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INSTRUCTIONS FOR SC1041 - FIDUCIARY INCOME TAX RETURN (Rev, 9/15/00)

NEW INFORMATION 2000

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South Carolina has updated income tax laws to conform with the Internal Revenue Code of 1986, as amended through December 31, 1999, including the

effective dates, with the modifications as explained in the instructions.

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The instructions for Page 1, Line 3 (Modifications Rdlated to Principal or to Non-Distributable income) have been revised.

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The State law, Code Section 12-6-1120(3) which did not allow for the exclusion by the Internal Revenue Code section 1031 when the sale or exchange of

real estate located in this State was received in the exchange for real estate located in another state, has been repealed. The Code Section 12-6-1180

which recognized the difference in basis because of this formerly state disallowed type of Code Section 1031 transaction has also been repealed. The

effective date for these changes is August 17, 2000.

FILING REQUIREMENTS

The fiduciary of a resident estate or trust must file a South Carolina Fiduciary retum (Form SC1041 ) if the estate or trust:

(a) is required to file a federal fiduciary income tax return for the taxable year, or

(b) had any South Carolina taxable income for the taxable year, or

The fiduciary of a nonresident estate or trust must file a South Carolina fiduciary return if the estate or trust had income or gain derived from South Carolina

sources.

Income from South Carolina sources includes income or gain from:

(a) real or tangible personal property located within South Carolina,

(b) a business, profession or occupation carried on in South Carolina, or

For a nonresident estate or trust, income from the following is not considered to be derived from South Carolina sources: annuities, interest,

dividends or gain from the sale or exchange of intangible personal property, unless it is part of the income from a business, trade, profession or

occupation carried on within South Carolina.

RESIDENT AND NONRESIDENT ESTATES AND TRUSTS DEFINED

A resident estate is the estate of a person who was a South Carolina resident at the time of death. All other estates are nonresident estates. A resident trust

is any trust which is administered in South Carolina. A trust being administered outside of South Carolina shall not be considered a resident trust merely

because the goveming instrument or a law requires that the laws of South Carolina be followed with respect to interpretation of administration of the trust. All

other trusts are nonresident trusts.

WHERE TO OBTAIN FORMS

Forms are available at the SC Department of Revenue Taxpayer Service Centers. Any form that cannot be obtained locally may be requested from the SC

Department of Revenue, Forms, Columbia, SC 29214-0402. Forms are also available on our website ( ) or through Fax on Demand at

1-800-768-3676.

WHEN AND WHERE TO FILE

A South Carelina fiduciary return of income should be completed after the federal fiduciary return is completed, but is due no later than the 15th day of the 4th

month after the close of the taxable year. Returns should be mailed to SC Department of Revenue, Fiduciary Tax Return, Columbia, SC 29214-0009. Failure

to file the return on time may subject the fiduciary to penalty. If additional time is needed to file your SC1041 you may file SC4868 by the due date of the

return. SC Department of Revenue will accept a federal extension in lieu of SC4868 provided the South Carolina income tax return shows a refund or

no balance due when the return is filed, if you intend to use the federal extension in lieu of South Carolina's extension, it is not necessary to send South

Carolina a copy of the federal form by the due date of the tax return. Simply attach a copy of the federal extension when you file the tax return within the

extended period.

PAYMENT OF TAX

The balance of the tax shown to be due on line 18, page 1 of your South Carolina fiduciary return, Form SC1041, must be paid in full. Failure to pay your tax

on time may subject you to assessment of penalty and interest. Payment should be made by check or money order to "SC Department of Revenue."

ACCOUNTING PERIOD

The accounting period for which the South Carolina fiduciary return, Form SC1041, is filed and the method of accounting used must be the same as that used

for federal tax purposes. If the estate's or trust's taxable year method of accounting is changed for federal purposes, the change applies similarly to the South

Carolina fiduciary return.

FEDERAL ADJUSTMENTS

Any taxpayer whose income has been adjusted by the Internal Revenue Service should report such adjustments to the SC Department of Revenue after the

federal adjustments are agreed to or become final between the taxpayer and the Internal Revenue Service. Such adjustment shall be reported by filing an

amended return for the applicable taxable year and attaching a copy of the revenue agent's report detailing such adjustments.

FIDUCIARY REPORTING OBLIGATIONS TO BENEFICIARIES

Fiduciaries must provide to each resident beneficiary the amount of fiduciary adjustment to be used in the preparation of the beneficiary's South Carolina

individual income tax return. (See column 4, Part II, page 2 of Form SC1041).

In addition, fiduciaries must provide to each nonresident beneficiary the amount of the nonresident beneficiary's share of income and credits from Part IV,

page 3 of Form SC1041.

Fiduciary adjustments and beneficiaries' shares of fiduciary adjustments, and beneficiaries' shares of income and credits are computed in Parts I, II, III, and IV,

pages 2 and 3 of Form SC1041. The following rules explain which of these parts should be completed.

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If a resident estate or trust has only resident beneficiaries, or if no amounts are distributable to nonresident beneficiaries, then it is necessary to complete

only Parts I and II.

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If a resident estate or trust has nonresident beneficiaries, then it is generally necessary to complete all parts. However, if amounts distributed to

nonresidents are non-taxable, then Part IV may be omitted.

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If all income of a resident estate or trust is taxable to the fiduciary and no distributions are made, or required to be made, then only Part I must be

completed.

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If a nonresident estate or trust has resident and/or nonresident beneficiaries, then all parts must be completed. However, if all income is taxable to the

fiduciary, then only Parts III and V are required to be completed.