were reported to the
IRS, enter that net amount in
column (d).

Section 1256 contracts and
straddles are reported on Form 6781,
Gains and Losses From Section 1256
Contracts and Straddles.

Capital Asset
Each item of property held by the
ANST is a capital asset except:
• Inventoriable assets or property held
primarily for sale to customers;
• Depreciable or real property used in
a trade or business, even if it is fully
depreciated;
• Certain copyrights, literary, musical,
or artistic compositions, letters or
memoranda, or similar property;
• Accounts or notes receivable
acquired in the ordinary course of a
trade or business for services rendered
or from the sale of inventoriable assets
or property held primarily for sale to
customers;
• Certain U.S. Government
publications not purchased at the public
sale price;
• Certain ‘‘commodities derivative
financial instruments’’ held by a dealer
(see section 1221(a)(6));
• Certain hedging transactions entered
into in the normal course of the ANST’s
trade or business (see section
1221(a)(7)); and
• Supplies regularly used in the
ANST’s trade or business.
You may find additional helpful
information in the following publications:
Pub. 544, Sales and Other Dispositions

Section 643(e)(3) Election
For noncash property distributions, a
fiduciary may elect to have the ANST
recognize gain or loss in the same
manner as if the distributed property
had been sold to the beneficiary at its
fair market value. If the election is
made, the beneficiary’s basis of such
property is its fair market value. This
election applies to all distributions made
by the ANST during the tax year and,
once made, may be revoked only with
IRS consent.
Note that section 267 does not allow
an ANST to claim a deduction for any
loss on property to which a section
643(e)(3) election applies. In addition,
when an ANST distributes depreciable
property, section 1239 applies to deny
capital gains treatment for any gain on
property to which a section 643(e)(3)
election applies.

Column (e)—Cost or Other
Basis
Generally, the basis of property
acquired by gift is the same as the
basis in the hands of the donor. If the
fair market value of the property at the
time it was transferred to the trust is
less than the transferor’s basis, then
the fair market value is used for
determining any loss on disposition.
If the property was transferred to the
ANST and a gift tax was paid under
Chapter 12, then increase the donor’s
basis as follows: Multiply the amount of
the gift tax paid by a fraction, the
numerator of which is the net
appreciation in value of the gift (defined
below), and the denominator of which is
the amount of the gift. For this purpose,
the net appreciation in value of the gift
is the amount by which the fair market
value of the gift exceeds the donor’s
adjusted basis.
Adjustments to basis. Before figuring
any gain or loss on the sale, exchange,
or other disposition of property owned
by the ANST, adjustments to the

Capital Loss Carryover Worksheet
Keep for Your Records
Use this worksheet to figure the ANST’s capital loss carryovers from the current tax year to the following tax year if Schedule D, line 12, is
a loss and (a) the loss on Schedule D, line 11, is more than $3,000, or (b) Form 1041-N, page 1, line 13 is a loss.
1. Enter taxable income (or loss) from Form 1041-N, line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
2. Enter loss from line 12 of Schedule D as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Enter amount from Form 1041-N, line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Adjusted taxable income. Combine lines 1, 2, and 3. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . .
4.
5. Enter the smaller of line 2 or line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
Note: If line 4 of Schedule D is a loss, go to line 6; otherwise, enter -0- on line 6 and go to line 10.
6. Enter loss from Schedule D, line 4, as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7. Enter gain, if any, from Schedule D, line 10. If that line is blank or shows a loss, enter -07.
8. Add lines 5 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9. Short-term capital loss carryover. Subtract line 8 from line 6. If zero or less, enter -0-. Enter this loss on the
short-term capital loss carryover line of next year’s Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.
Note: If line 10 of Schedule D is a loss, go to line 10; otherwise, skip lines 10 through 14.
10. Enter loss from Schedule D, line 10, as a positive amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
11. Enter gain, if any, from Schedule D, line 4. If that line is blank or shows a loss, enter -011.
12. Subtract line 6 from line 5. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
13. Add lines 11 and 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
14. Long-term capital loss carryover. Subtract line 13 from line 10. If zero or less, enter -0-. Enter this loss on the
long-term capital loss carryover line of next year’s Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.

