Form 1041 QFT 1041 QFT U.S. Income Tax Return for Qualified Funeral Trusts

Version A, Cycle 9

Form

1041-QFT

OMB No. 1545-1593

U.S. Income Tax Return for Qualified Funeral Trusts

Department of the Treasury
Internal Revenue Service

2013

Information about Form 1041-QFT and its instructions is at www.irs.gov/form1041qft.
For calendar year 2013 or short year beginning
, 2013, and ending

, 2013.

General Information

Part I
1

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2 Employer identification number

Name of trust or other entity filing return

3a Name and title of trustee
3b Number, street, and room or suite no. (If a P.O. box, see the instructions.)

3c City or town, province or state, country, and ZIP or foreign postal code

5

Check applicable boxes:
Initial return

Part II
1a
b
2a
b
3
4

Amended return

Final return

Change in the fiduciary or fiduciary's name

Change in fiduciary's address

Tax Computation
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1b
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2b
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5
6
7
8
9
10

Income
Deductions
Tax and Payments

4 Number of QFTs included on this return

Interest income . . . . . . . . . . . . .
Tax-exempt interest. Do not include on line 1a . . .
Total ordinary dividends . . . . . . . . . .
Qualified dividends . . . . . . . . . . . .
Capital gain or (loss) (attach Schedule D (Form 1041))
Other income. List type and amount

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Internal Use Only
DRAFT AS OF
June 5, 2013
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2a

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Total income. Combine lines 1a, 2a, 3, and 4 . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . .
Trustee fees . . . . . . . . . . . . . . . . . . .
Attorney, accountant, and return preparer fees . . . . . . . .
Other deductions not subject to the 2% floor . . . . . . . .
Allowable miscellaneous itemized deductions subject to the 2% floor

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10

11

Total deductions. Add lines 6 through 10

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Taxable income. Subtract line 11 from line 5 .

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14

Tax. (If this is a composite return, check here ▶
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Credits (see instructions). Specify the credits claimed

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13
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15
16
17
18
19
20

Subtract line 14 from line 13 . . . . . . . . . . . . . .
Net Investment Income Tax from Form 8960, line 21 . . . . . .
Total tax. Add lines 15 and 16 . . . . . . . . . . . . .
Payments (see instructions) . . . . . . . . . . . . . .
Tax due. If line 18 is smaller than line 17, enter amount owed
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Overpayment. If line 18 is larger than line 17, enter amount overpaid

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20

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Amount of line 20 to be: a Credited to 2014 estimated tax ▶

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b Refunded ▶

Signature of trustee or officer representing trustee

Print/Type preparer’s name

Preparer's signature

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Paid
Preparer
Use Only

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Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge
and belief, it is true, correct, and complete. Declaration of preparer (other than trustee) is based on all information of which preparer has any knowledge.
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Sign
Here

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May the IRS discuss this return
with the preparer shown below
(see instructions)?
Yes
No

Date
Date

Check
if
self-employed

Firm’s name

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Firm's EIN

Firm's address

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Phone no.

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 25368F

PTIN

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Form 1041-QFT (2013)

Version A, Cycle 9
Form 1041-QFT (2013)

Page

General Instructions
Section references are to the Internal
Revenue Code.

Future Developments
For the latest information about developments
related to Form 1041-QFT and its instructions,
such as legislation enacted after they were
published, go to www.irs.gov/form1041qft.

What's New
Net investment income tax. For tax years
beginning in 2013, an estate or trust may be
subject to net investment income tax (NIIT).
NIIT is a 3.8% tax on the lesser of an estate's
or trust's undistributed net investment income
or the excess of the estate's or trust's
adjusted gross income over a specified
threshold amount. NIIT may need to be
included when figuring estimated tax.

Purpose of Form
The trustee of a trust that has elected to be
taxed as a qualified funeral trust (QFT) files
Form 1041-QFT to report the income,
deductions, gains, losses, and tax liability of
the QFT. The trustee can use the form to
report information for a single QFT or for
multiple QFTs having the same trustee. If filing
Form 1041-QFT for multiple QFTs, please see
the rules discussed under Composite Return
on this page.
Pre-need funeral trusts that do not qualify
as QFTs should see the instructions for Form
1041, U.S. Income Tax Return for Estates and
Trusts, for their filing requirements.

