Line 24 - Alternative Tax Net Operating Loss Deduction (ATNOLD)

The ATNOLD is the sum of the alternative tax net operating loss (ATNOL) carryovers and carrybacks to the tax year, subject to the limitation explained below.

For tax years beginning after 1986, the net operating loss (NOL) under section 172(c) is modified for alternative tax purposes by (a) adding the adjustments made under sections 56 and 58 (subtracting if the adjustments are negative); and (b) reducing the NOL by any item of tax preference under section 57 (except the appreciated charitable contribution preference item). For an estate or trust that held a residual interest in a real estate mortgage investment conduit (REMIC), figure the ATNOLD without regard to any excess inclusion.

When figuring an NOL from a loss year prior to 1987, the rules in effect before enactment of the Tax Reform Act (TRA) of 1986 apply. The NOL under section 172(c) is reduced by the amount of the tax preference items that were taken into account in figuring the NOL. In addition, the NOL is figured by taking into account only itemized deductions that were alternative tax itemized deductions for the tax year and that were a modification to the NOL under section 172(d). See sections 55(d) and 172 as in effect before the TRA of 1986.

If this estate or trust is the beneficiary of another estate or trust that terminated in 2002, include any ATNOL carryover that was reported on line 13e of Schedule K-1 (Form 1041).

For tax years ending in 2001 or 2002, the ATNOLD is generally limited to AMTI (figured without regard to the ATNOLD). However, if an ATNOL is carried back to the tax year from a tax year ending after 2002, or for ATNOLs carried back from the tax year to tax years ending before 2001, the ATNOLD is limited to the sum of:

1. The smaller of :
   1. The sum of the ATNOL carrybacks to the tax year from tax years ending before 2001 or after 2002 and the ATNOL carryforwards to the tax year (unless the tax year ended in 2001 or 2002) or
   2. Ninety percent of AMTI for the tax year (figured without regard to the ATNOLD), plus
2. The smaller of:
   1. The sum of the ATNOL carrybacks to the tax year from a tax year ending in 2001 or 2002 and the ATNOL carryforwards to the tax year (if the tax year ended in 2001 or 2002), or
   2. AMTI for the tax year (figured without regard to the ATNOLD) reduced by the amount determined under 1 above.

To figure AMTI without regard to the ATNOLD, first figure a tentative amount for line 6 by treating line 24 as if it were zero. Next, figure a tentative total by combining lines 1-23 using the tentative line 6 amount and treating line 24 as if it were zero. The tentative total for lines 1-23 is AMTI figured without regard to the ATNOLD.

Enter on line 24 the smaller of the ATNOLD or the ATNOLD limitation. Any ATNOL not used because of the ATNOLD limitation can be carried back or forward. See section 172(b) for details. The treatment of ATNOLs does not affect your regular tax NOL.

For tax years ending in 2003, the ATNOLD may be limited. To figure the ATNOLD limitation, first figure AMTI without regard to the ATNOLD. For this purpose, figure a tentative amount for line 6 of Schedule I by treating line 24 as if it were zero. Then, figure a tentative total by combining lines 1-23 of Schedule I. The ATNOLD limitation is 90% of the tentative total. Enter on line 24 the smaller of the ATNOLD or the ATNOLD limitation. Any ATNOL not used because of the ATNOLD limitation can be carried back or forward. See section 172(b) for details. The treatment of ATNOLs does not affect your regular tax NOL.

Note:   If you elected under section 172(b)(3) to forego the carryback period for regular tax purposes, the election will also apply for the AMT.

Line 29 - Estate's or Trust's Share of Alternative Minimum Taxable Income

For an estate or trust that held a residual interest in a REMIC, line 29 may not be less than the estate's or trust's share of the amount on Schedule E (Form 1040), line 37, column (c). If that amount is larger than the amount you would otherwise enter on line 29, enter that amount instead and write Sch. Q on the dotted line next to line 29.

