Instructions For Form 5227 (Page 4 of 12) in pdf

See the instructions for Part III on page 5 to determine

Line 5—Farm Income or (Loss)

the amount of the current distribution to report to each

If the trust operated a farm, use Schedule F (Form 1040),

beneficiary on Form 1041, Schedule K-1.

Profit or Loss From Farming, to report farm income and

expenses. Enter the net profit or loss from Schedule F on

Part I—Ordinary Income

line 5.

Line 1—Interest Income

Line 6—Ordinary Gain or (Loss)

Report all taxable interest income that was received by

Enter from Form 4797, Sales of Business Property, the

the trust. Examples of taxable interest include interest

gain or loss from the sale or exchange of property other

from:

than capital assets and also from involuntary conversions

•

Accounts (including certificates of deposit and money

(other than casualty or theft). For more information, see

market accounts) with banks, credit unions, and thrifts;

the Instructions for Form 4797.

•

Notes, loans, and mortgages;

•

U.S. Treasury bills, notes, and bonds;

Deductions

•

U.S. savings bonds;

•

Deductions are to be allocated as follows.

Original issue discount; and

•

1. Allowable deductions directly attributable to one or

Income received as a regular interest holder of a Real

more classes of income items (i.e., interest, dividends, or

Estate Mortgage Investment Conduit (REMIC).

rents) or corpus are allocated to such income classes or

For taxable bonds acquired after December 31, 1987,

corpus.

amortizable bond premium is treated as an offset to the

2. Allowable deductions not allocated under 1 above

interest income instead of as a separate interest

are allocated on the basis of gross income after directly

deduction. See Pub. 550, Investment Income and

attributable deductions, to the extent of such income.

Expenses.

3. Deductions not allocated under either 1 or 2 above

may be allocated in any manner.

Line 2a—Qualified Dividends

Report on this line all qualified dividends received by the

No deduction is ever allowed for:

trust. In general, a qualified dividend is a dividend

•

The personal exemption under section 642(b),

received during the tax year from (a) a domestic

•

Charitable contributions under section 642(c),

corporation or (b) a qualified foreign corporation. A

•

Net operating losses under section 642(d),

qualified dividend does not include any dividend from a

•

corporation if the corporation is (or was) exempt from

Income distribution deductions under section 661,

•

income tax under section 501 or 521 for the corporation’s

Capital loss carryforwards under section 1212,

•

current or preceding tax year during which the distribution

Federal income taxes, or

•

was made.

Federal excise taxes under Chapter 42.

Generally, these dividends are reported to the trust in

Any expense that is not deductible in determining

box 1b of Form(s) 1099-DIV.

taxable income and not allocated to nontaxable income

Qualified dividends are treated as a separate class of

must be allocated to corpus. For a discussion on the

ordinary income for purposes of ordering distributions.

allocation of deductions to tax-exempt income, see the

See Ordering Rules on page 6 for more information on

Instructions for Form 1041.

distributions. See Pub. 550, Investment Income and

All federal income taxes for which the split-interest

Expenses, for additional information on qualified

trust is liable because it has unrelated business taxable

dividends, including holding period requirements.

income, and all taxes imposed by Chapter 42 of the

Line 2b—Total Ordinary Dividends

Internal Revenue Code (relating to private foundations),

are allocated to corpus.

Enter on line 2b the total of all ordinary dividends,

including the qualified dividends reported on line 2a.

Line 17—Long-Term Capital Gain or Loss

Line 3—Business Income or (Loss)

The total of long-term capital gains or losses from all

classes (described below) is entered on line 17a. The

If the trust operated a business, report the income and

following is a summary of the classes:

expenses on Schedule C, Profit or Loss From Business

•

(or Schedule C-EZ, Net Profit From Business) of Form

28% long-term capital gain class. This class consists

1040. See the instructions for F. Unrelated Business

of collectibles gains and losses and the taxable gain (but

Taxable Income on page 3. Enter the net profit or loss

not more than the section 1202 exclusion) on the sale or

from Schedule C or C-EZ on line 3.

exchange of qualified small business stock. Enter these

gains or losses on line 17b.

Line 4—Rents, Royalties, Partnerships,

•

Section 1250 long-term capital gain class. This

Other Estates and Trusts, etc.

class consists of unrecaptured section 1250 gain

(generally, the part of real estate capital gain attributable

Use Schedule E (Form 1040), Supplemental Income and

to depreciation) on sales, exchanges, etc., of assets held

Loss, to report the trust’s income or losses from rents,

more than one year. Enter this gain on line 17c.

royalties, partnerships, S corporations, other estates and

Undistributed, unrecaptured section 1250 gain on sales,

trusts, and REMICs. Enter the net profit or loss from

exchanges, etc., after May 6, 1997, is included in this

Schedule E on line 4. See the Instructions for Schedule E

class.

(Form 1040) for reporting requirements. If the trust

•

received a Schedule K-1 from a partnership, S

All other long-term capital gain class.This class

consists of all other gains or losses from sales,

corporation, or other flow-through entity, use the

corresponding lines on Form 5227 to report the interest,

exchanges, and conversions (including installment

dividends, capital gains, etc., from the flow-through entity.

payments received) of assets held more than 12 months.

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Instructions For Form 5227 Page 4

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