If a QFT has multiple beneficiaries, each
beneficiary’s separate interest under a
contract is treated as a separate QFT for the
purpose of figuring the tax and filing this
return. Each beneficiary’s share of the trust’s
income is determined in accordance with the
beneficiary’s interest in the trust. A
beneficiary’s interest in a trust may be
determined under any reasonable method.
Whenever these instructions refer to a trust
or QFT, it includes such separate interests
that are treated as separate QFTs.

Making the Election

• 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, and UPS Worldwide Express.
The private delivery service can tell you
how to get written proof of the mailing date.

Extension of Time To File
Use Form 7004, Application for Automatic
Extension of Time To File Certain Business
Income Tax, Information, and Other Returns,
to get a 6-month extension of time to file. An
extension of time to file a return does not
extend the time to pay the tax.

The trustee makes the election to treat a trust
as a QFT by filing Form 1041-QFT for the
trust by the due date (including extensions).
You may elect QFT status for a trust’s first
eligible year or for any subsequent year. Once
made, the election may not be revoked
without the consent of the IRS.

Where To File

Composite Return

Trustee

A trustee may file a single, composite Form
1041-QFT for some or all QFTs of which he or
she is the trustee, including QFTs that had a
short tax year.
You must attach a statement to a
composite Form 1041-QFT that includes the
following information for each QFT (or
separate interest treated as a separate QFT):
• The name of the owner or the beneficiary. If
you list the name of the owner and that trust
has more than one beneficiary, you must
separate the trust into shares held by the
separate beneficiaries;
• The type and gross amount of each type of
income earned by the QFT for the tax year.
For capital gains, identify separately the
amount of (a) net short-term capital gain,
(b) net long-term capital gain, (c) 28% rate
gain, and (d) unrecaptured section 1250 gain;
• The type and amount of each deduction and
credit allocable to the QFT;
• The tax and payments made for each QFT;
and
• The termination date for each QFT that was
terminated during the year.

2

File Form 1041-QFT at the following address:
Department of Treasury
Internal Revenue Service
Cincinnati, OH 45999

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

Paid Preparer

Internal Use Only
DRAFT AS OF
June 5, 2013

Qualified Funeral Trust

A QFT is a domestic trust that meets all of
the following requirements:
• The trust arose as a result of a contract with
a person engaged in the trade or business of
providing funeral or burial services or property
to provide such services.
• The sole purpose of the trust is to hold,
invest, and reinvest funds in the trust and to
use those funds solely to pay for funeral or
burial services or property to provide such
services for the benefit of the beneficiaries of
the trust.
• The only beneficiaries of the trust are
individuals for whom such services or
property are to be provided at their death
under the contracts described above.
• The only contributions to the trust are
contributions by or for such beneficiaries’
benefit.
• The trustee makes or previously had made
the election to treat the trust as a QFT.
• The trust would have been treated as owned
by the purchasers of the contracts under the
grantor trust provisions of the Code if the QFT
election had not been made.
Note. A trust that is not treated as owned by
the purchaser solely because of the death of
an individual will be treated as meeting this
requirement during the 60-day period
beginning on the date of that individual’s
death.

When To File
File Form 1041-QFT by April 15, 2014. The due
date for a composite return is also April 15, 2014,
even if the return includes QFTs that terminated
during the year. If you are filing for a short year,
file Form 1041-QFT by the 15th day of the 4th
month following the close of the short year. If the
due date falls on a Saturday, Sunday, or a legal
holiday, file by 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” rules for tax
returns and payments. These private delivery
services include only the following.
• DHL Express (DHL): DHL Same Day Service.
• Federal Express (FedEx): FedEx Priority
Overnight, FedEx Standard Overnight, FedEx
2Day, FedEx International Priority, and FedEx
International First.

Generally, anyone who is paid to prepare a
tax return must sign the return and fill in the
other blanks in the Paid Preparer Use Only
area of the return. The person required to sign
the return must:
• Complete the required preparer information,
• 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.
Anyone who is paid to prepare the trust's
return must enter their PTIN in the Paid
Preparer Use Only section. The PTIN entered
must have been issued after September 27,
2010. For information, see Form W-12, IRS
Paid Preparer Tax Identification Number
(PTIN) Application and Renewal.