Part II - Income Distribution Deduction on a Minimum Tax Basis

Line 30 - Adjusted Alternative Minimum Taxable Income

Generally, enter on line 30, Schedule I, the amount from line 25, Schedule I. However, if both line 4 on page 1 and line 25, Schedule I, are losses, enter on line 30, Schedule I, the smaller of those losses. If line 4 is zero or a gain and line 25 is a loss, enter zero on line 30, Schedule I.

Line 31 - Adjusted Tax-Exempt Interest

To figure the adjusted tax-exempt interest (including exempt-interest dividends received as a shareholder in a mutual fund or other regulated investment company), subtract the total of any:

1. Tax-exempt interest from line 2 of Schedule A of Form 1041 figured for AMT purposes and
2. Section 212 expenses allowable for AMT purposes allocable to tax-exempt interest, from the amount of tax-exempt interest received.

Do not subtract any deductions reported on lines 2 through 4.

Section 212 expenses that are directly allocable to tax-exempt interest are allocated only to tax-exempt interest. A reasonable proportion of section 212 expenses that are indirectly allocable to both tax-exempt interest and other income must be allocated to each class of income.

Line 33

Reduce the amount on line 33 by any allocable section 1202 exclusion (as refigured for AMT purposes).

Line 34

Enter any capital gains that were paid or permanently set aside for charitable purposes from the current year's income included on line 1 of Schedule A. Reduce the amount on line 34 by any allocable section 1202 exclusion (as refigured for AMT purposes).

Lines 35 and 36

Capital gains and losses must take into account any basis adjustments from line 13, Part I.

Line 41 - Adjustment for Tax-Exempt Income

In figuring the income distribution deduction on a minimum tax basis, the estate or trust is not allowed a deduction for any item of DNAMTI (line 37) that is not included in the gross income of the estate or trust figured on an AMT basis. Thus, for purposes of figuring the allowable income distribution deduction on a minimum tax basis, the DNAMTI is figured without regard to any tax-exempt interest (except for amounts from line 8).

If tax-exempt interest is the only tax-exempt income included in the total distributions (line 40), and the DNAMTI (line 37) is less than or equal to line 40, then enter on line 41 the amount from line 31.

If tax-exempt interest is the only tax-exempt income included in the total distributions (line 40), and the DNAMTI is more than line 40 (i.e., the estate or trust made a distribution that is less than the DNAMTI), then figure the adjustment by multiplying line 31 by a fraction, the numerator of which is the total distributions (line 40), and the denominator of which is the DNAMTI (line 37). Enter the result on line 41.

If line 40 includes tax-exempt income other than tax-exempt interest (except for amounts from line 8), figure line 41 by subtracting the total expenses allocable to tax-exempt income that are allowable for AMT purposes from tax-exempt income included on line 40.

Expenses that are directly allocable to tax-exempt income are allocated only to tax-exempt income. A reasonable proportion of expenses indirectly allocable to both tax-exempt income and other income must be allocated to each class of income.

Line 44 - Income Distribution Deduction on a Minimum Tax Basis

Allocate the income distribution deduction figured on a minimum tax basis among the beneficiaries in the same manner as income was allocated for regular tax purposes. Report each beneficiary's share on line 7 of Schedule K-1 (Form 1041).

Part III - Alternative Minimum Tax Computation

Line 53 - Alternative Minimum Foreign Tax Credit

To see if you need to figure the estate's or trust's AMT foreign tax credit, fill in line 55 of Schedule I as instructed. If the amount on line 55 is greater than or equal to the amount on line 52, the estate or trust does not owe the AMT. Enter zero on line 56 and see Who Must Complete on page 23 to find out if you must file Schedule I with Form 1041. However, even if the estate or trust does not owe AMT, you may need to complete line 53 to see if you have an AMT foreign tax credit carryback or carryforward to other tax years.

