TurboTax Business isn't "retaining the character" of excess-deduction property taxes received in a K-1 from another trust

[turbler]

I'm using TurboTax Business to prepare a 1041 for the final year of a complex trust that received a K-1 from another trust (in its final year) that passed excess deductions to my trust in Box 11, Code B ("Non-miscellaneous itemized deductions") of the K-1.

The excess deductions are all property taxes (and that's stated on the K-1), and it's my understanding that they "retain their character" in the hands of my trust — so to the extent that I can use them (and I can), they belong in Line 11 (Taxes) of the 1041, along with my trust's other property tax deductions.

But unless I missed something, the TurboTax step-by-step never asked me what kind of deductions those itemized deductions were, and TurboTax is putting them in Line 15a (Other Deductions), rather than Line 11 (Taxes).

The taxable income comes out the same either way (because I'm not up against the SALT limit), but the AMT result is different, because if I used 1041 Line 11 to deduct those taxes, they'd be included in Line 3 of Schedule I, whereas putting them in Line 15a (as TurboTax has done) keeps them out of the AMT calculations.

I'm new to TurboTax, but I know I can do "overrides" if I have to, but what I'm wondering is... am I only having this issue because I didn't answer all the questions properly in the step-by-step, and if not, is there a *best way* for me to adjust things so I get the right result?

[Anonymous_]

I have tried the scenario you described in your post on a test return and the K-1 I entered (from another trust) retained the attributes. 

For example, when the K-1 contained a figure on Line 11 with a B code, it was passed through to the beneficiary on a K-1 on the same line and with the same code. 

I am not sure why you are seeing a different result.

[turbler]

But 11B is non-miscellaneous itemized deductions generally, rather than property taxes specifically.

[Anonymous_]

Correct, but they are still itemized deductions for the beneficiary and a statement is generally provided that details the exact type of deduction.

[turbler]

That's right, and the K-1 this trust received had that more specific information. My question is, how do I input that info into TurboTax for the recipient trust's 1041 so that it's put in the line item for Taxes (and carried through to Sch. I, etc.)?

[Anonymous_]

I think I am misapprehending something here since both trusts are filing returns for their final year. As a result, there should be a pass-through to the beneficiary(ies) of the trust that received the K-1 (with a figure on Line 11B). Is that not the case?

Note that my test return contemplates the deduction being passed through to the ultimate beneficiaries on their K-1s.

[turbler]

It's the final year for the recipient trust, but there are capital gains that the property taxes will be deducted from, so the beneficiaries of the trust will get a pass-through of a reduced net capital gain, but won't be getting a pass-through of the tax deduction.

And as previously noted, whether the trust's 1041 puts the deduction in the Taxes line or the Other Deductions line affects the AMT calculation on Sch. I.

So my question is: since the TurboTax step-by-step didn't ask me what kind of itemized deduction this is, what's the best way for me to move it to the Taxes line. Just a manual override?

(As I said, I'm new to TurboTax, and I realize this may be kind of a beginner's question.)

[Anonymous_]

OK, if you want the deduction not to be entered as Other deductions in this scenario, then you will have to do that manually in Forms Mode.

[turbler]

Thanks for your help. I've adjusted the return manually.