4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 2)

4.119.4.8 
Form 1041 Analysis of Income Types

4.119.4.8.3 
Form 1041 Business Income or (Loss) - General

4.119.4.8.3.5  (09-17-2014)
Form 1041 Fishing Boat Proceeds - Analyzation

  1. When comparing Fishing Boat Proceeds amounts with the following entries, the amount must match within $1 or be CLEARLY identified by payer name, activity or as fish income:

    1. Form 1040, Schedule C, Part I.

    2. Form 1040, Schedule C-EZ Part II.

    3. Form 1040, Schedule E, Part I.

    4. Form 1040, Schedule E, Part II.

    5. Form 1041, line 3.

    6. Form 1041, line 8.

  2. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.3.6  (09-17-2014)
Form 1041 Fishing Boat Proceeds - Miscellaneous

  1. If Fishing Boat Proceeds are U/R, enter the following on the CP 2030:

    1. Select FISH INC from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Fishing Boat Proceeds IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.3.7  (09-17-2014)
Form 1041 Medical Payments - Analyzation

  1. Compare Medical Payments with entries on:

    1. Form 1040, Schedule C, Part I or Schedule C-EZ, Part II if it appears to be for a medical practice.

    2. Form 1040 Schedule E, Part II if it appears to be related to the medical profession.

    3. Form 1041, line 3.

    4. Form 1041, line 8, the amount must match within $1 or be CLEARLY IDENTIFIED as Medical Payments.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.3.8  (09-17-2014)
Form 1041 Medical Payments - Miscellaneous

  1. If Medical Payments are U/R, enter the following on the CP 2030:

    1. Select MEDICAL PAYMENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Medical Payments IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.3.9  (09-17-2014)
Form 1041 Nonemployee Compensation - Analyzation

  1. Compare Nonemployee Compensation amounts with entries on:

    1. Form 1040, Schedule C, Part I.

    2. Form 1040, Schedule C-EZ, Part II.

    3. Form 1040, Schedule F, Part I or III.

    4. Form 4835, Part I.

    5. Consider Nonemployee Compensation reported if it is included in a larger total on Form 1040, Schedule C, C-EZ, F or Form 4835, unless the IR is obviously not the same type of income.

    6. Form 1041, line 3.

  2. When comparing Nonemployee Compensation IRs with entries on any line not specifically identified for Nonemployee Compensation, the amount must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1040, Schedule E, Part I.

    2. Form 4797, Sales of Business Property, Parts I, II, or III - Consider the Nonemployee Compensation reported if the sales price matches the IR within $1.

    3. Form 6252, Installment Sale Income, line 5 or line 21.

    4. Form 1041, Schedule D, Part I, lines 1a, 2 , or 3 column (d) or Part II, lines 8a, 9 or 10, column (d).

    5. Form 8949, Part I, line 1 column (d) or Part II, line 1, column (d).

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Nonemployee Compensation may represent crop insurance proceeds, which are reported on Form 1040, Schedule F, line 6a or 6b, or Form 4835, line 5a or 5b.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.3.10  (09-17-2014)
Form 1041 Nonemployee Compensation - Miscellaneous

  1. If Nonemployee Compensation are U/R, enter the following on the CP 2030:

    1. Select NONEMPLOYEE COMPENSATION from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Nonemployee Compensation IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.4  (09-17-2014)
Form 1041 Securities Sales and Cost Basis - General

  1. Securities Sales are the proceeds from transactions involving stocks, bonds, other debt obligations, commodities or forward contracts.

  2. Cost Basis represents the purchase price of the securities sale.

  3. Securities Sales are identified on IDRS CC:IRPTR with Document Type 1099-B and Amount Type (IRPTR Literal) STOCK&BOND.

  4. Cost Basis is identified on IDRS CC:IRPTR with Document Type 1099-B and Amount Type (IRPTRL Literal) COST&BASIS.

    Note:

    Amount Type SALE&LOSS is for information purposes only.

    Note:

    Payers report COST&BASIS on "covered securities" (i.e., the sale of a stock transaction that was purchased in 2011 or later). Therefore, not all Form 1099-B IRs will contain a COST&BASIS.

4.119.4.8.4.1  (09-17-2014)
Form 1041 Securities Sales and Cost Basis - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Generally, Form 1099-B STOCK&BOND IRs contain a CUSIP (Committee on Uniform Security Identification Procedures) number. This number is usually nine characters long, consisting of alpha and/or numeric characters. The CUSIP number identifies the issuer of the transaction and the type of transaction. Alpha characters in the 7th and/or 8th position(s) of the CUSIP number denote fixed income obligation securities. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ When the taxpayer has reported these amounts, the IRs must be taken into consideration when determining the U/R amount.

