i1041_schedule_k-1--2021-00-00

2021

Department of the Treasury
Internal Revenue Service

Instructions for Schedule K-1
(Form 1041) for a Beneficiary
Filing Form 1040 or 1040-SR

Note. The fiduciary’s instructions for completing Schedule K-1 are in the
Instructions for Form 1041.
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule K-1
(Form 1041) and its instructions, such as
legislation enacted after they were
published, go to IRS.gov/Form1041.

Reminders
Excess deductions on termination.
Under Final Regulations - TD9918, each
excess deduction on termination of an
estate or trust retains its separate
character as an amount allowed in arriving
at adjusted gross income, a
non-miscellaneous itemized deduction, or
a miscellaneous itemized deduction. Box
11, code A, was revised to read Excess
deductions—Section 67(e) expenses and
a new Box 11, code B, Excess
deductions—Non-miscellaneous itemized
deductions was added.
See Box 11, Code A Excess
Deductions on Termination - Section 67(e)
Expenses and Box 11, Code B—Excess
Deductions on TerminationNon-Miscellaneous Itemized Deductions,
later, for more information.
Business interest expense limitation.
Every taxpayer who deducts business
interest is required to file Form 8990,
Limitation on Business Interest Expense
Under Section 163(j), unless an exception
for filing is met. For more information, see
Form 8990 and its instructions. For details,
see Code Z, under Box 14—Other
information, later.
Beneficiary's identification number.
For your protection, Schedule K-1 may
show only the last four digits of your
identifying number (social security number
(SSN), etc.). However, the estate or trust
has reported your complete identifying
number to the IRS.
Backup withholding. If Schedule K-1
shows backup withholding in box 13, code
B, attach a copy to your return.
Qualified business income deduction.
If applicable, a worksheet or statement
Dec 13, 2021

containing information needed to figure
your qualified business income deduction
should be attached to your Schedule K-1.
For more information, see the Instructions
for Form 8995, Qualified Business Income
Deduction Simplified Computation, or
Form 8995-A, Qualified Business Income
Deduction. Also see Code I. Section 199A
information, under Box 14—Other
information, later.

General Instructions
Purpose of Form

Use Schedule K-1 to report a beneficiary's
share of the estate’s or trust’s income,
credits, deductions, etc. on your Form
1040 or 1040-SR. Keep it for your records.
Don’t file it with your tax return, unless
backup withholding was reported in
box 13, code B.

Inconsistent Treatment of Items

Generally, you must report items shown
on your Schedule K-1 (including attached
schedules) the same way that the estate
or trust treated the items on its return.

If the treatment of an item on your
original or amended return is inconsistent
with the estate’s or trust’s treatment (or if
the estate or trust was required to but
hasn't filed a return), you must file Form
8082, Notice of Inconsistent Treatment or
Administrative Adjustment Request
(AAR), with your original or amended
return to identify and explain any
inconsistency (or to note that an estate or
trust return hasn't been filed).
If you are required to file Form 8082 but
fail to do so, you may be subject to the
accuracy-related penalty. This penalty is
in addition to any tax that results from
making your amount or treatment of the
item consistent with that shown on the
estate’s or trust’s return. Any deficiency
that results from making the amounts
consistent may be assessed immediately.

Errors

If you believe the fiduciary has made an
error on your Schedule K-1, notify the
fiduciary and ask for an amended or a
corrected Schedule K-1. Don’t change any
Cat. No. 11374Z

items on your copy. Be sure that the
fiduciary sends a copy of the amended
Schedule K-1 to the IRS. If you are unable
to reach an agreement with the fiduciary
regarding the inconsistency, you must file
Form 8082.
If you are the executor of an estate and
you received a decedent's Schedule K-1
from an estate or trust in which the
decedent had a beneficial interest, but the
decedent died in a prior year, then you
should request that the fiduciary send you
a corrected Schedule K-1 to reflect the
proper allocation of tax items under the
will or the trust's governing instrument.

Beneficiaries of
Generation-Skipping Trusts

If you received Form 706-GS(D-1),
Notification of Distribution From a
Generation-Skipping Trust, and paid a
generation-skipping transfer (GST) tax on
Form 706-GS(D), Generation-Skipping
Transfer Tax Return for Distributions, you
can deduct the GST tax paid on income
distributions on Schedule A (Form 1040),
line 6. To figure the deduction, see the
Instructions for Form 706-GS(D).

