Instructions For Form 5227 (Page 3 of 8) in pdf

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“Amended return” box. Complete the

Income distribution deductions under

Line 2—Dividends

entire return and correct the appropriate

section 661.

Report all taxable dividends received by

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lines with the new information. On an

Capital loss carryforwards under

the trust.

attachment, explain the reason for the

section 1212.

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Line 3—Business Income or

changes and identify the lines and

Federal income taxes.

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amounts being changed.

Federal excise taxes under Chapter 42.

(Loss)

Any expense that is not deductible in

If the trust operated a business, report the

If the amended return results in a

determining taxable income and not

income and expenses on Schedule C,

change to income, or a change in

allocated to nontaxable income must be

Profit or Loss From Business (or

distribution of any income or other

allocated to corpus. For a discussion on

Schedule C-EZ, Net Profit From

information provided to a recipient, an

the allocation of deductions to tax-exempt

Business) of Form 1040. See the

amended Schedule K-1 (Form 1041)

income, see the Instructions for Form

instructions for F. Unrelated Business

must be filed with the amended Form

1041.

Taxable Income above. Enter the net

5227 and a copy given to each recipient.

All Federal income taxes for which the

profit or (loss) from Schedule C or C-EZ

Check the “Amended K-1” box at the top

split-interest trust is liable because it has

on line 3.

of the Schedule K-1 (Form 1041).

unrelated business taxable income, and

Line 4—Rents, Royalties,

Change of name or address. If there

all taxes imposed by Chapter 42 of the

has been a change in the trustee’s name

Partnerships, Other Estates and

Internal Revenue Code (relating to private

or address, check the appropriate box.

foundations), are allocated to corpus.

Trusts, etc.

Use Schedule E (Form 1040),

Line 17—Long-Term Capital

F. Unrelated Business Taxable

Supplemental Income and Loss, to report

Gain or (Loss)

Income (section 664 trusts

the trust’s income or (losses) from rents,

only)

The total of long-term capital gains or

royalties, partnerships, S corporations,

(losses) from all three tax rate groups

If the charitable remainder trust has any

other estates and trusts, and REMICs.

(described below) is entered on line 17a.

unrelated business taxable income (within

Enter the net profit or (loss) from

The following is a summary of the three

the meaning of section 512 and related

Schedule E on line 4. See the Instructions

tax rate groups:

regulations) for 2002, all of the trust’s

for Schedule E (Form 1040) for reporting

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28% group. This group includes

income is subject to the same taxes

requirements. If the trust received a

collectibles gains and losses and the

(including estimated tax payments) that

Schedule K-1 from a partnership, S

taxable gain (but not more than the

are imposed on complex trusts under

corporation, or other flow-through entity,

section 1202 exclusion) on the sale or

Subchapter J of the Internal Revenue

use the corresponding lines on Form

exchange of qualified small business

Code. The trust cannot be taxed as a

5227 to report the interest, dividends,

stock. Enter these gains or (losses) on

grantor trust.

capital gains, etc., from the flow-through

line 17b.

entity.

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If you answer “Yes,” in addition to

25% group. This consists of

Form 5227, file Form 1041 (if a domestic

Line 5—Farm Income or (Loss)

unrecaptured section 1250 gain

trust). Use Form 1041 to report all the

(generally, the part of real estate capital

If the trust operated a farm, use

trust’s income (not just the unrelated

gain attributable to depreciation) on sales,

Schedule F (Form 1040), Profit or Loss

business income) and its deductions

exchanges, etc., of assets held more than

From Farming, to report farm income and

(including the deduction for distributions

1 year. Enter this gain on line 17d.

expenses. Enter the net profit or (loss)

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to beneficiaries) and to compute any tax

20% group. This is all other gains or

from Schedule F on line 5.

due. Use the regular trust rules contained

losses from sales, exchanges, and

in the Instructions for Form 1041. You

Line 6—Ordinary Gain or

conversions (including installment

must also complete Schedule I of Form

(Loss)

payments received) of assets held more

1041 to determine whether the trust is

than 12 months. Within this group there

Enter from Form 4797, Sales of Business

subject to any alternative minimum tax.

are two classes, qualified 5-year gain

Property, the gain or loss from the sale or

items and Other 20% gain items.

exchange of property other than capital

See the instructions for Part III on

Qualified 5-year gain items are those on

assets and also from involuntary

page 4 to determine the amount of the

which there is long-term capital gain

conversions (other than casualty or theft).

current distribution to report to each

(other than 28% rate gain or realized

For more information, see the Instructions

beneficiary on Form 1041, Schedule K-1.

unrecaptured section 1250 gain) from the

for Form 4797.

sale or other disposition of property held

Part I—Ordinary Income

Deductions

for more than 5 years and are entered on

line 17c. Other 20% gain items are all the

Deductions are to be allocated as follows:

Line 1—Interest Income

remaining items in the 20% group.

1. Allowable deductions directly

Report all taxable interest income that

For more information, see the

attributable to one or more classes of

was received by the trust. Examples of

Instructions for Schedule D (Form 1041).

income items (i.e., interest, dividends, or

taxable interest include interest from:

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rents) or corpus are allocated to such

Accounts (including certificates of

Part II—Accumulation

income classes or corpus.

deposit and money market accounts) with

2. Allowable deductions not allocated

Schedule

banks, credit unions, and thrifts.

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under 1 above are allocated on the basis

Notes, loans, and mortgages.

Report the income (both current and

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of gross income after directly attributable

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

cumulative undistributed income) of the

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deductions, to the extent of such income.

U.S. savings bonds.

trust for purposes of determining the

3. Deductions not allocated under

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Original issue discount.

character of distributions in three

either 1 or 2 above may be allocated in

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Income received as a regular interest

categories:

any manner.

holder of a Real Estate Mortgage

1. Ordinary income,

Investment Conduit (REMIC).

No deduction is ever allowed for:

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2. Capital gains and losses, and

For taxable bonds acquired after

The personal exemption under section

3. Nontaxable income.

December 31, 1987, amortizable bond

642(b).

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premium is treated as an offset to the

Charitable contributions under section

A loss in any one of the three

interest income instead of as a separate

642(c).

categories may not be used to reduce a

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interest deduction. See Pub. 550,

Net operating losses under section

gain in any other category. For example,

Investment Income and Expenses.

642(d).

a capital loss may not be used to reduce

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Instructions For Form 5227 Page 3

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