    1. Be careful when determining the position of the CUSIP number containing the alpha characters. The first six digits represent the issuer number and the 4th and 5th and/or 6th positions may contain alpha character(s).

    2. Pursue STOCK&BOND IRs whose entity includes nontaxable Municipal Bond, tax free exchange or tax free unless the CUSIP number meets the conditions provided above.

  3. Some STOCK&BOND IR(s) appear to be duplicates because the account numbers, the amounts, AND the source (paper or tape) are identical. DO NOT consider these IR(s) as duplicates if the transaction (sales) dates shown on the IR(s) are different.

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Example:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. If Form 1041, Schedule D is present without Form 8949, Sales and Other Dispositions of Capital Assets, compare STOCK&BOND amounts with entries on:

    1. Form 1041, Schedule D, Part I, line(s) 1a through 3, column (d).

    2. Form 1041, Schedule D, Part II, line(s) 8a through 10, column (d).

      Note:

      Use the IR payer name or item description to identify the stock transactions reported on the tax return.

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  6. If the Form 8949, or attachment provides a breakdown of stock transactions by payer name, sales date or item description:

    1. Compare Form 8949 Part I, line 1, column (d) or Part II, line 1, column (d) entries to the STOCK&BOND and give credit for identified reported amounts.

    2. If there are multiple IRs with the same payer name or item description, compare the total to the identified amount(s) reported on the return.

    3. Do not give credit for any amounts reported on the Form 8949 when the payer name or item description does not match the IR, unless there is a dollar match.

    4. Ensure that any amounts reported on attachments/forms are properly included as income on page one of the return.

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  7. If there is STOCK&BOND U/R and the taxpayer reports a capital loss of $3,000 or more include PARAGRAPH 8.

  8. If the taxpayer does not file a Form 1041 Schedule D, Form 8949 or a breakdown of securities sales is not provided and there is more than one Securities Sales IR, take the following action:

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Group the remaining IRs by Amount Type STOCK&BOND and compare the total to the gross amounts reported on Form 1041, line 4.

    3. If the STOCK&BOND group total is smaller, consider the issue resolved.

    4. If the STOCK&BOND group total is larger, consider the difference underreported.

    5. Group any COST&BASIS Amount Types, consider the difference underreported and enter zero as the reported amount.

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  9. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.4.2  (09-17-2014)
Form 1041 Securities Sales and Cost Basis - Miscellaneous

  1. When STOCK&BOND is U/R, enter the following on the CP 2030:

    1. Select SECURITIES SALES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Securities Sales IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 13 when Securities Sales are U/R.

  3. When COST&BASIS is U/R, enter the following on the CP 2030:

    1. Select COST BASIS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount as a negative in the "Shown on return" field.

    3. Enter the total of all U/R Cost Basis IRs PLUS the "Shown on return" amount as a negative in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.5  (09-17-2014)
Form 1041 Aggregate Profit Or Loss On Contracts - General

  1. Transactions relating to regulated futures contracts are taxable under IRC Section 1256 and are generally referred to as "Section 1256 Contracts" . Payers report these transactions on Form 1099-B, boxes 9-12. The overall aggregate profit or loss on contracts is reported in box 12.

  2. Aggregate Profit or Loss on Contracts are identified with Document Type 1099-B and Amount Type (IRPTR Literal) PROFT&LOSS.

    Note:

    UNREAL PY, REALIZED, and UNREAL CY are for information purposes only.

4.119.4.8.5.1  (09-17-2014)
Form 1041 Aggregate Profit Or Loss On Contracts - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. When more than one information return containing Aggregate Profit Or Loss On Contracts is present and the taxpayer does not provide a breakdown:

    1. Group all Aggregate Profit Or Loss On Contracts together.

    2. Compare the group total amount to the total reported Aggregate Profit Or Loss On Contracts on Form 1041, line 4.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.5.2  (09-17-2014)
Form 1041 Aggregate Profit Or Loss On Contracts - Miscellaneous

  1. If Aggregate Profit Or Loss on Contracts Income is U/R, enter the following on the CP 2030:

    1. Select AGGREGATE PROFIT OR LOSS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Aggregate Profit Or Loss on Contracts IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 14 when Aggregate Profit Or Loss is U/R.

