Alabama Form 41 (Trust Return)

[nancy2]

I have a trust return that has to file in two states.  Alabama is the resident return.  So far I am unable to make the adjustments (Sch C) work properly.  So I can override amounts myself, but will this stop the return from transmitting electronically?

Also, if I remove the Alabama return and then reopen an Alabama return without transferring data, should I be able to just do the return from scratch myself without any problem?  Not sure if that would prevent the federal return from attaching in the efile process.  

TIA

[JH6]

If you override Sch C then it may cause issues with e-filing. 

You mentioned "without transferring data". Is that year to year transfer or Fed to state transfer? Fed to state transfer cannot be removed but year to year transfer can be removed with removing the state return. 

May I ask why Sch C does not work for you? Column C is the AL adjusted amount. In your case, it is a resident trust so Column C reports all source Fed amount adjusted for AL purpose (like conformity, tax deduction adjustment, etc.). Please provide more details so I can help you with troubleshooting. 

[nancy2]

Thank you for your response.  I wish I knew why it doesn't work.  I have spent much time trying to make it work and the only way to do that apparently is override.   

One issue is the Sch E amounts.  Both of which are not Alabama items.  One is rental property that has been an issue for years and I have simply made another line on the Schedule called, Non Alabama Income to back it out.  This year there is a partnership interest.....  again, not an Alabama item.  I have been unable to find a way to back that out other than overriding the Sch C Alabama amount to zero.  Which results in an error message of course.  I have asked the question here a few days ago about some worksheet that is referenced in the instructions but I cannot find it in the program.  

The next issue is allocating the federal expenses between the two states.   The only worksheet I can locate in the program simply allocates between taxable and tax exempt.  Which is not an issue in this case.  

I also need help with the K-2 form on a partnership return.  Can you help with that?

Thank you.

[ihan]

What is your question on Schedule K-2?

[nancy2]

Thank you for your response.

I'm sure there are more but the most pressing K-2 question is how to include the overflow.  I have more countries than lines on your worksheet.  I don't see an option for adding more or even getting a total included so that the grand totals work and allocate correctly to K-1's.  

Also, I enter the countries that I can on the first line, Sales, even though I have 0 amounts to enter there.  I was told here that if I did that it would carryover to every other line.  And, the error message I had would go away, since I had only entered on the Qualified Dividends line.  The error message did go away when I do this.  However, it has not "stuck".  When I leave that return and come back, all of the lines no longer have entries on them.  

The truth is, I have already set up a formatted worksheet to enter all the information I have.  What effect will it have if I simply answer no to the K-2 question on form 1065 page 4?  I currently have that answered as yes, which, immediately causes an error message.  Can I just answer no there and then attach my worksheets?  

[nancy2]

@ihan Here is another K-2 issue.  Line C-the answer to question 1 is No.  However, checking no gives me an error message.  If I look at Part I, I see that item no 4, Foreign tax translation is checked.  When I try to uncheck it, it says it is automatically checked and to change it you must override.  However, when I try to override it simply gives me a red X in the box and another error.  

[JH6]

Per Sch E instruction "Use Schedule E to report income or (loss) from rents, royalties,
partnerships, S corporations, estates, and trusts. Resident Trust and
estates report all sources of income. Nonresident Trust and estates
will report only income sources from property owned or business
transacted in Alabama." , if it is a resident trust, then all source income is reported on Sch E.  In program there is a smart worksheet on the top of Sch E to allocate the AL source and outside of AL source income (Sch E AL Source Income Smart Wks). The income is allocated based on the address of the property. This smart worksheet is used to calculate the AL source of income for nonresident beneficiary K-1. The income reported on Sch E should tie to Sch C line 5a and 5b. And Sch E income/expense info can be transferred from Federal. 

Regarding allocating federal expenses between two states, if AL tax return is filed as the resident trust, then again all source expenses should be reported on Form 41 and a credit can be claimed on Sch FC Section B Part A for income tax paid to other states. In program the fourth column on Sch C "Enter AL Source Amount" column is used to report AL source income/deductions for nonresident beneficiary K-1 purpose. If you want to report the AL source income/deduction on a resident trust tax return, it can be reported there.  But this column is created for calculation purpose and it is not part of Sch C graphic. And please check the instruction or tax law for how to report income/expenses for the other state you are going to file the tax return for. 

Hope this helps. 

[nancy2]

@JH6 Thanks for your help.