Form 4952 and K-1 for estate beneficiaries

[engrkenr]

I paid the exorbitant licensing fees to Intuit for the estate level TTax software for my late surviving parent along with the associated state additional fee and this is after paying for TTax Deluxe to do my personal taxes.  I talked to numerous individuals at the call centers to help me realize this is what I needed to file, a 1041 for the decedent and the resultant K-1s. 

I read the IRS instructions for Form 1041, all 53 pages, I read the specific IRS instructions for Schedule K-1 (Form 1041) for a beneficiary filing Form 1040, and IRS Publication 529. I inputted all the data required for my late parent, which included a substantial carry over Form 4952 Investment Interest Expense Deduction.  The estate level TTax software created the 1041 and the required K-1s, and the K-1s included Schedule D carry over capital losses to the beneficiary's K1s.

However, there was no investment interest expense deduction carried thru to the beneficiaries via the K-1. No one has yet been able to tell me why. This, despite, IRS Publication 529, Miscellaneous Deductions, page 10, paragraph titled Excess Deductions of an Estate or Trust. "Generally, if an estate or trust has an excess deduction resulting from total deductions being greater than its gross income, in the estate's or trust's last year, a beneficiary can deduct the excess deductions, depending on its character. The excess deductions retain their character as an adjustment to arrive at adjusted gross income on Schedule 1 Form 1040 as a non-miscellaneous itemized deduction reported on Schedule A Form 1040, or as a miscellaneous itemized deduction. For more information on excess deductions of an estate or trust, see the instructions for Schedule K-1 Form 1041 for a beneficiary filing Form 1040 or 1040SR."

The questions for TTax are, why didn't your software carry over my deceased parent's excess investment expense from their Form 4952 to me via the K-1? Has TTax misinterpreted IRS Publication 529 Miscellaneous Deductions as noted above?

[PatriciaV]

If this is the final return for the trust (and indicated on Form 1041), excess deductions should be reported on Schedule K-1 Line 11(b). You may need to confirm that you have checked the box for Final Return under Line F.

[engrkenr]

Thank you for your feedback.  The box for "Final Return" on the 1041 Line "F" is checked.  The question remains, why didn't TTax Business (for Estates) generate a K-1 for me with the excess Investment Interest Expense Deduction which would in turn generate a Form 4952 for my 1040-SR just like it did for my Sch D capital loss carry forward?  If my interpretation that TTax should have created a 4952 for me is not correct, why is the 4952 referenced on the back of the K-1?

Thank you, engrkenr

[ThomasM125]

Per the instructions for schedule K-1 of Form 1041, you are to enter the excess deductions on termination of a trust in box 11 of schedule k-1 and use the code "A". You can do that on the form in TurboTax. The instructions do not mention the form 4592, only that you report the adjustment on Schedule 1 of form 1040, Part II, line 24(k). Once you input the K-1 schedule into your personal TurboTax program, with the box 11, code "A" entry, it will flow to line 24(k) on your schedule 1.