4.119.4.8.6  (09-17-2014)
Form 1041 Rents, Royalties, Partnership, Other Estates and Trusts

  1. Estate's or trust's share of income or (losses) from Rents, Royalties, Partnerships, S Corporations, other Estates and Trusts, and Real Estate Mortgage Investment Conduits (REMICs) are reported on Form 1040, Schedule E and is carried forward to Form 1041, line 5.

4.119.4.8.6.1  (09-17-2014)
Form 1041 Rents and Royalties - General

  1. Rent and Royalties income is compensation for the use of property or rights by someone other than the owner.

  2. Rent and Royalties display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Rents RENTS 1099-MISC
    Net Rental Real Estate income NET RENTAL K-1 1041
    Other Rental income OTH RENTAL K-1 1041
    Net Rental Real Estate income REAL EST K-1 1065
    Other Net Rental income OTHER RENT K-1 1065
    Net Rental Real Estate income REAL EST K-1 1120S
    Rents OTHER RENT K-1 1120S
    Royalties ROYALTIES 1099-MISC
    Royalties ROYALTIES K-1 1065
    Royalties ROYALTIES K-1 1120S

4.119.4.8.6.2  (09-17-2014)
Form 1041 Rents and Royalties - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Compare RENTS or ROYALTIES amounts with entries on:

    1. Form 1040, Schedule E, Part I, lines 3 and 4.

    2. Form 1041, line 5.

    3. Form 1040, Schedule C, Part l, line 1 or Schedule C-EZ, Part II, line 1. If the taxpayer is in the business of rental property, or it can be determined from the payer name or business activity that the income is from the same source. When screening for Rents/Royalties income on Form 1040, Schedule C, also consider any additional Business Income IR(s) to determine the U/R amount.

    4. Consider the IRs reported if the gross amount on Form 4835 is large enough to include the Rent/Royalty amount. As long as distributions from Amount Types (IRPTR Literal) TX GRANT, PATRONAGE, NONPAT DIS, RTAIN ALLC, AG SUBS, MRKGAINCCC, and CROP INS are accounted for first. Otherwise, issue a CP 2030 for the full amount of the IR(s).

    5. Form 1041, Schedule D, or Form 8949. If income is identified as Coal and Timber royalties, patents, rights of way, or easements. If the payer is identified and the amount is larger accept, if the payer is identified and the amount is smaller give credit and pursue the difference.

  3. RENTS or ROYALTIES for the following entries must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1040, Schedule C, Part 1, line 6.

    2. Form 1040, Schedule E Part ll.

    3. Form 1040, Schedule F, Part I or Part III. Do not pursue IRs when the amount matches Form 1040, Schedule F, lines 2, 8 or 43 within $1, or a larger amount is present and is identified as rent or royalty.

    4. Form 1041, line 8.

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. If a breakdown of Rents and Royalty Income is not shown on the return and there is more than one IR:

    1. Group by income type RENTS or ROYALTIES as applicable.

    2. Compare the group total amount to the total reported rents or royalties.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  6. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.6.3  (09-17-2014)
Form 1041 Rents and Royalties - Miscellaneous

  1. If Rents and Royalties is U/R, enter the following on the CP 2030:

    1. Select RENTS or ROYALTIES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Rents or Royalties IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.6.4  (09-17-2014)
Form 1041 Partnership/Trust/S-Corporation (Conduit Income) - General

  1. Conduit income is the taxpayer's distributive share from a Form 1065, U.S. Return of Partnership Income, Form 1120-S, U.S. Income Tax Return for an S Corporation or Form 1041, U.S. Income Tax Return for Estates and Trusts.

  2. Conduit income displays on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Ordinary Dividends DIVIDENDS
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Interest Income INTEREST
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Rental Real Estate Income REAL EST
    • K-1 1120S

    • K-1 1065

    Net Rental Real Estate Income NET RENTAL
    • K-1 1041

    Other Net Rental Income OTHER RENT
    • K-1 1120S

    • K-1 1065

    Other Rental Income OTH RENTAL
    • K-1 1041

    Net Short Term Captial Gain SHT TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Net Long Term Capital Gain LNG TRM CG
    • K-1 1120S

    • K-1 1041

    • K-1 1065

    Other Portfolio and Non-Business Income OTH PRTFLO
    • K-1 1041

    Royalties ROYALTIES
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income OR INC K-1
    • K-1 1120S

    • K-1 1065

    Ordinary Business Income BUSI INC
    • K-1 1041

    Guaranteed Payments GUAR PAYMT
    • K-1 1065

    Section 179 Deduction SECT179 EX
    • K-1 1120S

    • K-1 1065

    Note:

    The literal SECT179 EX is shown for information only. Do not pursue the 179EX amount.