-5-

Page 6 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Unrecaptured Section 1250 Gain Worksheet
Keep for Your Records
If the ANST is not reporting a gain on Form 4797, line 7 (for 2004, or the comparable line for the current tax year), skip lines 1
through 9 and go to line 10.
1. If the ANST has a section 1250 property in Part III of Form 4797 for which you made an entry in Part I of Form
4797 (but not on Form 6252), enter the smaller of line 22 or line 24 of Form 4797 (for 2004, or the comparable
line for the current tax year) for that property. If the ANST did not have any such property, go to line 4. If it had
more than one such property, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
2. Enter the amount from Form 4797, line 26g (for 2004, or the comparable line for the current tax year), for the
property for which you made an entry on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Enter the total unrecaptured section 1250 gain included on line 26 or line 37 of Form(s) 6252 (for 2004, or the
comparable line for the current tax year), from installment sales of trade or business property held more than 1
year (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
5. Enter the total of any amounts reported to the ANST on a Schedule K-1 from a partnership or an S corporation
as “unrecaptured section 1250 gain” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
6. Add lines 3 through 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7. Enter the smaller of line 6 or the gain from Form 4797, line 7 (for 2004, or the
comparable line for the current tax year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
8. Enter the amount, if any, from Form 4797, line 8 (for 2004, or the comparable line for the
current tax year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9. Subtract line 8 from line 7. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.
10. Enter the amount of any gain from the sale or exchange of an interest in a partnership attributable to
unrecaptured section 1250 gain (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
11. Enter the total of any amounts reported to the ANST on a Schedule K-1, Form 1099-DIV, or Form 2439 as
‘‘unrecaptured section 1250 gain’’ from an estate, trust, real estate investment trust, or mutual fund (or other
regulated investment company) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.
12. Enter the total of any unrecaptured section 1250 gain from sales (including installment sales) or other
dispositions of section 1250 property held more than 1 year for which you did not make an entry in Part I of Form
4797 for the year of sale (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.
13. Add lines 9 through 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.
14. If the ANST had any section 1202 gain or collectibles gain or (loss), enter the total of
lines 1 through 4 of the 28% Rate Gain Worksheet on page 8. Otherwise, enter -0- . . . . 14.
15. Enter the (loss), if any, from Schedule D, line 4. If Schedule D, line 4, is zero or a gain,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.
16. Enter the ANST’s long-term capital loss carryover from Schedule D, line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . 16. (
)
17. Combine lines 14 through 16. If the result is zero or a gain, enter -0-. If the result is a (loss), enter it as a positive
amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.
18. Unrecaptured section 1250 gain. Subtract line 17 from line 13. If zero or less, enter -0-. Combine this result with
the result on line 7 of the 28% Rate Gain Worksheet, if any, and enter that result on Schedule D, line 23 . . . . . . 18.

property’s basis may be required. See
Pub. 551 for additional information.

Column (f)—Gain or (Loss)
Make a separate entry in this column
for each transaction reported on lines 1
and 5 and any other lines that apply to
the ANST. For lines 1 and 5, subtract
the amount in column (e) from the
amount in column (d). Enter negative
amounts in parentheses.

Line 23
Add line 18 from the Unrecaptured
Section 1250 Gain Worksheet and line
7 from the 28% Rate Gain Worksheet.

Unrecaptured Section 1250
Gain
Complete the Unrecaptured Section
1250 Gain Worksheet on this page if
any of the following apply.
• During the tax year, the ANST sold or
otherwise disposed of section 1250
property (generally, real property that
was depreciated) held more than 1
year.

• The ANST received installment
payments during the tax year for
section 1250 property held more than 1
year for which it is reporting gain on the
installment method.
• The ANST received a Schedule K-1
from an estate or trust, partnership, or
S corporation that shows ‘‘unrecaptured
section 1250 gain’’ reportable for the
tax year.
• The ANST received a Form
1099-DIV or Form 2439 from a real
estate investment trust or regulated
investment company (including a
mutual fund) that reports ‘‘unrecaptured
section 1250 gain’’ for the tax year.
• The ANST reported a long-term
capital gain from the sale or exchange
of an interest in a partnership that
owned section 1250 property.

