Other Information

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Other Information

Question 1

If the estate or trust received tax-exempt income, figure the allocation of expenses between tax-exempt and taxable income on a separate sheet and attach it to the return. Enter only the deductible amounts on the return. Do not figure the allocation on the return itself. For more information, see the instructions for Allocation of Deductions for Tax-Exempt Income, earlier.

Report the amount of tax-exempt interest income received or accrued in the space provided below Question 1.

Also, include any exempt-interest dividends the estate or trust received as a shareholder in a mutual fund or other regulated investment company.

Question 2

All salaries, wages, and other compensation for personal services must be included on the return of the person who earned the income, even if the income was irrevocably assigned to a trust by a contract assignment or similar arrangement.

The grantor or person creating the trust is considered the owner if he or she keeps “beneficial enjoyment” of or substantial control over the trust property. The trust's income, deductions, and credits are allocable to the owner.

If you checked “Yes” for Question 2, see Special Reporting Instructions, earlier.

Question 3

Check the “Yes” box and enter the name of the foreign country if either 1 or 2 below applies.

  1. The estate or trust owns more than 50% of the stock in any corporation that owns one or more foreign bank accounts.

  2. At any time during the year the estate or trust 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 estate or trust:
  • 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.

Get Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, to see if the estate or trust is considered to have an interest in or signature or other authority over a bank, securities, or other financial account in a foreign country. You can get Form TD F 90-22.1 from the IRS website at www.irs.gov/pub/irs-pdf/f90221.pdf.

If you checked “Yes” for Question 3, file Form TD F 90-22.1 by June 30, 2013, 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.

If you are required to file Form TD F 90-22.1 but do not, you may have to pay a penalty of up to $10,000 (more in some cases).

Question 4

The estate or trust 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; or

  • It received a distribution from a foreign trust.

    An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.

Question 5

An estate or trust claiming an interest deduction for qualified residence interest (as defined in section 163(h)(3)) on seller-provided financing must include on an attachment to the 2012 Form 1041 the name, address, and TIN of the person to whom the interest was paid or accrued (that is, the seller).

If the estate or trust received or accrued such interest, it must provide identical information on the person liable for such interest (that is, the buyer). This information does not need to be reported if it duplicates information already reported on Form 1098.

Question 6

To make the section 663(b) election to treat any amount paid or credited to a beneficiary within 65 days following the close of the tax year as being paid or credited on the last day of that tax year, check the box. This election can be made by the fiduciary of a complex trust or the executor of a decedent's estate. For the election to be valid, you must file Form 1041 by the due date (including extensions). Once made, the election is irrevocable.

Question 7

To make the section 643(e)(3) election to recognize gain on property distributed in kind, check the box and see the Instructions for Schedule D (Form 1041).

Question 9

Generally, a beneficiary is a skip person if the beneficiary is in a generation that is two or more generations below the generation of the transferor to the trust.

To determine if a beneficiary that is a trust is a skip person, and for exceptions to the general rules, see the definition of a skip person in the instructions for Schedule R of Form 706.