Exemption Worksheet for Qualified Disability Trusts Only

Page 23 of 37

Instructions for Form 1041 and Schedules A, B, G, J, and K-1

12:20 - 25-SEP-2009

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

. The 2-year carryback period does not apply to the portion of an
NOL attributable to an eligible loss; a farming loss; a qualified
disaster, GO zone, recovery assistance, or disaster recovery
assistance loss; or a specified liability loss.

2b(2), or Schedule D (Form 1041), line
18.
Also, a deduction is allowed for the
GST tax imposed as a result of a
taxable termination or a direct skip
occurring as a result of the death of the
transferor. See section 691(c)(3). Enter
the estate’s or trust’s share of these
deductions on line 19.

Line 20—Exemption
Decedents’ estates. A decedent’s
estate is allowed a $600 exemption.
Trusts required to distribute all
income currently. A trust whose
governing instrument requires that all
income be distributed currently is
allowed a $300 exemption, even if it
distributed amounts other than income
during the tax year.
Qualified disability trusts. A qualified
disability trust is allowed a $3,650
exemption if the trust’s modified AGI is
less than or equal to $166,800. If its
modified AGI exceeds $166,800,
complete the worksheet below to figure
the amount of the trust’s exemption. To
figure modified AGI, follow the
instructions for figuring AGI for line 15b
on page 21, except use zero as the
amount of the trust’s exemption when
figuring AGI.
A qualified disability trust is any trust:
1. Described in 42 U.S.C.
1396p(c)(2)(B)(iv) and established
solely for the benefit of an individual
under 65 years of age who is disabled,
and

2. All of the beneficiaries of which
are determined by the Commissioner of
Social Security to have been disabled
for some part of the tax year within the
meaning of 42 U.S.C. 1382c(a)(3).
A trust will not fail to meet item 2
above just because the trust’s corpus
may revert to a person who is not
disabled after the trust ceases to have
any disabled beneficiaries.
All other trusts. A trust not described
above is allowed a $100 exemption.

Tax and Payments
Line 22—Taxable Income
Minimum taxable income. Line 22
cannot be less than the larger of:
• The inversion gain of the estate or
trust, as figured under section 7874, if
the estate or trust is an expatriated
entity or a partner in an expatriated
entity, or
• The sum of the excess inclusions of
the estate or trust from Schedule Q
(Form 1066), line 2c.
NOL. If line 22 (figured without regard
to the minimum taxable income rule
stated above) is a loss, the estate or
trust may have an NOL. Do not include
the deductions claimed on lines 13, 18,
and 20 when figuring the amount of the
NOL.
Generally, an NOL may be carried
back to the prior 2 tax years (3 years to
the extent the loss is an eligible loss; 5
years to the extent the loss is a farming
loss; 10 years to the extent the loss is a
specified liability loss). An estate or

trust may also elect to carry an NOL
forward only, instead of first carrying it
back. For more information, see the
Instructions for Form 1045, Application
for Tentative Refund.
Complete Schedule A of Form 1045
to figure the amount of the NOL that is
available for carryback or carryover.
Use Form 1045 or file an amended
return to apply for a refund based on an
NOL carryback. For more details, see
Pub. 536, Net Operating Losses
(NOLs) for Individuals, Estates, and
Trusts.
On the termination of the estate or
trust, any unused NOL carryover that
would be allowable to the estate or trust
in a later tax year, but for the
termination, is allowed to the
beneficiaries succeeding to the property
of the estate or trust. See the
instructions for Schedule K-1 (Form
1041), box 11, codes D and E on page
34.
Excess deductions on termination.
If the estate or trust has for its final year
deductions (excluding the charitable
deduction and exemption) in excess of
its gross income, the excess is allowed
as an itemized deduction to the
beneficiaries succeeding to the property
of the estate or trust.
In general, an unused NOL
carryover that is allowed to
beneficiaries (as explained above)
cannot also be treated as an excess
deduction. However, if the final year of
the estate or trust is also the last year
of the NOL carryover period, the NOL
carryover not absorbed in that tax year

Exemption Worksheet for Qualified Disability Trusts
Only—Line 20

Keep for Your Records

Note: If the trust’s modified AGI* is less than or equal to $166,800, enter $3,650 on Form 1041, line 20.
Otherwise, complete the worksheet below to figure the trust’s exemption.
1. Maximum exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
2. Enter the trust’s modified AGI* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
3. Threshold amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

$166,800

4. Subtract line 3 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
Note: If line 4 is more than $122,500, enter $2,433 on line 9 below. Do not complete lines 5
through 8.
5. Divide line 4 by $2,500. If the result is not a whole number, increase it to the next higher
whole number (for example, increase 0.0004 to 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
6. Multiply line 5 by 2% (.02) and enter the result as a decimal . . . . . . . . . . . . . . . . . . . . . 6.
7. Multiply line 1 by line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.
8. Divide line 7 by 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
9. Exemption. Subtract line 8 from line 1. Enter the result here and on Form 1041, line 20 . . . . . . . . . . . . . . . 9.
*Figure the trust’s modified AGI in the same manner as AGI is figured in the line 15b instructions on page 21,
except use zero when figuring the amount of the trust’s exemption.

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$3,650