Instructions for the
Unrecaptured Section 1250
Gain Worksheet
Lines 1 through 3. If the ANST had
more than one property described on

-6-

line 1, complete lines 1 through 3 for
each property on a separate worksheet.
Enter the total of the line 3 amounts for
all properties on line 3 and go to line 4.
Line 4. To figure the amount to enter
on line 4, follow the steps below for
each installment sale of trade or
business property held more than 1
year.
Step 1. Figure the smaller of (a) the
depreciation allowed or allowable or (b)
the total gain for the sale. This is the
smaller of line 22 or line 24 of the 2004
Form 4797 (or the comparable lines of
Form 4797 for the year of sale) for that
property.
Step 2. Reduce the amount figured
in step 1 by any section 1250 ordinary
income recapture for the sale. This is
the amount from line 26g of the 2004
Form 4797 (or the comparable line of
Form 4797 for the year of sale) for that
property. The result is the total
unrecaptured section 1250 gain that

Page 7 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

28% Rate Gain Worksheet
Keep for Your Records
1. Enter the total of all collectibles gain or (loss) from items reported on line 5, column (f),
of Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Enter as a positive number the amount of any section 1202 exclusion reported on line 5, column (f),
of Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Enter the total of all collectibles gain or (loss) from items reported on Schedule D, line 6 . . . . . . . . .
4. Enter the total of all collectibles gain from capital gain distributions reported on line 7 of Schedule D .
5. Enter the long-term capital loss carryover from Schedule D, line 9 . . . . . . . . . . . . . . . . . . . . . . . .
6. If Schedule D, line 4, is a (loss), enter that (loss) here. Otherwise, enter -0- . . . . . . . . . . . . . . . . . .
7. Combine lines 1 through 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

must be allocated to the installment
payments received from the sale.
Step 3. Generally, the amount of
section 1231 gain on each installment
payment is treated as unrecaptured
section 1250 gain until the total
unrecaptured section 1250 gain figured
in step 2 has been used in full. Figure
the amount of gain treated as
unrecaptured section 1250 gain for
installment payments received during
the tax year, as the smaller of (a) the
amount from line 26 or line 37 of the
2004 Form 6252, whichever applies (or
comparable lines for the current tax
year), or (b) the amount of
unrecaptured section 1250 gain
remaining to be reported. This amount
is generally the total unrecaptured
section 1250 gain for the sale reduced
by all gain reported in prior years
(excluding section 1250 ordinary
income recapture). However, if you
chose not to treat all of the gain from
payments received after May 6, 1997,
and before August 24, 1999, as
unrecaptured section 1250 gain, use
only the amount you chose to treat as
unrecaptured section 1250 gain for
those payments to reduce the total
unrecaptured section 1250 gain
remaining to be reported for the sale.
Include this amount on line 4.
Line 10. Include on line 10 the ANST’s
share of the partnership’s unrecaptured
section 1250 gain that would result if
the partnership had transferred all of its
section 1250 property in a fully taxable
transaction immediately before the
ANST sold or exchanged its interest in
that partnership. If the ANST
recognized less than all of the realized
gain, the partnership will be treated as
having transferred only a proportionate
amount of each section 1250 property.
Line 12. An example of an amount to
include on line 12 is unrecaptured
section 1250 gain from the sale of a
vacation home previously used as a
rental property but converted to
personal use prior to the sale. To figure
the amount to enter on line 12, follow
the applicable instructions below.

Installment sales. To figure the
amount to include on line 12, follow the
steps below for each installment sale of
property held more than 1 year for
which you did not make an entry in Part
I of Form 4797 for the year of sale.
• Step 1. Figure the smaller of (a) the
depreciation allowed or allowable or (b)
the total gain for the sale. This is the
smaller of line 22 or line 24 of the 2004
Form 4797 (or comparable lines of
Form 4797 for the year of sale) for that
property.
• Step 2. Reduce the amount figured in
step 1 by any section 1250 ordinary
income recapture for the sale. This is
the amount from line 26g of the 2004
Form 4797 (or the comparable line of
Form 4797 for the year of sale) for that
property. The result is the total
unrecaptured section 1250 gain that
must be allocated to the installment
payments received from the sale.
• Step 3. Generally, the amount of
capital gain on each installment
payment is treated as unrecaptured
section 1250 gain until the total
unrecaptured section 1250 gain figured
in step 2 has been used in full. Figure
the amount of gain treated as
unrecaptured section 1250 gain for
installment payments received during
the tax year, as the smaller of (a) the
amount from line 26 or line 37 of the
2004 Form 6252 (or comparable lines
for the current tax year) whichever
applies, or (b) the amount of
unrecaptured section 1250 gain
remaining to be reported. This amount
is generally the total unrecaptured
section 1250 gain for the sale reduced
by all gain reported in prior years
(excluding section 1250 ordinary
income recapture). However, if you
chose not to treat all of the gain from
payments received after May 6, 1997,
and before August 24, 1999, as
unrecaptured section 1250 gain, use
only the amount you chose to treat as
unrecaptured section 1250 gain for
those payments to reduce the total
unrecaptured section 1250 gain

-7-

........