4.119.4.8.6.5  (09-17-2014)
Form 1041 Partnership/Trust/S-Corporation (Conduit Income) - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. When screening conduit IRs, keep the positive and negative amounts separate, but be aware that the taxpayer may have netted the negative IRs against positive IRs and/or the totals on the tax return. Review all forms, schedules and attached explanations to identify gross income amounts.

    Caution:

    Ensure that any amounts reported on attachments/forms are properly included as income on page one of the return.

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. REAL EST, OTHER RENT, GUAR PAYMT and OR INC K-1 is reported on Form 1040, Schedule E, Part II, Columns (g) and/or (j). If the amount is not found on Form 1040, Schedule E, Part II, Columns (g) and/or (j), check column (a) for the payer name and/or column (d) for the payer EIN.

    1. If the taxpayer reports passive income on column (g) or passive loss on column (f) AND attaches Form 8582, Passive Activity Loss Limitations, accept the gain or loss as reported, regardless of the amount, including zero.

    2. If the taxpayer does not report the payer name/EIN on the Form 1040, Schedule E (or Schedule E is not completed/present) AND attaches Form 8582, Passive Activity Loss Limitation, that includes the payer name and/or EIN of the discrepant IR, consider the discrepancy resolved.

    3. If the taxpayer attaches a completed Form 6198, At Risk Limitation, that matches the payer name and/or EIN consider the discrepancy resolved regardless of whether there is corresponding income/loss reported on Form 1040, Schedule E.

  7. OTH RENTAL, NET RENTAL, BUSI INC and OTH PRTFLO is reported on Form 1040, Schedule E, Part III, column (d) and/or (f), If the amount is not found on Form 1040, Schedule E, Part III, column (d) and/or (f), check column (a) for the payer name and/or column (b) for the payer EIN.

    1. If the taxpayer reports passive income on column (d) or passive loss on column (c) AND attaches Form 8582, Passive Activity Loss Limitation, accept the gain or loss as reported, regardless of the amount, including zero.

    2. If the taxpayer does not report the payer name/EIN on the Form 1040, Schedule E (or Schedule E is not completed/present) AND attaches Form 8582, Passive Activity Loss Limitation, that includes the payer name and/or EIN of the discrepant IR, consider the discrepancy resolved.

    3. If the taxpayer attaches a completed Form 6198, At Risk Limitation, that matches the payer name and/or EIN consider the discrepancy resolved regardless of whether there is corresponding income/loss reported on Form 1040, Schedule E.

  8. Compare Amount Types: REAL EST, NET RENTAL, OTHER RENT, OTH RENTAL, OR INC K-1, BUSI INC, OTH PRTFLO, and GUAR PAYMT with entries on:

    1. Form 1040, Schedule E, Part II and III.

    2. The taxpayer may combine Schedule K-1 amounts with SECTION 179 DEDUCTION and report the net on Form 1041, Schedule E, Part II or III. If the taxpayer did not claim the SECTION 179 DEDUCTION do not pursue.

    3. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    4. These Amount Types may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules, forms and attachments before pursuing discrepant K-1 amounts.

  9. ROYALTIES are reported on Form 1040 Schedule E, Part I, line 4.

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. If multiple conduit IRs are present from the same payer for the same taxpayer take the following action:

    1. Review IDRS CC:IRPTRL for each IR to determine the On File Date.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. If the On File Date is the same for multiple IRs and none of the IRs are reported, pursue all IRs.

  12. IDRS research is required to determine if fully U/R Schedule K-1 (Form 1041 ) IRs Trusts are the result of a fiscal year filling requirement. Using the payer EIN, research IDRS CC:BMFOLI to determine the following:

    1. Presence of MFT 05 with a Return Posted indicator of "Y" , denoting that a Schedule K-1 (Form 1041) was filed.

    2. If the MFT 05 indicates that it is for our BMF-AUR tax year pursue the U/R amount. If for another tax year, consider the issue resolved.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. Conduit income may be found elsewhere on the return and/or attachments. Thoroughly review the entire return, schedules and attachments before pursuing discrepant K-1 amounts:

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Consider each component of a K-1 IR separately. For example, if the taxpayer only reports the INTEREST/DIVIDENDS portion of the IR but fails to report the remaining K-1 income types included on the IR (e.g. OR INC K-1, GUAR PAYMT, etc.), pursue the remaining income types based on the applicable IRM procedures.