Specific Instructions
Part I—Information About the
Estate or Trust
Item E
If the Item E box is checked, this is the
final year of the estate or trust.
Note. If the “Final K-1” box at the top of
Schedule K-1 is checked, this is the final
return for the beneficiary.

Part III—Beneficiary’s Share of
Current Year Income,
Deductions, Credits, and Other
Items

The amounts shown in boxes 1 through 14
reflect your share of income, loss,
deductions, credits, etc., from an estate or
trust. For Form 1040 or 1040-SR filers,
page 2 of Schedule K-1 provides
summarized reporting information. The
summarized reporting information reflects

references to forms in use for calendar
year 2021.
Note. If you are not an individual, report
the amounts in each box as instructed on
your tax return.
Codes. In box 9 and boxes 11 through
14, the fiduciary will identify each item by
entering a code in the column to the left of
the dollar amount entry space. These
codes are identified on page 2 of
Schedule K-1.
Attached statements. The fiduciary will
enter an asterisk (*) after the code, if any,
in the column to the left of the dollar
amount entry space for each item for
which it has attached a statement
providing additional information. For those
informational items that cannot be
reported as a single dollar amount, the
estate or trust will enter an asterisk in the
left column and write “STMT” in the dollar
amount entry space to indicate the
information is provided on an attached
statement.

Box 1—Interest Income
This box reports the beneficiary’s share of
the taxable interest income. This amount
is reported on line 2b of Form 1040 or
1040-SR and Schedule B, Part I, line 1, if
applicable.

Box 2a—Ordinary Dividends
This box reports the beneficiary’s share of
ordinary dividends. This amount is
reported on line 3b of Form 1040 or
1040-SR and Schedule B, Part II, line 5, if
applicable.

Box 2b—Qualified Dividends
This box reports the beneficiary’s share of
qualified dividends. This amount is
reported on line 3a of Form 1040 or
1040-SR.

Boxes 3 and 4a—Net Short-Term
and Net Long-Term Capital Gain
Net short-term capital gains are reported
on line 5 of Schedule D (Form 1040) and
net long-term capital gains are reported on
line 12 of Schedule D (Form 1040).
If there is an attachment to this
Schedule K-1 reporting a disposition of a
passive activity, see the Instructions for
Form 8582, Passive Activity Loss
Limitations, for information on the
treatment of a disposition of an interest in
a passive activity.

Boxes 4b and 4c—28% Rate Gain
and Unrecaptured Section 1250
Gain
A 28% rate gain is reported on line 4 of the
28% Rate Gain Worksheet—Line 18 in the
Schedule D (Form 1040) instructions.
An unrecaptured section 1250 gain is
reported on line 11 of the Unrecaptured
Section 1250 Gain Worksheet—Line 19 in
the Schedule D (Form 1040) instructions.

Box 5—Other Portfolio and
Nonbusiness Income
The amount reported in this box is your
distributive share of royalties, annuities,
and other income that isn't subject to the
passive activity rules. It also includes
income in respect of a decedent (IRD),
which isn't included in box 1, 2a, 3, 4a, 6,
7, or 8.

Boxes 6 through 8—Ordinary
Business Income, Net Rental Real
Estate Income, and Other Rental
Income
The fiduciary will provide you with a
separate schedule showing your
distributive share of income from each
trade or business, net rental real estate, or
other rental activity.
Any losses reported in boxes 6 through
8 may be subject to the passive loss
limitations of section 469, which generally
limits deducting passive losses only from
passive activity income. The rules for
applying these limitations to beneficiaries
haven't yet been issued. For more details,
see Pub. 925, Passive Activity and At-Risk
Rules.

Box 9—Directly Apportioned
Deductions
The fiduciary must attach a statement
showing depreciation, depletion, and
amortization directly apportioned to you, if
any, for each activity reported in boxes 5
through 8.

Box 10—Estate Tax Deduction
(Including Certain
Generation-Skipping Transfer
Taxes)
If an estate or trust distributes income in
respect of a decedent (IRD) to a
beneficiary, the beneficiary is entitled to
deduct the portion of the estate tax
imposed on the decedent's estate which is
attributable to the IRD distributed to the
beneficiary. You may claim this amount on
line 16 of Schedule A (Form 1040). For an
example of how this amount was
computed, see Regulations section
-2-

1.691(c)-2 and Pub. 559, Survivors,
Executors, and Administrators.