Paid Preparer Authorization
If the trustee wants to allow the IRS to
discuss the QFT’s 2013 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
Use Only section of the QFT’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 QFT’s return.
The trustee is also authorizing the paid
preparer to:
• Give the IRS any information that is missing
from the QFT’s return,
• Call the IRS for information about the
processing of the QFT’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 trustee is not authorizing the paid
preparer to receive any refund check, bind
the QFT to anything (including any additional
tax liability), or otherwise represent the QFT
before the IRS.

Version A, Cycle 9
Form 1041-QFT (2013)

Page

3

The authorization will automatically end no
later than the due date (without regard to
extensions) for filing the QFT’s 2014 tax
return. If the trustee wants to expand the paid
preparer’s authorization or revoke the
authorization before it ends, see Pub. 947,
Practice Before the IRS and Power of
Attorney.

The penalty will not be imposed if you can
show that the failure to file on time was due to
reasonable cause. If you receive a notice
about penalty or interest after filing the return,
send us an explanation and we will determine
whether you meet the reasonable cause
criteria. Do not attach an explanation to the
return.

• By mail or fax—Send in a completed Form
SS-4. Form SS-4 can be obtained by calling
1-800-829-3676.
If the QFT has not received its EIN by the
time the return is due, write “Applied for” in
the space for the EIN.

Accounting Methods

Late Payment of Tax

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 want a third party (such as an
accountant or an attorney) to receive mail for
the QFT, enter on the street address line
“C/O” followed by the third party’s name and
street address or P.O. box.
If you change your address (including a new
“in care of” name and address) after filing
Form 1041-QFT, use Form 8822, Change of
Address, to notify the IRS.

Figure taxable income using the method of
accounting regularly used in keeping the
QFT’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 QFT 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.

Accounting Period
All QFTs must use a calendar year as their
accounting period.

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.
If you include interest or any of
these penalties with your payment,
identify and enter these amounts
CAUTION in the bottom margin of Form
1041-QFT. Do not include the interest or
penalty amount in the balance of tax due on
line 17.

Line 4—Number of QFTs

Other Penalties

Composite Return

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If this is a composite return, enter the total
number of QFTs (including separate interests
treated as separate QFTs) included on the
return.

Internal Use Only
!
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DRAFT AS OF
June 5, 2013

Rounding Off to Whole Dollars

You may round off cents to whole dollars on
your return and statements. 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, 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 that it
remains unpaid. The maximum penalty is 25%
of the unpaid amount. The penalty applies to
any unpaid tax on the return. Any penalty is in
addition to interest charges on late payments.

Line 3—Address

Generally, a QFT must pay estimated income
tax for 2014 if it expects to owe, after
subtracting withholding and credits, at least
$1,000 in tax. Estimated tax liability is figured
for the individual QFT, and not for a
composite return taken as a whole. 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-pay penalty, 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, up to
a maximum of 25% of the tax due, for each
month the return is not filed. If the return is
more than 60 days late, the minimum penalty
is the smaller of $135 or the tax due.

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.

Final Form 1041

Part II—Tax Computation

CAUTION

If this is a composite return,
enter in Part II the totals for all
the QFTs included on the return.

Income

If you have an existing EIN(s) that you
previously used for filing Form 1041 and that
you will not use again (i.e., for QFTs included
in a composite return), you should file Form
1041 and check the final return box.

Line 2a—Total Ordinary Dividends
Report all ordinary dividends received during
the tax year.
Report capital gain distributions on
Schedule D (Form 1041), line 9.

Specific Instructions

Line 2b—Qualified Dividends
Enter on line 2b the amount reported on line
2a that is a qualified dividend. A qualified
dividend is a dividend received during the tax
year from (a) a domestic corporation or (b) a
qualified foreign corporation. A qualified
dividend does not include: any dividend from
a corporation if the corporation is (or was)
exempt from income tax under section 501 or
521 for the tax year during which the
distribution was made; any amount allowed
as a deduction under section 591; or any
dividend described under section 404(k).
Exception. Some dividends may be reported
to the trust as qualified dividends but are not
qualified dividends. See the instructions for
line 2b(2) in the 2013 Instructions for Form
1041 for more information.

Part I—General Information
Line 1—Name of Trust
Copy the exact name from the Form SS-4,
Application for Employer Identification
Number, used to apply for the employer
identification number you are using to file
Form 1041-QFT.