  14. DIVIDENDS - See IRM 4.119.4.8.2.2, Form 1041 Dividends - Analyzation, for further instructions.

  15. INTEREST - See IRM 4.119.4.8.1.1, Form 1041 Interest - Analyzation, for further instructions.

  16. RENTS and ROYALTIES - See IRM 4.119.4.8.6.2, Form 1041 Rents and Royalties – Analyzation, for further instructions.

  17. Compare Schedule K-1 Amount Type SHT TRM CG with entries on:

    1. Form 8949, Part I, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Short Term Capital Gains are reported on Form 1041, line 4.

    3. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

  18. Compare Schedule K-1 Amount Type LNG TRM CG with entries on:

    1. Form 8949, Part II, line 1. Taxpayers are instructed to write "from Schedule K-1" and to enter the amount in column (h).

    2. If the taxpayer did not file a Schedule D, determine if the Capital Gains are reported on Form 1041, line 4.

    3. Form 1041, line 8 Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

  19. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.6.6  (09-17-2014)
Form 1041 Partnership/Trust/S-Corporation (Conduit Income) - Miscellaneous

  1. If Conduit Income is U/R, enter the following on the CP 2030:

    1. Select the PARTNERSHIP/TRUST/SMALL BUSINESS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Conduit Income IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.7  (09-17-2014)
Form 1041 Farm Income

  1. If the estate or trust operated a farm, income and expenses will be reported on Form 1040 Schedule F Profit or Loss From Farming, and carried to Form 1041 line 6.

  2. Farm rental income and expenses can be reported on Form 1040 Schedule E or Form 1040 Schedule F and carried to Form 1041 line 6. Taxpayers are instructed not to use Form 4835.

4.119.4.8.7.1  (09-17-2014)
Form 1041 Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - General

  1. Agriculture Payments are governmental subsidies paid to farmers and agricultural businesses to supplement their income. Market Gain on Commodity Credit Corp. (CCC) Loans are the market gain associated with the repayment of a CCC loan.

  2. Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Agriculture Payments AG SUBS 1099-G
    Market Gain on Commodity Credit Corporation loans repaid using cash or CCC certificates MRKGAINCCC 1099-G

4.119.4.8.7.2  (09-17-2014)
Form 1041 Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - Analyzation

  1. Compare Agriculture Payments and/or Market Gain amounts with entries on:

    1. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 1040, Schedule E, Part II. If the income is from a farming business, consider the Agriculture Payments and/or Market Gain amount reported.

    4. Form 4835, Farm Rental Income and Expenses line 3a (line 3b if line 3a is zero or blank).

    5. Form 1041, line 6.

    6. Form 1040, Schedule E, Part V, line 42:

    If the amount reported on Schedule E, Part V, line 42 is Then
    Equal to or greater then the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
    Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

    Exception:

    Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. Agriculture Payments and/or Market Gain comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1040 Schedule F, lines 8 or 43. Form 1040 Schedule F, lines 2 or 37 (agricultural payments reported as commodities).

    2. Form 4835, Farm Rental Income and Expenses, line 6.

    3. Form 1041, line 8.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

  3. Agricultural subsidy payments made to members of federally recognized Native American Tribes under programs administered by the Department of Agricultures Stabilization and Conservation Service are exempt from federal income taxes when the subsidy is received as a result of activity occurring on the individual's allotted land. Do not pursue apparent U/R Agricultural subsidy payments amounts if information on the return or attached schedules/statements references Revenue Ruling 69-289.

  4. When more than one information return containing Agriculture Payments and/or Market Gain amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Agriculture Payments and/or Market Gain together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.7.3  (09-17-2014)
Form 1041 Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - Miscellaneous

  1. If Agricultural Payments or Market Gain on CCC Loans is U/R, enter the following on the CP 2030:

    1. Select AGRICULTURE PAYMENTS or MARKET GAIN ON CCC LOANS from the drop down menu in the "Your income and deductions" field.

      Exception:

      When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Agricultural Payments or Market Gain on CCC Loans IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.7.4  (09-17-2014)
Form 1041 Commodity Credit Corp. (CCC) Loans Forfeited - General

  1. Commodity Credit Corporation (CCC) Loans Forfeited are reported on Form 1099-A, Acquisition or Abandonment of Secured Property, and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) DEBT OUT.

    Note:

    PRPTY FMV is displayed for information purposes only.

4.119.4.8.7.5  (09-17-2014)
Form 1041 Commodity Credit Corp. (CCC) Loans Forfeited - Analyzation

  1. When the outstanding debt relates to a forfeited Commodity Credit Corporation loan, the payer is instructed to indicate "CCC" in the property description on Form 1099-A, box 6.