To figure the AMT foreign tax credit:

1. Complete and attach a separate AMT Form 1116, with the notation at the top, Alt Min Tax for each separate limitation category specified at the top of Form 1116.
   Note:   When applying the separate limitation categories, use the applicable AMT rate instead of the regular tax rate to determine if any income is high-taxed.
2. If you (on behalf of the estate or trust) previously made or are making the simplified limitation election (see below), skip Part I and enter on the AMT Form 1116, line 16, the same amount you entered on that line for the regular tax. If you did not complete Form 1116 for the regular tax and you previously made or are making the simplified limitation election (on behalf of the estate or trust), complete Part I and lines 14 through 16 of the AMT Form 1116 using regular tax amounts.
   If the election does not apply, complete Part I, using only income and deductions allowed for the AMT that are attributable to sources outside the United States. If the Instructions for Form 1116 require you to complete Worksheet A or B, you must first complete an AMT Worksheet for line 17, following the Instructions under 5 below.
3. Complete Part II and lines 9 through 13 of the AMT Form 1116. Use the estate's or trust's AMT foreign tax credit carryover, if any, on line 10.
4. If the simplified limitation election does not apply, complete lines 14 through 16 of the AMT Form 1116.
5. If you did not complete Schedule D (Form 1041) for the regular tax and did not complete Part IV of Schedule I of Form 1041, enter the AMTI from Schedule I, line 29, on line 17 of the AMT Form 1116 and go to 6 below. Otherwise, follow these steps to complete, for the AMT, the Worksheet for line 17 in the Form 1116 instructions:
   1. Enter the amount from Schedule I of Form 1041, line 29, on line 1 of the AMT Worksheet for line 17.
   2. Complete a Schedule D for the AMT as explained in the instructions for lines 58, 59, and 63 on page 29 (or, if you already completed an AMT Schedule D to complete Part IV of Schedule I, use that Schedule D). Next, enter the amount from Schedule I, line 51, on line 18 of your AMT Schedule D or line 1 of the AMT Schedule D Tax Worksheet. Then, complete lines 22 through 34 of the AMT Schedule D (you may skip lines 23, 29, and 31) or lines 10 through 33 of the AMT Schedule D Tax Worksheet (you may skip lines 15, 19, 21, 25, and 31).
   3. Complete the rest of the AMT Worksheet for Line 17 using amounts from the AMT Schedule D.
6. Enter the amount from Schedule I, line 52, on the AMT Form 1116, line 19. Complete lines 18, 20, and 21 of the AMT Form 1116.
7. Complete Part IV of the first AMT Form 1116.

Follow the instructions below to figure the amount to enter on line 53 of Schedule I of Form 1041.

If you have no entry on line 24 of Schedule I of Form 1041, and no intangible drilling costs (IDCs) (or the exception for IDCs does not apply to the estate or trust - see the instructions for line 22 on page 26), enter on line 53 of Schedule I the smaller of:

• 90% of line 52 of Schedule I or
• The amount from line 33 of the first AMT Form 1116.

If you have an entry on line 24 or the exception for IDCs applies to the estate or trust:

1. Figure the amount of tax that would be on line 52 if line 24 were zero and the exception did not apply.
2. Multiply the amount from 1 above by 10%.
3. Subtract the amount from 2 above from the tax on line 52.
4. Enter on Schedule I, line 53, the smaller of the amount from 3 above or the amount from line 33 of the first AMT Form 1116.

AMT foreign tax credit carryback and carryforward.   If the AMT foreign tax credit is limited, any unused amount can be carried back or forward in accordance with sections 59(a)(2)(B) and 904(c).

Note:   The election to forego the carryback period for regular tax purposes also applies for the AMT.

Simplified limitation election.   The estate or trust may elect to use a simplified section 904 limitation to figure its AMT foreign tax credit. To do so, use the estate's or trust's regular tax income for Form 1116, Part I, instead of refiguring the estate's or trust's foreign source income for the AMT, as described in 2 on page 28. The estate or trust must make the election for the first tax year after 1997 for which it claims an alternative minimum tax foreign tax credit. If it does not make the election for that year, it may not make it for a later year. Once made, the election applies to all later tax years and may be revoked only with IRS consent.