Box 11, Code A—Excess
Deductions on Termination Section 67(e) Expenses
If this is the final return of the estate or
trust, and there are excess deductions on
termination that are section 67(e)
expenses reported to you as a beneficiary,
you may deduct the excess deductions
shown in box 11, code A, as an
adjustment to income. Report this amount
on Schedule 1 (Form 1040), Part II,
line 24k.
See Final Regulations - TD9918, for
examples of allowable excess deductions
on termination of an estate or trust.
Excess deductions on termination
occur only during the last tax year of the
trust or decedent’s estate when the total
deductions (excluding the charitable
deduction and exemption) are greater
than the gross income during that tax year.
Only the beneficiary of an estate or trust
that succeeds to its property is allowed to
deduct that entity’s excess deductions on
termination. A beneficiary who doesn’t
have enough income in that year to absorb
the entire deduction can’t carry the
balance over to any succeeding year.

Box 11, Code B—Excess
Deductions on TerminationNon-Miscellaneous Itemized
Deductions
If this is the final return of the estate or
trust, and there are excess deductions on
termination that are non-miscellaneous
itemized deductions reported to you as a
beneficiary, you may deduct the excess
deductions shown in box 11, code B, on
the applicable line on Schedule A (Form
1040). The fiduciary will provide you with a
statement of allowable deductions. See
Final Regulations - TD9918, for examples
of allowable excess deductions on
termination of an estate or trust. A
beneficiary who doesn’t have enough
income in the tax year to absorb the entire
deduction can’t carry the balance to any
succeeding year.
Note. Section 67(g) suspends
miscellaneous itemized deductions
subject to the 2% floor for tax years 2018
through 2025. Therefore, miscellaneous
itemized deductions are not deductible as
excess deductions on termination. Consult
your state taxing authority for information
about deducting miscellaneous itemized
deductions on your state tax return.

2021 Instructions for Schedule K-1 (Form 1041)

Box 11, Codes C and D—Unused
Capital Loss Carryover

Box 13—Credits and Credit
Recapture

Upon termination of the trust or
decedent’s estate, the beneficiary
succeeding to the property is allowed to
deduct any unused capital loss carryover
under section 1212.

Codes A through Q, and code Z, list all the
credits that may be allocated to you as a
beneficiary.

A short-term capital loss carryover,
reported as code C, is reported on
Schedule D (Form 1040), line 5.
A long-term capital loss carryover,
reported as code D, is reported, as
appropriate, on Schedule D (Form 1040),
line 12; line 5 of the 28% Rate Gain
Worksheet for Schedule D, line 18; and
line 16 of the Unrecaptured Section 1250
Gain Worksheet for Schedule D, line 19.

Box 11, Codes E and F—NOL
Carryover
Upon termination of a trust or decedent’s
estate, a beneficiary succeeding to its
property is allowed to deduct any unused
net operating loss (NOL) if the carryover
would be allowable to the trust or estate in
a later tax year but for the termination. The
deduction for regular tax purposes,
reported as code E, is reported on
Schedule 1 (Form 1040), line 8a.
A deduction for an Alternative Tax NOL
(ATNOL) carryover for Alternative
Minimum Tax (AMT) purposes, reported
as code F, is reported on Form 6251,
line 2f.

Box 12—Alternative Minimum Tax
Items
The information reported in box 12, codes
A through I is used to prepare your Form
6251. Code A, Adjustment for minimum
tax purposes, is the total amount reported
on Form 6251, line 2j. Codes B through F
represent the portion, if any, of the amount
included in code A.
Codes B through F. If you have an
amount in box 12 with code B, C, D, E, or
F, see the instructions for lines 13, 14, and
15 of Form 6251.
Codes G through I. Include the amount
with any of these codes on the applicable
line of Form 6251.
Code J. Exclusion items. If you pay
alternative minimum tax in 2021, the
amount in box 12, code J, will help you
figure any minimum tax credit for 2022.
See the 2022 Form 8801, Credit for Prior
Year Minimum Tax—Individuals, Estates,
and Trusts, for more information.