  2. The debt (principal only) owed at the time that the Commodity Credit Corporation (CCC) loan is forfeited is considered income.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡

  4. Compare Debts Out (ie: CCC Loan Forfeited) with entries on:

    1. Form 1040, Schedule F, line 5b (use line 5c if line 5b is zero or blank) or line 40b (use line 40c if line 40b is zero or blank).

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 4835, line 4b (use line 4c if line 4b is zero or blank).

    4. Give credit for amounts reported on Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    6. Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    7. Form 1040, Schedule E, Part V, line 42:

    If the amount reported on Schedule E, Part V, line 42 is Then
    Equal to or greater then the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
    Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

    Exception:

    Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  5. Consider CCC loans Forfeited reported if income from a farming business is reported on Schedule E, Part II.

  6. When more than one information return containing CCC Loan Forfeited amounts are present and the taxpayer does not provide a breakdown:

    1. Group all CCC Loan Forfeited together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  7. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.7.6  (09-17-2014)
Form 1041 Commodity Credit Corp. (CCC) Loans Forfeited - Miscellaneous

  1. If CCC Loans forfeited are U/R, enter the following on the CP 2030:

    1. Select COMMODITY CREDIT CORPORATION LOANS FORFEITED from the drop down menu in the "Your income and deductions" field.

      Exception:

      When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Commodity Credit Corporation (CCC) Loans Forfeited IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.7.7  (09-17-2014)
Form 1041 Crop Insurance - General

  1. Crop Insurance proceeds are payments received by farmers or agricultural businesses as a result of destruction or damage to crops.

  2. Crop Insurance is reported on Form 1099-MISC and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) CROP INS.

4.119.4.8.7.8  (09-17-2014)
Form 1041 Crop Insurance - Analyzation

  1. Compare Crop Insurance with entries on:

    1. Form 1040, Schedule F, line 6a (use line 6b if line 6a is zero or blank) or line 41.

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 4835, line 5b (use line 5c if line 5b is zero or blank).

    4. Give credit for amounts reported on Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    6. Form 1040, Schedule E, Part V, line 42:

      If the amount reported on Schedule E, Part V, line 42 is Then
      Equal to or greater then the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
      Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. Apparent Crop Insurance discrepancies may be due to the taxpayer electing to defer reporting the proceeds to the next year. Consider any Crop Insurance discrepancies resolved when ALL of the following conditions are met:

    1. Uses a cash accounting method (see Form 1040, Schedule F), AND

    2. Attaches a statement electing to defer Crop Insurance proceeds to the subsequent year (under IRC Section 451(d) and Regulation Section 1.451-6).

      Note:

      If the taxpayer filed Form 1040, Schedule F, box 6c should be checked. If Form 4835 is filed, box 5c should be checked.

  3. When more than one information return containing Crop Insurance amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Crop Insurance together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.7.9  (09-17-2014)
Form 1041 Crop Insurance - Miscellaneous

  1. If Crop Insurance is U/R, enter the following on the CP 2030:

    1. Select CROP INSURANCE from the drop down menu in the "Your income and deductions" field.

      Exception:

      When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Crop Insurance IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 20 whenever Crop Insurance is U/R.

4.119.4.8.7.10  (09-17-2014)
Form 1041 Cooperative Distributions - General

  1. Cooperative Distributions are paid by cooperatives to their members.

  2. Cooperative Distributions display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Patronage Dividends PATRONAGE 1099-PATR
    Per-unit Retained Allocations RTAIN ALLC 1099-PATR
    Redemption of Nonqualified Notices and Retain Allocations REDEMPTION 1099-PATR
    Non Patronage Distributions NONPAT DIS 1099-PATR

    Note:

    INVEST CRD, WRK OP CRD, PT AMT ADJ, PROD DEDCT and OTH CDT&DD are for information purposes only.

4.119.4.8.7.11  (09-17-2014)
Form 1041 Cooperative Distributions - Analyzation

  1. Group Patronage Dividends, Per-unit Retain Allocations, Redemption Amount and Non Patronage Distributions IRs to determine the overall amount AND compare with the following entries:

    1. Form 1040, Schedule F, line 3a (use 3b if line 3a is zero or blank) or 38a (use line 38b if line 38a is zero or blank).

      Caution:

      Per Unit Retain Allocations may be reported on Form 1040, Schedule F line 2. Only give credit if the amount reported on line 2 matches within $1 or is clearly identified as Per Unit Retain Allocations.

    2. Form 4835, Farm Rental Income and Expenses, line 2a (line 2b if line 2a is zero or blank).

    3. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    4. Form 1041, line 6.