Part IV - Line 52 Computation Using Maximum Capital Gains Rates

Lines 58, 59, and 63

You generally may enter the amounts from Schedule D or the Schedule D Tax Worksheet as instructed on Schedule I, lines 58 and 59. But do not use those amounts if either of the following applies:

1. Any gain or loss on Schedule D is different for the AMT (for example, because the AMT basis was different due to depreciation adjustments or an incentive stock option adjustment or the AMT capital loss carryover from 2001 was different).
2. You did not complete Part V of Schedule D because Form 1041, line 22, was zero or less.

If 1 or 2 above applies, complete a Schedule D for the AMT. If 1 above applies, refigure the amounts for Schedule D, Parts I, II, III, and IV for the AMT; otherwise, use the regular tax amounts. Next, complete lines 19 through 21 of the AMT Schedule D (lines 2 through 9 of the AMT Schedule D Tax Worksheet, if applicable). Use amounts from the AMT Schedule D or AMT Schedule D Tax Worksheet to complete Schedule I, lines 58 and 59. Keep the AMT Schedule D and worksheet for your records but do not attach the AMT Schedule D to Form 1041.

Do not refigure the amount from Schedule D, line 26 (Schedule D Tax Worksheet line 16), when completing Schedule I, line 63. If you did not complete Part V of Schedule D (or the Schedule D Tax Worksheet) for the regular tax, enter zero on Schedule I, line 63.

Note:   Do not decrease the estate's or trust's section 1202 exclusion by the amount, if any, included on line 9.

Line 65

Generally, you may enter the amount from Schedule D, line 15c, column (2), on Schedule I, line 65. However, if the qualified 5-year gain is different for the AMT (for example, because of a different basis), you must complete an AMT Qualified 5-Year Gain Worksheet (on page 32). If the amount on any line of the worksheet is different for the AMT, use the AMT amount instead of the regular tax amount. Enter the estate's or trust's portion on Schedule I, line 65.

Schedule D (Form 1041) - Capital Gains and Losses

General Instructions

Purpose of Form

Use Schedule D (Form 1041) to report gains and losses from the sale or exchange of capital assets by an estate or trust.

To report the sale or exchange of property used in a trade or business, involuntary conversions (other than casualties and thefts), and certain ordinary gains and losses, see Form 4797 and related instructions.

If property is involuntarily converted because of a casualty or theft, use Form 4684.

Section 1256 contracts and straddles are reported on Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.

Capital Asset

Each item of property held by the estate or trust (whether or not connected with its trade or business) is a capital asset except:

• Inventoriable assets or property held primarily for sale to customers;
• Depreciable or real property used in a trade or business, even if it is fully depreciated;
• Certain copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property;
• Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of inventoriable assets or property held primarily for sale to customers;
• Certain U.S. Government publications not purchased at the public sale price;
• Certain commodities derivative financial instruments held by a dealer (see section 1221(a)(6));
• Certain hedging transactions entered into in the normal course of a trade or business (see section 1221(a)(7)); and
• Supplies regularly used in a trade or business.

You may find additional helpful information in the following publications:

• Pub. 544, Sales and Other Dispositions of Assets, and
• Pub. 551, Basis of Assets.

Short-Term or Long-Term

Separate the capital gains and losses according to how long the estate or trust held or owned the property. The holding period for short-term capital gains and losses is 1 year or less. The holding period for long-term capital gains and losses is more than 1 year. Property acquired by a decedent's estate from the decedent is considered as held for more than 1 year.

When you figure the length of the period the estate or trust held property, begin counting on the day after the estate or trust acquired the property and include the day the estate or trust disposed of it. Use the trade dates for the date of acquisition and sale of stocks and bonds traded on an exchange or over-the- counter market.

Section 643(e)(3) Election

For noncash property distributions, a fiduciary may elect to have the estate or trust recognize gain or loss in the same manner as if the distributed property had been sold to the beneficiary at its FMV. The distribution deduction is the property's FMV. This election applies to all distributions made by the estate or trust during the tax year and, once made, may be revoked only with IRS consent.

