Schedule J (Form 1041) — Accumulation Distribution for Certain Complex Trusts

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Schedule J (Form 1041) — Accumulation Distribution for Certain Complex Trusts

General Instructions

Use Schedule J (Form 1041) to report an accumulation distribution for a domestic complex trust that was:

  • Previously treated at any time as a foreign trust (unless an exception is provided in future regulations), or

  • Created before March 1, 1984, unless that trust would not be aggregated with other trusts under the rules of section 643(f) if that section applied to the trust.

An accumulation distribution is the excess of amounts properly paid, credited, or required to be distributed (other than income required to be distributed currently) over the DNI of the trust reduced by income required to be distributed currently. To have an accumulation distribution, the distribution must exceed the accounting income of the trust.

Specific Instructions

Part I—Accumulation Distribution in 2012

Line 1—Distribution Under Section 661(a)(2)

Enter the amount from Form 1041, Schedule B, line 10, for 2012. This is the amount properly paid, credited, or required to be distributed other than the amount of income for the current tax year required to be distributed currently.

Line 2—DNI

Enter the amount from Form 1041, Schedule B, line 7, for 2012. This is the amount of DNI for the current tax year determined under section 643(a).

Line 3—Distribution Under Section 661(a)(1)

Enter the amount from Form 1041, Schedule B, line 9, for 2012. This is the amount of income for the current tax year required to be distributed currently.

Line 5—Accumulation Distribution

If line 11 of Form 1041, Schedule B, is more than line 8 of Form 1041, Schedule B, complete the rest of Schedule J and file it with Form 1041, unless the trust has no previously accumulated income.

Generally, amounts accumulated before a beneficiary reaches age 21 may be excluded by the beneficiary. See sections 665 and 667(c) for exceptions relating to multiple trusts. The trustee reports to the IRS the total amount of the accumulation distribution before any reduction for income accumulated before the beneficiary reaches age 21. If the multiple trust rules do not apply, the beneficiary claims the exclusion when filing Form 4970, as you may not be aware that the beneficiary may be a beneficiary of other trusts with other trustees.

For examples of accumulation distributions that include payments from one trust to another trust, and amounts distributed for a dependent's support, see Regulations section 1.665(b)-1A(b).

Part II—Ordinary Income Accumulation Distribution

Enter the applicable year at the top of each column for each throwback year.

Line 6—DNI for Earlier Years

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1977 Form 1041, Schedule C, line 5
1978–1979 Form 1041, line 61
1980 Form 1041, line 60
1981–1982 Form 1041, line 58
1983–1996 Form 1041, Schedule B, line 9
1997–2011 Form 1041, Schedule B, line 7

For information about throwback years, see the instructions for line 13. For purposes of line 6, in figuring the DNI of the trust for a throwback year, subtract any estate tax deduction for IRD if the income is includible in figuring the DNI of the trust for that year.

Line 7—Distributions Made During Earlier Years

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1977 Form 1041, Schedule C, line 8
1978 Form 1041, line 64
1979 Form 1041, line 65
1980 Form 1041, line 64
1981–1982 Form 1041, line 62
1983–1996 Form 1041, Schedule B, line 13
1997–2011 Form 1041, Schedule B, line 11

Line 11—Prior Accumulation Distribution Thrown Back to Any Throwback Year

Enter the amount of prior accumulation distributions thrown back to the throwback years. Do not enter distributions excluded under section 663(a)(1) for gifts, bequests, etc.

Line 13—Throwback Years

Allocate the amount on line 5 that is an accumulation distribution to the earliest applicable year first, but do not allocate more than the amount on line 12 for any throwback year. An accumulation distribution is thrown back first to the earliest preceding tax year in which there is undistributed net income (UNI). Then, it is thrown back beginning with the next earliest year to any remaining preceding tax years of the trust. The portion of the accumulation distribution allocated to the earliest preceding tax year is the amount of the UNI for that year. The portion of the accumulation distribution allocated to any remaining preceding tax year is the amount by which the accumulation distribution is larger than the total of the UNI for all earlier preceding tax years.

A tax year of a trust during which the trust was a simple trust for the entire year is not a preceding tax year unless (a) during that year the trust received outside income, or (b) the trustee did not distribute all of the trust's income that was required to be distributed currently for that year. In this case, UNI for that year must not be more than the greater of the outside income or income not distributed during that year.

The term “outside income means amounts that are included in the DNI of the trust for that year but that are not “income” of the trust as defined in Regulations section 1.643(b)-1. Some examples of outside income are: (a) income taxable to the trust under section 691; (b) unrealized accounts receivable that were assigned to the trust; and (c) distributions from another trust that include the DNI or UNI of the other trust.