    5. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    6. Form 1040, Schedule E, Part V, line 42:

      If the amount reported on Schedule E, Part V, line 42 is Then
      Equal to or greater then the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
      Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.7.12  (09-17-2014)
Form 1041 Cooperative Distributions - Miscellaneous

  1. If Cooperative Distributions is U/R, enter the following on the CP 2030:

    1. Select COOPERATIVE DISTRIBUTION from the drop down menu in the "Your income and deductions" field.

      Exception:

      When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cooperative Distribution IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.7.13  (09-17-2014)
Form 1041 Taxable Grants - General

  1. A grant is subsidized financing paid by a federal, state, or local programs for energy conservation or production projects, and is income to the recipient.

  2. Taxable grants are reported on Form 1099-G.

  3. Taxable grants are identified on IDRS CC:IRPTR as Amount Type (IRPTR Literal) TX GRANT.

4.119.4.8.7.14  (09-17-2014)
Form 1041 Taxable Grants - Analyzation

  1. If the payer is the US Department of Agriculture, compare Taxable Grant amount(s) with entries on:

    1. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    2. Form 1040, Schedule F, lines 8 or 43. The amount must match within $1 or be clearly identified as grants.

    3. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    4. Form 4835, line 3a (line 3b if line 3a is zero or blank).

    5. Form 1041, line 6.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

      Note:

      If agriculture payments are present, consider these amounts when determining the U/R.

    6. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    7. Form 1040, Schedule E, Part V, line 42:

      If the amount reported on Schedule E, Part V, line 42 is Then
      Equal to or greater then the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
      Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. When more than one information return containing Taxable Grants amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Taxable Grants together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.7.15  (09-17-2014)
Form 1041 Taxable Grants - Miscellaneous

  1. If Taxable Grants are U/R, enter the following on the CP 2030:

    1. Select TAXABLE GRANTS from the drop down menu in the "Your income and deductions" field.

      Exception:

      When giving credit for amounts reported on Form 1040, Schedule E, Part I, line 3, select RENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Taxable Grants IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.8  (09-17-2014)
Form 1041 Real Estate Sales - General

  1. Real estate transactions are the proceeds from the transfer (sale or exchange) of real estate.

  2. Real estate transactions are identified on IDRS CC:IRPTR with Document Type "1099-S" and Amount Type (IRPTR Literal) REAL ES SL.

    Note:

    BYR RE TAX is displayed for information only.

4.119.4.8.8.1  (09-17-2014)
Form 1041 Real Estate Sales - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Compare Real Estate Sales amounts with entries on:

    1. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    2. Form 1040, Schedule C, line 1 or 6 or C-EZ line 1 ONLY when the Business Activity relates to Real Estate activities. Consider any other Business income related IRs when determining the total amount to compare to Form 1040, Schedule C, line 1 or 6 or C-EZ line 1.

    3. Form 4797, Sale of Business Property, lines 1, 2(d), 10(d), or 20.

    4. Form 6252, Installment Sale Income, lines 5 or 21.

    5. Form 1041, Schedule D, or Form 8949.

    6. Form 8824, Like-Kind Exchanges, line 15.

  3. If the amounts reported on these Forms or Schedules are equal to or greater than the REAL ES SL IR(s) amounts, consider the issue resolved. If the amounts reported are less, consider the difference U/R.

  4. Ensure that amounts reported on Forms and Schedules are properly carried forward to page 1 of the Form 1041.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.8.2  (09-17-2014)
Form 1041 Real Estate Sales - Miscellaneous

  1. If Real Estate Sales are U/R, enter the following on the CP 2030:

    1. Select REAL ESTATE SALES from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Real Estate Sales IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 18 whenever Real Estate Sales are U/R.

4.119.4.8.9  (09-17-2014)
Form 1041 Other Income - General

  1. All income that is not included on lines 1, 2a, and 3 through 7 should be listed on line 8. The type and amount should be on an attached schedule if the estate or trust has more than one item.

  2. Other income is reported on Form 1099-MISC.

  3. Other income is identified on IDRS CC:IRPTR as Amount Type (IRPTR Literal) MISC OTH I.

4.119.4.8.9.1  (09-17-2014)
Form 1041 Other Income - Analyzation

  1. Compare Other income with entries on:

    1. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

    2. Form 1041, Schedule F, lines 8 or 43. The amount must match within $1 or be clearly identified.

    3. Form 4835, line 6. The amount must match within $1 or be clearly identified.

    4. Form 1040, Schedule C, line 6.

  2. The Other Income amount on a Form 1099-MISC IR represents the full value of Other Income. If the taxpayer reports a lesser amount, consider the difference U/R, unless documentation is attached to the return.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instruction.