Generally, you must file the source
credit form along with Form 3800, General
Business Credit, to claim the general
business credits listed on Schedule K-1
(Form 1041), codes C through Q, and
code Z. However, if your only source for
the credits listed on Form 3800, Part III, is
from pass-through entities, you may not
be required to complete the source credit
form. Instead, you may be able to report
the credit directly on Form 3800. See
below for the instructions for specific
credits.
Code A. Credit for estimated taxes.
The beneficiary treats this amount as a
payment of estimated tax. To figure any
underpayment and penalty on Form 2210,
Underpayment of Estimated Tax by
Individuals, Estates, and Trusts, treat the
amount entered in box 13, code A, as an
estimated tax payment made on January
18, 2022.
Note. Form 1041-T, Allocation of
Estimated Tax Payments to Beneficiaries,
must be timely filed by the fiduciary for the
beneficiary to get the credit for an
estimated tax payment.
Code B. Credit for backup withholding.
Include this amount on line 25c of your
Form 1040 or 1040-SR and attach a copy
of Schedule K-1 (Form 1041) to your
return.
Code C. Low-income housing credit.
Report this amount on Form 8586, line 4. If
your only source for the credit is a
pass-through entity, such as an estate or
trust, you can report the amount from
Form 8586, line 4, directly on Form 3800,
Part III, line 4d.
Code D. Rehabilitation credit and energy credit. The fiduciary must give you a
statement that shows the information you
will need and where to enter it on Form
3468, Investment Credit, so that you can
figure the amount of any rehabilitation
credit and energy credit that you may
claim.
Code E. Other qualifying investment
credit. This code is used to report the
qualified investment for figuring the
qualifying advanced coal project credit,
the qualifying gasification project credit,
and the qualifying advanced energy
project credit. The fiduciary must provide
you with a statement that shows the
information you will need and where to
report it on Form 3468 so that you can
figure the amount of the previously listed
credits that you may claim.

2021 Instructions for Schedule K-1 (Form 1041)

-3-

Code H. Biofuel producer credit. See
the Instructions for Form 6478 for more
information. If your only source for the
credit is a pass-through entity, such as an
estate or trust, you can report the amount
on Form 3800, Part III, line 4c.
Code J. Renewable electricity, refined
coal, and Indian coal production credit. The fiduciary must provide you with a
statement showing the amount of credit to
report on Form 8835, line 19 (including the
allocation of the credit for production
during the 4-year period beginning on the
date the facility was placed in service and
for production after that period). If your
only source for the credit is a pass-through
entity, you can report the amount from
line 19 directly on Form 3800, Part III, lines
1f and 4e, as applicable. Otherwise,
complete Form 8835 as directed.
Code O. Biodiesel and renewable diesel fuels credit. If this credit includes the
small agri-biodiesel producer credit, the
fiduciary will provide additional information
on an attached statement. If no statement
is attached, report this amount on line 9 of
Form 8864. If a statement is attached, see
the Instructions for Form 8864, line 11.
Code R. Recapture of credits. If you are
required to recapture any credits, the
fiduciary will provide a statement with the
information you need to figure your credit
recapture.
Code Z. Other credits. This code is
used to report the beneficiary’s share of
the employee retention credit. For more
information on the employee retention
credit, see the Instructions for Form
5884-A, Employee Retention Credit for
Employers Affected by Qualified
Disasters. If your only source for the
employee retention credit is a
pass-through entity, such as an estate or
trust, you can report the amount directly
on Form 3800, Part III, line 1aa.

Box 14—Other Information
Code F. Gross farming and fishing income. The amount of farming and fishing
income is included in box 6. This income
is separately stated to help determine if
you are subject to a penalty for
underpayment of estimated tax. Report
the amount of gross farming and fishing
income on Schedule E (Form 1040),
Supplemental Income and Loss, line 42.
Code H. Net investment income tax.
This amount is the beneficiary's
adjustment for section 1411 net
investment income or deductions. Enter
this amount on line 7 of Form 8960, as
applicable. See the Instructions for Form
8960.
Code I. Section 199A information.
Generally, you may be allowed a

deduction of up to 20% of your
apportioned net qualified business income
plus 20% of your apportioned qualified
REIT dividends, also known as section
199A dividends, and qualified publicly
traded partnership (PTP) income from the
trust or estate. The trust or estate will
provide the information you need to help
figure your deduction.
Once you have this information, you
will use one of two forms to help you figure
your qualified business income deduction.
1. Use Form 8995, Qualified Business
Income Deduction Simplified
Computation, if:
a) You have qualified business income,
section 199A dividends, or PTP income
(defined below);
b) Your 2021 taxable income before your
QBI deduction is less than or equal to
$164,900 if single, head of household,
qualifying widow/er, or are a trust or estate
($329,800 if married filing jointly or
$164,925 if married filing separately); and
c) You aren’t a patron in a specified
agricultural or horticultural cooperative.
2. Use Form 8995-A, Qualified
Business Income Deduction, if you don’t
meet all three of these requirements.
Qualified business income
pass-through entity reporting
information. Using the information
provided to you by the trust or estate,
complete the appropriate form as
identified above.
QBI or Qualified PTP items subject
to beneficiary-specific determinations.
The amounts reported to you reflect your
apportioned pro rata share of items from
the trust or estate’s trade(s) or
business(es), or aggregation(s) and may
include items that aren’t includible in your
calculation of the QBI deduction. When
determining QBI or qualified PTP income,
you must include only those items that are
qualified items of income, gain, deduction,
and loss included or allowed in
determining taxable income for the tax
year. To determine your QBI or your
qualified PTP income amounts and for
information on where to report them, see
the Instructions for Form 8995 or Form
8995-A, as applicable.
W-2 wages. The amounts reported
reflect your apportioned pro rata share of
the trust or estate’s W-2 wages allocable
to the QBI of each qualified trade or