Line 16—Tax-Exempt Interest Included on Line 13

For each throwback year, divide line 15 by line 6 and multiply the result by the following:

Throwback year(s) Amount from line
1969–1977 Form 1041, Schedule C, line 2(a)
1978–1979 Form 1041, line 58(a)
1980 Form 1041, line 57(a)
1981–1982 Form 1041, line 55(a)
1983–2011 Form 1041, Schedule B, line 2

Part III—Taxes Imposed on Undistributed Net Income

For the regular tax computation, if there is a capital gain, complete lines 18 through 25 for each throwback year. If the trustee elected the alternative tax on capital gains, complete lines 26 through 31 instead of lines 18 through 25 for each applicable year. If there is no capital gain for any year, or there is a capital loss for every year, enter on line 9 the amount of the tax for each year identified in the instruction for line 18 and do not complete Part III. If the trust received an accumulation distribution from another trust, see Regulations section 1.665(b)-1A.

Note.

The alternative tax on capital gains was repealed for tax years beginning after December 31, 1978. The maximum rate on net capital gain for 1981, 1987, and 1991 through 2011 is not an alternative tax for this purpose.

Line 18—Regular Tax

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1976 Form 1041, page 1, line 24
1977 Form 1041, page 1, line 26
1978–1979 Form 1041, line 27
1980–1984 Form 1041, line 26c
1985–1986 Form 1041, line 25c
1987 Form 1041, line 22c
1988–2011 Form 1041, Schedule G, line 1a

Line 19—Trust's Share of Net Short-Term Gain

For each throwback year, enter the smaller of the capital gain from the two lines indicated. If there is a capital loss or a zero on either or both of the two lines indicated, enter zero on line 19.

Throwback year(s) Amount from line
1969–1970 Schedule D, line 10, column 2, or
Schedule D, line 12, column 2
1971–1978 Schedule D, line 14, column 2, or
Schedule D, line 16, column 2
1979 Schedule D, line 18, column (b), or
Schedule D, line 20, column (b)
1980–1981 Schedule D, line 14, column (b), or
Schedule D, line 16, column (b)
1982 Schedule D, line 16, column (b), or
Schedule D, line 18, column (b)
1983–1996 Schedule D, line 15, column (b), or
Schedule D, line 17, column (b)
1997–2002 Schedule D, line 14, column (2), or
Schedule D, line 16, column (2)
2003 Schedule D, line 14a, column (2), or
Schedule D, line 16a, column (2)
2004–2011 Schedule D, line 13, column (2), or
Schedule D, line 15, column (2)

Line 20—Trust's Share of Net Long-Term Gain

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1970 50% of Schedule D, line 13(e)
1971–1977 50% of Schedule D, line 17(e)
1978 Schedule D, line 17(e), or line
31, whichever is applicable,
less Form 1041, line 23
1979 Schedule D, line 25 or line 27,
whichever is applicable, less
Form 1041, line 23
1980–1981 Schedule D, line 21, less
Schedule D, line 22
1982 Schedule D, line 23, less
Schedule D, line 24
1983–1986 Schedule D, line 22, less
Schedule D, line 23
1987–1996 Schedule D, the smaller
of any gain on line 16
or line 17, column (b)
1997–2001 Schedule D, the smaller
of any gain on line 15c or
line 16, column (2)
2002 Schedule D, the smaller
of any gain on line 15a or
line 16, column (2)
2003 Schedule D, the smaller
of any gain on line 15a or
line 16a, column (2)
2004–2011 Schedule D, the smaller
of any gain on line 14a
or line 15, column (2)

Line 22—Taxable Income

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1976 Form 1041, page 1, line 23
1977 Form 1041, page 1, line 25
1978–1979 Form 1041, line 26
1980–1984 Form 1041, line 25
1985–1986 Form 1041, line 24
1987 Form 1041, line 21
1988–1996 Form 1041, line 22
1997 Form 1041, line 23
1998–2011 Form 1041, line 22

Line 26—Tax on Income Other Than Long-Term Capital Gain

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969 Schedule D, line 20
1970 Schedule D, line 19
1971 Schedule D, line 50
1972–1975 Schedule D, line 48
1976–1978 Schedule D, line 27

Line 27—Trust's Share of Net Short-Term Gain

If there is a loss on any of the following lines, enter zero on line 27 for the applicable throwback year. Otherwise, enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969–1970 Schedule D, line 10, column 2
1971–1978 Schedule D, line 14, column 2

Line 28—Trust's Share of Taxable Income Less Section 1202 Deduction

Enter the applicable amounts as follows:

Throwback year(s) Amount from line
1969 Schedule D, line 19
1970 Schedule D, line 18
1971 Schedule D, line 38
1972–1975 Schedule D, line 39
1976–1978 Schedule D, line 21

Part IV—Allocation to Beneficiary

Complete Part IV for each beneficiary. If the accumulation distribution is allocated to more than one beneficiary, attach an additional copy of Schedule J with Part IV completed for each additional beneficiary. Give each beneficiary a copy of his or her respective Part IV information. If more than 5 throwback years are involved, use another Schedule J, completing Parts II and III for each additional throwback year.

If the beneficiary is a nonresident alien individual or a foreign corporation, see section 667(e) about retaining the character of the amounts distributed to determine the amount of the U.S. withholding tax.

The beneficiary uses Form 4970 to figure the tax on the distribution. The beneficiary also uses Form 4970 for the section 667(b)(6) tax adjustment if an accumulation distribution is subject to estate or generation-skipping transfer tax. This is because the trustee may not be the estate or generation-skipping transfer tax return filer.