Business & farm

See the attached multipage PDF that walks you through the process in a Final Year of a Form 1041 allocating income, excess deductions, and other distributable amounts to the beneficiary.

1. Executor Fees go to Trustee Fees in Deductions
2. Generally such fees are allocable to all types of income
3. In Final Year, even if not previously, distributions are made to the beneficiary or beneficiaries
4. Unless the Will or Trust provided for explicit amounts to go to a beneficiary, it is usually by percentage.
5. One beneficiary = 100%
6. Note that negative distributable amount of "income" meaning that distributable amounts are of the excess deductions
7. Distributable amounts to go to K-1 Worksheet
8. K-1 Worksheet - note Box 11 Line A 
9. Actual K-1 to be reported to IRS and beneficiary - note box 11 code A

Excess Deductions occur only upon termination of the entity during the last tax year of the trust or decedent's estate, and when the total deductions (excluding the charitable deductions and the exemption available to the entity) are greater than the gross income for the entity for the year. These 'excess deductions' are reported in Box 11 of the Schedule K-1 (Form 1041) with a code of 'A'. Generally, a deduction based on a Net Operating Loss carryover is not available to the beneficiary as an excess deduction. However, if the final year tax return (Form 1041) filed by the trust or estate is also the final year in which the NOL carryover can be taken by the entity, then the NOL carryover may be taken as an excess deduction. For additional information see: Publication 536 - Net Operating Losses (NOL's) for Individuals, Estates or Trusts, also see 26 CFR 1.642(h)-4 - Excess deductions on termination of an estate or trust