Wednesday, March 23, 2011

Making sense of a 1041K-1 Form

Q.  I gave my preparer all the proper documents for the preparation of both the trust return and my individual return. For the life of me, I can't figure out how the figures from the trust return correlate to either the 1041 K-1 form or to my individual return. I never seem to be able to get a hold of my CPA, he's always with a client. Can you help? AJ, Arizona

A.  Trust returns are a unique kind of entity, in that they are not treated the way an individual tax is. For example, you are allowed to deduct the expenses related to the trust directly from income. Additionally, you are allowed to allocate the net income to have expenses offset the highest taxable income first. No other tax return allows us to do that!

I realize how busy your CPA is, and suggest you make an appointment for after April 18th this year. He or she should be happy to review it with you and answer any remaining questions.

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