1041 Schedule K-Beneficiary Share of Income, Deductions, Credits, Etc.

[jwhuffman]

I have a 1041 Schedule K that was done on IRA money from Grandmother's inheritance that was in Alabama.  I live in Georgia. I am assuming that I will have to file this in both AL and GA state taxes? or would it only go on Federal?

Also on the 1041 Schedule K, there is positive number in box 5, but the same number is negative in box 14....but Turbo tax is not allowing me to enter it as (1100) only as -1100.

[dmertz · Accepted solution]

This is income that you received in your state of residence, GA, not AL.  With regard to this IRA income, your grandmother's estate estate files an AL income tax return, not you.

Interesting that box 14 has something related to the IRA distribution.  What is the code associated with the box-14 amount?

[jwhuffman]

Box 14 has code H

[dmertz · Accepted solution]

Ah, that makes sense then.  Most items reported in box 5 of a Schedule K-1 (Form 1041) are items that are to be included in the calculation of total investment income from the purpose of preparing Form 8960 to calculate Net Investment Tax.  However, distributions from IRAs that are includible in box 5 are not, hence the adjustment provided in box 14 with code H.

Simply enter the amounts are indicated, a positive $1,100 in box 5 of TurboTax's Estate and Trust Schedule K-1 and negative $1,100 (as "-1100", no parentheses) in box 14 with code H.  The box 5 amount will be included on Schedule E Part III and on Form 8960 line 4a, and the box 14 amount will be included on Form 8960 line 7 as a modification to investment income, offsetting the amount on line 4a.  If your MAGI is less than the limit for your filing status, TurboTax will just omit Form 8960 from your tax return entirely, otherwise Form 8960 will be included showing that the $1,100 is not considered to be investment income.