How to set allocation options in Lacerte for a 1041 K-1

There are two ways to allocate deductions (depreciation, depletion, and credits) in the fiduciary module. Deductions and credits can be maintained in the fiduciary entity or allocated to the beneficiaries. User options will define the default method on these allocations.

To modify these options globally:

1. From the Settings menu, select Options.
2. Select the Tax Return tab.
3. Select K-1 Distribution Options from the left sections menu.
4. Select either Maintain in Trust or Prorate between Beneficiary/Trust in the following dropdown items:
   • Depreciation
   • Depletion
   • Credits

To change the options for a specific client:

1. Open Screen 9, Schedule K-1 Distribution Options.
2. Enter a 1 or a 2 in the following fields, as applicable:
   • Depreciation: 1=in fiduciary, 2= prorate to beneficiary [O]
   • Depletion: 1=in fiduciary, 2= prorate to beneficiary [O]
   • Credits: 1=in fiduciary, 2= prorate to beneficiary [O]

To set the pro-rata and tiered method:

There are two methods to allocate expenses among different classes of income, the pro-rata and tiered method. User options can define the default method as follows:

1. From the Settings menu, select Options.
2. Select the Tax Return tab.
3. Select K-1 Distribution Options from the left sections menu.
4. In the K-1 Deductions dropdown item, select either Tier allocation or Pro-rata allocation.

To override the method for a specific client:

1. Go to Screen 44, Deduction Allocation for DNI.
2. In the DNI Allocation Options section, enter a 1 or a 2 in the field Automatic allocation: 1=tier, 2=pro-rata[O].