Line 2—Employer Identification
Number (EIN)
If the QFT is not filing as part of a composite
return, use the EIN of the QFT. If the QFT
does not have an EIN, it must apply for one.
Every trustee that elects to file a composite
return must apply for an EIN to be used only
for filing Form 1041-QFT. A trustee must use
a separate EIN for every Form 1041-QFT it
files.
A QFT without an EIN can apply for one.
• Online—A QFT can receive an EIN by
Internet and use it immediately to file a return.
Go to the IRS website at www.irs.gov/
businesses/small and click on Employer ID
numbers.
• By telephone—Call 1-800-829-4933.

Line 4—Other Income
Enter all other types of income not included
on line 1a, 2a, or 3. List the type and amount
on an attached statement if the QFT(s) has
more than one item.

Deductions
Allocation of Deductions for Tax-Exempt
Income

Version A, Cycle 9
Form 1041-QFT (2013)

Page

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 taxexempt income and other income must be
allocated to each class of income.
Limitations on Deductions
Generally, the amount a QFT 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
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 your own statement, listing by type
and amount all allowable deductions that are
not deductible elsewhere on the form.

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CAUTION

Line 13—Tax
Tax rate schedule. Unless the instructions
that follow for Schedule D or Composite
Return apply, figure the tax using the Tax
Rate Schedule below. Enter the tax on line 13.

2013 Tax Rate Schedule
If taxable
income
is:
Over—
$0
2,450
5,700
8,750
11,950

But
not
over—
$2,450
5,700
8,750
11,950
----

Its tax is:
15%
$367.50 + 25%
1,180.00 + 28%
2,034.00 + 33%
3,090.00 + 35%

Of the
amount
over—
$0
2,450
5,450
8,750
11,950

Schedule D. If the QFT had both a net
capital gain and any taxable income, or any
qualified dividends and any taxable income,
complete Part V of Schedule D (Form 1041)
on line 13 and enter the tax from line 34 of
Schedule D.
Composite return. If this is a composite
return, check this box and enter on line 13
the total of the tax computed separately for
each QFT using either the 2013 Tax Rate
Schedule above or Schedule D (Form 1041).

• Federal income tax withheld (for example,
backup withholding).
• 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 19—Tax Due
You must pay the tax in full when the return
is filed. Make the check or money order
payable to “United States Treasury.” Write the
EIN from line 2 of the form and “2013 Form
1041-QFT” on the payment. Enclose, but do
not attach, the payment with Form 1041-QFT.
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 this
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.
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.
Generally, tax returns and return information
are confidential, as required by section 6103.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping . . . . 9 hr., 34 min.
Learning about the law
or the form . . . . . . 2 hr., 18 min.
Preparing the form . . . 5 hr., 20 min.
Copying, assembling,
and sending the form
to the IRS . . . . . . . . 48 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:M:S, 1111 Constitution Ave.
NW, IR-6526, Washington, DC 20224. Do not
send the tax form to this address. Instead,
see Where To File.

Internal Use Only
DRAFT AS OF
June 5, 2013

QFTs are not allowed a deduction
for a personal exemption.

Line 10—Allowable Miscellaneous Itemized
Deductions Subject to the 2% Floor
These deductions 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
administrative costs on lines 7 through 9 to
the extent they are costs incurred in the
administration of the QFTs that would not
have been incurred if the property were not
held by the QFTs.
If this is a composite return, you must
figure the AGI separately for each QFT using
each QFT’s share of the amounts on the lines
referred to above.

Line 14—Credits

Specify the type of credit being claimed and
attach any required credit forms. If you are
claiming more than one type of credit, attach
a statement 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 Investment Income Tax

For tax years beginning on or after January 1,
2013, a QFT may be liable for the net
investment income tax enacted under section
1411. To determine if this tax applies, see
Form 8960 and its Instructions at

Line 17—Total Tax

If the QFT owes any additional taxes (for
example, alternative minimum tax, recapture
taxes, etc.), include these taxes on line 17. To
the left of the entry space, write the type and
amount of the tax. Also attach to Form
1041-QFT any forms required to figure these
taxes (for example, Schedule I (Form 1041)).
See the Instructions for Form 1041 for more
details on additional taxes that may apply.

Line 18—Payments
Include on line 18 any of the following.
• Estimated tax payments made for 2013.
• Tax paid with a request for an extension of
time to file.

4