What this line means
The identifying information for each estate or trust from which you received income or loss during the year. Enter the name and employer identification number (EIN) for each entity. The amounts come from Schedule K-1 (Form 1041) issued by the estate or trust’s fiduciary. Like Part II, you separate the income and loss into passive and nonpassive columns based on the nature of the underlying activity.
Does this apply to you?
- You received a Schedule K-1 (Form 1041) from an estate after a family member’s death
- You are a beneficiary of a trust that distributes income to you
- You received income from a grantor trust, revocable trust, or irrevocable trust
- You are the beneficiary of a deceased person’s estate during the administration period
Easy to overlook
Estate K-1s often arrive late and cover a non-calendar year Estates and trusts frequently operate on a fiscal year, not a calendar year. A K-1 from a decedent’s estate may cover a period that straddles two of your tax years. The income reported on your return corresponds to the estate’s or trust’s tax year that ends within your calendar year. Late-arriving K-1s from estates in probate are the most common reason beneficiaries file extensions. 1 IRS Schedule E instructions — Line 33
Trust distributions carry out different types of income A trust’s K-1 may include ordinary income, capital gains, tax-exempt interest, and other income types. Each type retains its character when it passes through to you. Tax-exempt interest remains tax-exempt on your return. Capital gains remain capital gains reported on Schedule D, not on Schedule E. Only the ordinary income portion typically goes on Schedule E Part III. 2 General filing pattern — inherited estate K-1 not reported
Watch out for this
Ignoring a K-1 from a small estate because the amount seems insignificant. The IRS receives a copy of every Schedule K-1 (Form 1041) filed by an estate or trust. Even a K-1 showing $200 in income triggers an automated matching notice if you fail to report it. The amount does not need to be large to generate a CP2000 notice.
Footnotes
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IRS Schedule E (Form 1040) Instructions, Line 33. https://www.irs.gov/instructions/i1040se ↩
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IRS Schedule K-1 (Form 1041) Instructions, Income Types. https://www.irs.gov/instructions/i1041sk1 ↩