business, or aggregation. See the
Instructions for Form 8995 or Form
8995-A, as applicable.

199A(g) deduction. See the Instructions
for Form 8995-A.

UBIA of qualified property. The
amounts reported reflect your apportioned
pro rata share of the trust or estate’s
unadjusted basis immediately after
acquisition (UBIA) of qualified property of
each qualified trade or business, or
aggregation. See the Instructions for Form
8995 or Form 8995-A, as applicable.
Section 199A dividends. The
amount reported reflects your apportioned
pro rata share of the trust or estate’s net
section 199A dividends. See the
Instructions for Form 8995 or Form
8995-A, as applicable.
Patrons of specified agricultural
and horticultural cooperatives. If the
trust or estate was a patron of an
agricultural or horticultural cooperative
(Specified Cooperative), you must use
Form 8995-A to figure your QBI deduction.
In addition, you must complete
Schedule D (Form 8995-A) to determine
your patron reduction.
QBI items allocable to qualified
payments from specified cooperatives
subject to beneficiary-specific
determinations. The amounts reported
to you reflect your apportioned pro rata
share of items from the trust or estate’s
trade(s) or business(es), or aggregation(s)
and include items that may not be
includible in your calculation of the QBI
deduction and patron reduction. When
determining QBI items allocable to
qualified payments you must include only
qualified items that are included or
allowed in determining taxable income for
the tax year. To determine your QBI items
allocable to qualified payments see the
Instructions for Form 8995-A.
Wages allocable to qualified
payments from specified cooperatives.
The amounts reported reflect your
apportioned pro rata share of the trust or
estate’s W-2 wages allocable to qualified
payments of each qualified trade or
business, or aggregation. See the
Instructions for Form 8995-A.
Section 199A(g) deduction from
specified cooperatives. The amount
reported reflects your apportioned pro rata
share of the trust or estate’s net section

-4-

Code Z. Other information. If this code
is used, the fiduciary will provide you with
any additional information you may need
to file your return that isn't shown
elsewhere on this Schedule K-1.
The fiduciary will provide you with any
information needed to figure capital gains
with respect to a section 1061 partnership
interest. For more information, see Section
1061 Reporting Guidance FAQs.
If you receive a statement regarding
the splitting of foreign tax credits from the
income to which it relates, section 909
may prevent you from deducting the
foreign tax credit until the related foreign
income is taken into account. See Form
1116, Foreign Tax Credit, and Pub. 514,
Foreign Tax Credit for Individuals, for
more information.
The fiduciary will provide you the
information that you need to figure your
section 951A income. Report your section
951A income on Schedule 1 (Form 1040),
line 8n, or the comparable line of your
income tax return. For details, see the
Instructions for Form 8992.
Your distributive share of the net
amount of section 965(a) inclusion less
the corresponding section 965(c)
deduction should be reported in box 14,
code Z. In addition, the fiduciary will
provide a statement detailing your
distributive share of the section 965(a)
inclusion, the section 965(c) deduction,
and any section 960 deemed paid foreign
tax credits related to your distributive
share of the section 965(a) inclusion
(relevant to corporate beneficiaries and
individual beneficiaries electing to be
taxed as a corporation on gross income
under section 951(a), including such gross
income by reason of section 965).
If an estate or trust is required to file
Form 8990, the adjusted taxable income
of an estate or trust beneficiary is reduced
by any income (including any distributable
net income) received from the estate or
trust by the beneficiary to the extent such
income supported a deduction for
business interest expense under section
163(j)(1)(B) in computing the estate's or
trust's taxable income. If applicable, the
fiduciary will provide you the necessary
information to calculate this amount in an
attachment to Schedule K-1.

2021 Instructions for Schedule K-1 (Form 1041)