The Indiana Schedule K-1 is prepared for each beneficiary as part of the Indiana return.
Enter the name, address and social security number for each beneficiary, grantor or owner on the "General Section" of the federal "Beneficiary Income" worksheet.
The beneficiary number is a mandatory entry. It is used to match information from the K-1 transmittal, K-1 footnotes and any supplemental information entered on other sections of this worksheet to the correct beneficiary.
The entries in these sections generally apply to both federal and Indiana. Federal and Indiana differences in tax law and information entered are taken into account when computing the distribution deductions and related beneficiary allocations. Indiana Schedule K-1s are produced for both resident and nonresident beneficiaries.
The state code is used to determine the residency status of the beneficiaries. If the state code is anything other than "IN" or blank, the beneficiary is treated as an Indiana nonresident.
All amounts and percentages entered in the "Required distributions" and the "Discretionary distributions" boxes in the "General" section are converted to a distribution percentage for each beneficiary. Additions and subtractions are allocated between beneficiaries and the fiduciary based on this distribution percentage.
Allocations for nonresident beneficiaries are based on the state code entries for the beneficiaries and the income source.
Currently, the state code entry is ignored for grantor or custodial returns. All nonresident grantors or owners are processed as though they were residents of the state of the grantor or custodial trust.
Intangible income is considered Indiana source whenever "IN" is selected as the state code.
Intangible income without a specific situs ("State Code" box is blank) will not be distributed to nonresident beneficiaries. Intangible income (such as interest, dividends, capital gains and open line other income amounts) identified as being Indiana source will be included on the Indiana nonresident beneficiaries' Schedule K-1.
To prevent the intangible income from being included on the nonresident beneficiaries' Schedule K-1, leave the "State code" field blank.
Income and gains from tangible business properties (rents, farms, etc.) will carry to the nonresident beneficiaries' Schedule K-1 when the state code for the income property is blank or "IN."
Gains from the sale of in-state source assets held one year or less will be treated as ordinary gains, and gains from the sale of in-state source assets held longer will be treated as long-term capital gains. Ordinary gains are distributed to the nonresident beneficiaries based on ordinary income percents and/or amounts entered on the "Beneficiary Basic Data, Options, Distribution & Export Information" worksheet. Long-term capital gains are distributed using the long-term capital gains percents and/or amounts.
Valid transactions are those entered on the "Business Property, Casualties and Theft" of the federal "Gains and Losses" worksheet, the appropriate sections of the "Installment Sales" worksheet and the appropriate sections of the "Contracts and Straddles" worksheet.
If this is a final K-1 for a specific beneficiary, select the applicable box. The "Final K-1" check box on the corresponding Indiana Schedule K-1 will be checked.
The resident state letter is available for nonresident beneficiaries. The letter provides information used for filing the beneficiary's resident state individual return. To produce the letter for specific nonresident beneficiaries, select the "Resident State Letter" field. To request the letter for all nonresident beneficiaries, select the “Prepare resident state letter for all nonresident beneficiaries" field on this section.
The Resident State Letter is available for beneficiaries of simple trusts, complex trusts and estates. Currently, this letter is not produced for grantor trusts and custodial/agency accounts.
The amounts and percentages entered on this form are converted to a distribution percentage for each beneficiary. These percentages are used to allocate the Indiana adjustments to the beneficiaries.
Refer to the help screen of the "State Allocation Overrides" section help of the "Specific Allocation” worksheet for more information on Indiana allocation overrides.
Use this worksheet and section to specifically allocate depreciation, depletion, taxes, credits, minimum tax income and final year distributions.
Refer to this section's help screen for more information.
Distribution percentages, computed from entries on the "Beneficiary Information" and "Specific Allocation" worksheets are used to allocate Indiana adjustment amounts to the beneficiaries. To override the computed ordinary income percent, use the "State Allocation Overrides" section.
The decimal amounts entered are used to compute each adjustment item distributed to the beneficiaries on the Indiana Schedule K-1. No "Decimal" column is required to total 1.00. If the "Decimal Column" is less than 1.00, the difference between the total and 1.00 represents the fiduciary's portion.
An entry in this field is used to allocate Indiana adjustment amounts; unless an overriding entry has been made in the "U.S. Interest" section. If no entries are present, the ordinary income percent computed from input on the federal "Beneficiary Information" worksheet for required distributions and discretionary distributions and input on the federal "Specific Allocation" worksheet are used to distribute Indiana adjustment amounts.
When the "General" section of the "Beneficiary Information" worksheet is used to allocate income to the beneficiaries, an ordinary income percentage is computed. This computed percent is used to allocate U.S. interest to the beneficiaries.
When the "Income" section of the "Specific Allocation" worksheet is used to specifically allocate U.S. interest, a computed percentage is used to allocate U.S. interest to the Indiana beneficiaries.
An entry in the "U.S. Interest" field in this section overrides the other computed percents previously mentioned.
Because Indiana is a nonconforming state to federal bonus depreciation statutes, bonus depreciation must be added back. Enter the amount of the beneficiary's share of the bonus depreciation in these boxes. This amount will flow to the Additions section of the Indiana K-1 accompanied by the text "Bonus Depreciation Adjustment".
Entering decimal overrides for some beneficiaries and not all beneficiaries will result in zero distribution of adjustment amounts to those beneficiaries without a decimal override entered.
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