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If the allocation fields are blank for all beneficiaries, the income types are allocated equally among all first tier beneficiaries for simple trusts, grantor trusts, agency relationships, and all final returns. If this is the desired outcome, use the First tier beneficiaries: Allocate all items, except capital gains, equally field on Screen Allocate to improve processing speed.

Fields & buttons

Allocations group box

Required amounts and percentages are applicable to first tier beneficiaries, while discretionary amounts and percentages are applicable to second tier beneficiaries. For estates and complex trusts, a beneficiary may be both first and second tier.

Use these fields to allocate all ordinary (non-capital) income types net of deductions using a single set of amounts and percentages. When you enter both amounts and percentages for estates and non-grantor trusts, the amounts allocate first and then the percentages are applied to the remaining balance.  

Notes

  • Discretionary amount and percentage fields are not available for the following return types: simple trusts, grantor trusts, agency relationships, qualified subchapter S trusts, and charitable remainder trusts.
  • Required amount fields are not available for the following return types: grantor trusts, agency relationships, qualified subchapter S trusts, and charitable remainder trusts.
  • The First tier beneficiaries: Allocate all items, except capital gains, equally field on Screen Allocate has precedence; therefore, when that field is marked, the required amount and percent fields are not available on the Federal tab.
  • Required distributions are based on net accounting income amounts. If there are both required and discretionary distributions, the required distribution is allocated first for all applicable beneficiaries and then any remaining net income is allocated using the discretionary allocation information.
  • If amounts or percentages are entered in the Special Allocations dialog for an income type (for example, interest income), the income type is removed from the allocation using the income distribution amounts or percents. Therefore, you must specify a different allocation for that income type in its entirety for all beneficiaries who should receive distributions of that specific income type.
  • For more information on beneficiary allocations, see Allocating items to beneficiaries.

Required amounts and percentages are applicable to first tier beneficiaries, while discretionary amounts and percentages are applicable to second tier beneficiaries. For estates and complex trusts, a beneficiary may be both first and second tier.

Use these fields to allocate all capital gains net of deductions using a single set of amounts and percentages. When you enter both amounts and percentages for estates and non-grantor trusts, the amounts allocate first and then the percentages are applied to the remaining balance.  

Notes

  • Discretionary amount and percentage fields are not available for the following return types: simple trusts, grantor trusts, agency relationships, qualified subchapter S trusts, and charitable remainder trusts.
  • Required amount fields are not available for the following return types: grantor trusts, agency relationships, qualified subchapter S trusts, and charitable remainder trusts.
  • The First tier beneficiaries: Allocate capital gains equally field on Screen Allocate has precedence; therefore, when that field is marked, the required amount and percent fields are not available on the Federal tab.
  • You cannot use amounts to allocate capital losses.
  • For non-final returns of estates and non-grantor trusts, note the following:
    • If you leave these fields blank, all capital gains and losses allocate to the fiduciary.
    • As a default, capital losses do not allocate in excess of capital gains. To allocate losses, enter X in the Allocate capital losses to beneficiaries on non-final return field on Screen Allocate.
  • For final returns, grantor trusts, and agency relationships, note the following:
    • If you leave these fields blank, all capital gains and losses allocate using entries in the Income distributions amount and percent fields.
    • If you leave all fields blank, capital gains allocate equally to the beneficiaries.

Other Allocations group box

Enter a percentage to directly allocate depreciation and amortization to the beneficiary. The calculated amounts from these entries report on the beneficiary’s Schedule K-1, box 9, instead of Schedules C, E, and F and Form 4562. 

Enter a percentage to directly allocate depletion to the beneficiary on Schedule K-1, box 9, instead of Schedule C or E.

Enter the beneficiary’s percentage of any current-year business or foreign credits and the estate tax deduction. If you leave these fields blank and have not marked the First tier beneficiaries: Allocate all items, except capital gains, equally field on Screen Allocate, the following will happen.

  • For non-final returns of estates and complex trusts, 100 percent allocates to the fiduciary.
  • For final returns and simple trusts, the following allocations occur.
    • 100 percent of the current-year credit allocates to the beneficiaries.
    • If you do not want 100 percent of the current–year credit allocated to the beneficiaries, mark the Final return or simple trust: Allocate credits, estate taxes, or state withholding between trust and beneficiaries field on Screen Allocate and enter percentages in the fields on this tab for each beneficiary. To allocate 100 percent to the fiduciary, leave the percent fields blank.
  • For grantor trusts and agency relationships, 100 percent of the credit always allocates to the beneficiaries.

For more information about foreign tax credit, see Form 1116 FAQs.

The amount entered here allocates in the Section 3406 backup withholding allocated to beneficiaries field on Screen Allocate up to the amount of withholding entered in the following locations:

  • Statement dialog for the Interest income, Dividends, or Other income field on Screen Income
  • Statement dialog for the Other withholding field on Screen PayExt
  • Federal tax withheld field on Screens 1099M, 1099R, W2, and W2G
  • Federal income tax withheld field on Screen K1-3

To produce the Beneficiary’s Oil / Gas Summary Schedule, enter a percentage to indicate what portion of the information on the Oil / Gas Well Schedule should be reported to the beneficiary.

Note: This percentage is only for the Beneficiary’s Oil / Gas Summary Schedule and does not affect the amounts reported on Schedule K-1 or on the Grantor / Agency Report.

Other Returns group box

If you do not wish to use this field, you can also force the total annuity income received by all beneficiaries on Screen SIT. The amount you enter on Screen SIT divides equally among the beneficiaries, and nothing happens with the amount you enter in this field.

If you are preparing a return for a pooled income fund and an option has been entered in the Pooled income funds: Allocate based on ownership share field on Screen Allocate, enter the beneficiary’s share of ownership. 100 percent of the income allocates based on this owner’s share divided by the sum of all owners' shares.

Other buttons

Click this button to open the Special Allocations dialog to specially allocate net income items for the beneficiary.

Click this button to open the Partial Grantor dialog to complete the Grantor / Agency Report for partial grantor trusts for the beneficiary.

Note: This button is enabled only when the return is a partial grantor trust and the Partial grantor trust beneficiary checkbox in the Other Information group box on the Beneficiary tab is marked for the beneficiary.

This button is only available for grantor trust returns. 

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