Note that section 267 does not allow a trust or a decedent's estate to claim a deduction for any loss on property to which a section 643(e)(3) election applies. In addition, when a trust or a decedent's estate distributes depreciable property, section 1239 applies to deny capital gains treatment for any gain on property to which a section 643(e)(3) election applies.

Related Persons

A trust cannot deduct a loss from the sale or exchange of property directly or indirectly between any of the following:

• A grantor and a fiduciary of a trust;
• A fiduciary and a fiduciary or beneficiary of another trust created by the same grantor;
• A fiduciary and a beneficiary of the same trust;
• A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is owned directly or indirectly by or for the trust or by or for the grantor of the trust; or
• An executor of an estate and a beneficiary of that estate, except when the sale or exchange is to satisfy a pecuniary bequest (i.e., a bequest of a sum of money).

Items for Special Treatment

The following items may require special treatment:

• Wash sales of stock or securities (including contracts or options to acquire or sell stock or securities) (section 1091).
• Gain or loss on options to buy or sell (section 1234).
• Certain real estate subdivided for sale that may be considered a capital asset (section 1237).
• Gain on disposition of stock in an interest charge domestic international sales corporation (section 995(c)).
• Gain on the sale or exchange of stock in certain foreign corporations (section 1248).
• Sales of stock received under a qualified public utility dividend reinvestment plan. See Pub. 550 for details.
• Transfer of appreciated property to a political organization (section 84).
• Disposition of market discount bonds (section 1276).
• Gains from certain constructive ownership transactions. Gain in excess of the gain the estate or trust would have recognized if the estate or trust had held a financial asset directly during the term of a derivative contract must be treated as ordinary income. See section 1260 for details.
• The sale of qualified empowerment zone assets acquired after December 21, 2000, that the estate or trust held for more than 1 year, if you elect to postpone gain by purchasing other qualified empowerment zone assets during the 60-day period that began on the date of the sale. See Pub. 550 and Pub. 954.

Constructive Sales Treatment for Certain Appreciated Positions

Generally, the estate or trust must recognize gain (but not loss) on the date it enters into a constructive sale of any appreciated position in stock, a partnership interest, or certain debt instruments as if the position were disposed of at FMV on that date.

The estate or trust is treated as making a constructive sale of an appreciated position when it (or a related person, in some cases) does one of the following:

• Enters into a short sale of the same or substantially identical property (i.e., a short sale against the box).
• Enters into an offsetting notional principal contract relating to the same or substantially identical property.
• Enters into a futures or forward contract to deliver the same or substantially identical property.
• Acquires the same or substantially identical property (if the appreciated position is a short sale, offsetting notional principal contract, or a futures or forward contract).

Exception. Generally, constructive sale treatment does not apply if:

• The estate or trust closed the transaction before the end of the 30th day after the end of the year in which it was entered into,
• The estate or trust held the appreciated position to which the transaction relates throughout the 60-day period starting on the date the transaction was closed, and
• At no time during that 60-day period was the estate's or trust's risk of loss reduced by holding certain other positions.

For details and other exceptions to these rules, see Pub. 550.

Exclusion of Gain on Qualified Small Business Stock (Section 1202)

Section 1202 provides for an exclusion of 50% of the gain on the sale or exchange of qualified small business (QSB) stock. The section 1202 exclusion applies only to qualified small business stock held for more than 5 years. To be qualified small business stock, the stock must meet all of the following tests:

• It must be stock in a C corporation (i.e., not S corporation stock).
• It must have been originally issued after August 10, 1993.
• As of the date the stock was issued, the corporation was a qualified small business. A qualified small business is a domestic C corporation with total gross assets of $50 million or less (a) at all times after August 9, 1993, and before the stock was issued, and (b) immediately after the stock was issued. Gross assets include those of any predecessor of the corporation. All corporations that are members of the same parent-subsidiary controlled group are treated as one corporation.
• The estate or trust acquired the stock at its original issue (either directly or through an underwriter), either in exchange for money or other property or as pay for services (other than as an underwriter) to the corporation. In certain cases, the estate or trust may meet the test if it acquired the stock from another person who met this test (such as by gift or at death) or through a conversion or exchange of qualified small business stock the estate or trust held.
• During substantially all the time the estate or trust held the stock:
  1. The corporation was a C corporation,
  2. At least 80% of the value of the corporation's assets were used in the active conduct of one or more qualified businesses (defined below), and
  3. The corporation was not a foreign corporation, DISC, former DISC, corporation that has made (or that has a subsidiary that has made) a section 936 election, regulated investment company, real estate investment trust, REMIC, FASIT, or cooperative.

