What does "gross income sourced at beneficiary level" mean when TT is asking for details about foreign income reported in box 14 of a trust k-1?

[melpaw57]

Thank you Hope. I've addressed all entries from Box 14 on my K-1.

[chnoiseoff]

Does my K-1 gross income include tax-exempt interest reported on line 14 code A?

Just to be clearer, my K-1 form 1041 only has entries for:

2a (ordinary dividends),

2b (qualified dividends),

14 code A (tax-exempt interest),

14 code B (foreign tax credit)

When TT asks me to enter, "Gross Income Sourced at Beneficiary Level: US Sourced Income", does that include my 14A tax-exempt interest?  Thus 2a plus14A values or just 2a (ordinary div) ?

[JohnW152]

Gross Income Sourced at Beneficiary Level: US Sourced Income doesn't necessarily mean Box 2a plus Box 14 Code A.

The screen below generates because you've entered the foreign tax credit from K-1 Box 14 Code B on a previous screen.  Because of the inclusion of foreign tax credit, the program realizes that the K-1 must have some foreign income.  What it's trying to get at is a breakdown of U.S. Source Income vs. Foreign Source Income.

The amount entered in Gross Income Sourced at Beneficiary Level would equal the sum of Gross Income Sourced at Beneficiary Level: U.S. Source Income and Gross Income Sourced at Beneficiary Level: Foreign Source Income.

Gross income would include your tax-exempt interest, presumably in the U.S. Source Income category, and you're correct that you'd enter Box 2a as opposed to Box 2b, but which Source Income box it would go into depends on where it came from.

@chnoiseoff 

[chnoiseoff]

JohnW152 (Expert),

Thankyou for your response to my question.  Please clarify the slight contrast between your first sentence.

You said, "Gross Income Sourced at Beneficiary Level: US Sourced Income doesn't necessarily mean Box 2a plus Box 14 Code A." 

And your last paragraph,

You  said, "Gross income would include your tax-exempt interest, presumably in the U.S. Source Income category...".  

1)  When would my Trust 's tax-exempt interest income (Box 14 code A) ever ("not necessarily") not be included in my total gross income for the purpose of calculating the allowable foreign tax credit?

2)  I tried to research this on the internet outside of the TT forums with not success.  I am curious how did you learn the answer to this question I asked.  How would I read more for my own curiosity and educational improvement about how the IRS defined gross income for my trust that includes or excludes something like tax exempt interest income.  I imagine it took you years to acquire all your knowledge but I would like to learn how to research details like this that don't easily show up on a Google Search.

Thanks again for your help.

[JohnW152]

What I intended to convey in the first sentence is that the Box 2a amount wouldn't necessarily be included in US Sourced Income, although the tax-exempt interest likely would be. 

Since there's foreign tax shown in Box 14, there's presumably foreign income somewhere on the K-1, and it may well be the Box 2a amount.  As I noted initially, the foreign tax is what's triggering the screen you're asking about.

As far as research, results are admittedly fairly spotty when it comes to Box 14 Code A.  When it came to your question, I looked at

• Box 14 -- Other Information in the Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 or 1040-SR
• Box 14 -- Other Information in the Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (Note that this is for the preparer of Schedule K-1, unlike the link above, which is for the beneficiary), and
• Box 14 on Page 2 of Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. 

I apologize for any ambiguity.

@chnoiseoff