1.

.
.
.
.
.
.

2.
3.
4.
5. (
6.
7.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

)

remaining to be reported for the sale.
Include this amount on line 12.
Other sales or dispositions of
section 1250 property. For each sale
of property held more than 1 year (for
which an entry was not made in Part I
of Form 4797), figure the smaller of (a)
the depreciation allowed or allowable or
(b) the total gain for the sale. This is the
smaller of line 22 or line 24 of Form
4797 (for 2004, or the comparable line
for the current tax year) for that
property. Next, reduce that amount by
any section 1250 ordinary income
recapture for the sale. This is the
amount from line 26g of Form 4797 (for
2004, or the comparable line for the
current tax year) for that property. The
result is the total unrecaptured section
1250 gain for the sale. Include this
amount on line 12.

28% Rate Gain or (Loss)
Complete the 28% Rate Gain
Worksheet if lines 10 and 11 are both
greater than zero and at least one of
the following apply:
• The ANST reports in Part II, column
(f), a section 1202 exclusion from the
eligible gain on qualified small business
stock, or
• The ANST reports in Part II, column
(f), a collectibles gain or (loss).
A collectibles gain or loss is any
long-term gain or deductible long-term
loss from the sale or exchange of a
collectible that is a capital asset.
Collectibles includes works of art,
rugs, antiques, metals (such as gold,
silver, and platinum bullion), gems,
stamps, coins, alcoholic beverages,
and certain other tangible property.
Also, include gain (but not loss) from
the sale or exchange of an interest in a
partnership, S corporation, or trust held
for more than 1 year and attributable to
unrealized appreciation of collectibles.
For details, see Regulations section
1.1(h)-1. Also, attach the statement
required under Regulations section
1.1(h)-1(e).

Page 8 of 8

Instructions for Form 1041-N

15:45 - 7-JAN-2005

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Schedule K —
Distributions to
Beneficiaries

Tier III Distributions (Section
646(e)(3))

Use this schedule to report the type
and amount of distributions that were
made to each beneficiary. A copy of
this schedule must be furnished to the
sponsoring ANC. The sponsoring ANC,
not the ANST, provides information to
the beneficiaries regarding distributions.
Distributions for each year are
considered to have been made in the
following order.

These are distributions considered to
have been made by the sponsoring
ANC with respect to its stock.
Tier III distributions are taxable to
beneficiaries as dividends, to the extent
of current or accumulated earnings and
profits of the sponsoring ANC (after
adjustment for distributions made by
the sponsoring ANC during the year).
Section 643(e) applies for purposes of
determining the amount of a Tier III
distribution of property (other than
cash).

Tier I Distributions (Section
646(e)(l))

Tier IV Distributions (Section
646(e)(4))

These are distributions from the ANST
to the extent of the ANST’s taxable
income, reduced by any income tax
paid by the ANST on that income, and
increased by any tax-exempt interest
income.
Tier I distributions are excluded from
the gross income of the beneficiary.

These are distributions of any amounts
that remain after applying the above
rules. They are considered as amounts
in excess of distributable net income for
the year.
Tier IV distributions are excluded
from the gross income of the
beneficiary.

Tier II Distributions (Section
646(e)(2))

Privacy Act and Paperwork
Reduction Act Notice. We ask for the
information on this form to carry out the
Internal Revenue laws of the United
States. You are required to give us the
information. We need it to ensure that
you are complying with these laws and
to allow us to figure and collect the right
amount of tax. Section 6109 requires

These are distributions of amounts that
would have been Tier I distributions in
prior years (during which a section 646
election was in effect), but that have
not, in fact, been distributed in any prior
year.
Tier II distributions are excluded
from the gross income of the
beneficiary.

-8-

return preparers to provide their
identifying numbers on the return.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions
must be retained as long as their
contents may become material in the
administration of any Internal Revenue
law.
The time needed to complete and
file this form will vary depending on
individual circumstances. The
estimated average time is:
Recordkeeping . . .
Learning about the
law or the form . . .
Preparing the form
Copying,
assembling, and
sending the form to
the IRS . . . . . . . . .

32 hr., 16 min.
2 hr., 39 min.
4 hr., 12 min.

16 min.

If you have comments concerning
the accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. You can write to the Internal
Revenue Service, Tax Products
Coordinating Committee,
SE:W:CAR:MP:T:T:SP, Room 6406,
1111 Constitution Ave. NW,
Washington, DC 20224. Do not send
the tax form to this address. Instead,
see Where To File on page 2.