Note:   A specialized small business investment company (SSBIC) is treated as having met test 2 above.

A qualified business is any business other than the following:

• One involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services.
• One whose principal asset is the reputation or skill of one or more employees.
• Any banking, insurance, financing, leasing, investing, or similar business.
• Any farming business (including the raising or harvesting of trees).
• Any business involving the production of products for which percentage depletion can be claimed.
• Any business of operating a hotel, motel, restaurant, or similar business.

For more details about limits and additional requirements that may apply, see section 1202.

Pass-through entities.   If the estate or trust held an interest in a pass-through entity (a partnership, S corporation, mutual fund, or other regulated investment company) that sold qualified small business stock, the estate or trust generally must have held the interest on the date the pass-through entity acquired the qualified small business stock and at all times thereafter until the stock was sold to qualify for the exclusion.

How to report.   Report in column (f) of line 6 the entire gain realized on the sale of qualified small business stock. In column (g) of line 6, report as 28% rate gain an amount equal to the section 1202 exclusion. Complete all other columns as indicated. Directly below the line on which you reported the gain, enter in column (a) Section 1202 exclusion, and enter as a (loss) in column (f) the amount of the allowable exclusion. Also include 42% of the exclusion as a positive amount on Schedule I, line 9.

Gain from Form 1099-DIV.   If the estate or trust received a Form 1099-DIV with a gain in box 2e, part or all of that gain (which is also included in box 2a) may be eligible for the section 1202 exclusion. In column (a) of line 6, enter the name of the corporation whose stock was sold. In column (f), enter the amount of the allowable exclusion as a (loss). In column (g), enter the amount of the allowable exclusion as a gain.

Gain from Form 2439.   If the estate or trust received a Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, with a gain in box 1e, part or all of that gain (which is also included in box 1a) may be eligible for the section 1202 exclusion. In column (a) of line 6, enter the name of the corporation whose stock was sold. In column (f), enter the amount of the allowable exclusion as a (loss). In column (g), enter the amount of the allowable exclusion as a gain.

Gain from an installment sale of QSB stock.   If all payments are not received in the year of sale, a sale of QSB stock that is not traded on an established securities market generally is treated as an installment sale and is reported on Form 6252. Part or all of any gain from the sale that is reported on Form 6252 for the current year may be eligible for the section 1202 exclusion. In column (a) of line 6, enter the name of the corporation whose stock was sold. In column (f), enter the amount of your allowable exclusion as a loss. In column (g), enter the amount of your allowable exclusion as a gain.

Rollover of gain from qualified small business stock.   If the estate or trust held qualified small business stock (as defined above) for more than 6 months, it may elect to postpone gain if it purchased other qualified small business stock during the 60-day period that began on the date of the sale.

The estate or trust must recognize gain to the extent the sale proceeds exceed the cost of the replacement stock. Reduce the basis of the replacement stock by any postponed gain.

The estate or trust must make the election no later than the due date (including extensions) for filing Form 1041 for the tax year in which the stock was sold. If the original Form 1041 was filed on time, the election may be made on an amended return filed no later than 6 months after the due date of the original return (excluding extensions). Write Filed pursuant to section 301.9100-2 at the top of the amended return, and file it at the same address used for the original Form 1041.

To make the election, report the entire gain realized on the sale on line 1 or 6. Directly below the line on which you reported the gain, enter in column (a) Section 1045 Rollover and enter as a (loss) in column (f) the amount of the postponed gain.

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