4.119.4.8.9.2  (09-17-2014)
Form 1041 Other Income - Miscellaneous

  1. If Other income is U/R, enter the following on the CP 2030:

    1. Select OTHER INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Other income IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.10  (09-17-2014)
Form 1041 Cancellation of Debt - General

  1. Cancellation of Debt is considered income to the taxpayer if a debt owed to the Federal Government, financial institution, credit union or other creditor was discharged and is not otherwise excluded from gross income.

  2. Cancellation of Debt are reported on Form 1099-C.

  3. Cancellation of Debt are identified on IDRS CC:IRPTR as Amount Type (IRPTR Literal) AMT DBT CN.

    Note:

    PRPTY FMV and INT FORGVN are displayed for information purposes only.

4.119.4.8.10.1  (09-17-2014)
Form 1041 Cancellation of Debt - Analyzation

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Cancellation of Debt comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1041, lines 8.

    2. Form 1040 Schedule C, Part I, line 6 (or Schedule C-EZ, line 1).

    3. Form 1040, Schedule E, Part I, lines 3 and/or 4.

    4. Form 1040, Schedule F, Part I, lines 3, 4, 5b, 6, and 8 or Part III, line 39a through 43.

  3. If the taxpayer reduces the reported AMT DBT CN amount by the INT FORGVN amount,≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If the taxpayer received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is personally liable (recourse debt), the amount by which the canceled debt exceeds the PRPTY FMV of the property must generally be reported as ordinary income on Form 1041, line 8.

    Note:

    The payer may indicate on the Form 1099-C that the taxpayer is personally liable for repayment of the debt. The 1099-C IR indicates Personally liable in the "Was Debtor Personal liable" field on IDRS CC:IRPTR.

  5. If the taxpayer has received AMT DBT CN from a Foreclosure or Repossession and the taxpayer is not personally liable (non-recourse debt), the gain or loss is computed by comparing the balance of the loan amount (1099-C) with the adjusted basis.

    1. Losses are non-deductible, unless the property was used in trade or business or held for investment. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Include a Special Paragraph to inform the taxpayer these losses are not deductible.

    2. Losses in excess of gains from sales of property used in trade or business are deductible as ordinary losses.

  6. If the taxpayers indicate that the income is not taxable because they are insolvent, (e.g., Form 982, Box 1b, is checked or on an attached statement), they MUST provide a statement showing the amount of their insolvency. If taxpayers do not provide a breakdown of their assets and liabilities, DO NOT consider them to be insolvent. The taxpayers are considered insolvent if the net liability amount(s) shown on the attached statement is GREATER than the total fair market value of assets immediately prior to the debt cancellation.

    1. If the AMT DBT CN amount(s) is less than or equal to the insolvency amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. If the AMT DBT CN amount(s) is more than the insolvency amount, the amount of the taxpayers insolvency must be considered. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. When more than one information return containing Cancellation of Debt amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Cancellation of Debt together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

4.119.4.8.10.2  (09-17-2014)
Form 1041 Cancellation of Debt - Miscellaneous

  1. If Cancellation of Debt is U/R, enter the following on the CP 2030:

    1. Select CANCELLATION OF DEBT from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Cancellation of Debt IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include the following Special paragraph on the notice "If the canceled debt is excludable due to insolvency, please provide us with a breakdown of your total assets and liabilities immediately before the debt was discharged. You are insolvent to the extent that just prior to the debt cancellation your total liabilities exceeded your total assets (e.g., if your liabilities totaled $15,000 and your assets totaled $12,000, you are insolvent by $3,000). A worksheet that you may use for calculating insolvency is included in Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Debt cancellation is excludable only up to the insolvent amount. You must include any canceled debt that exceeds the amount of your insolvency as income on your tax return, unless an exclusion applies."

4.119.4.8.11  (09-17-2014)
Form 1041 Gambling Winnings - General

  1. Gambling winnings are identified on IDRS CC:IRPTR as Document Type "W-2G" and Amount Type (IRPTR Literal) GR WINNING.

    Note:

    IDEN WAGER is displayed for information purpose only.

4.119.4.8.11.1  (09-17-2014)
Form 1041 Gambling Winnings - Analyzation

  1. Compare Gambling winnings with entries on:

    1. Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule C, line 1 or C-EZ line 1 ONLY when the Business Activity relates to Gambling Industries - including Casinos and Racetracks activities. Consider any other Business income related IRs when determining the total amount to compare to Form 1040, Schedule C, line 1 or C-EZ line 1.

  2. When more than one information return containing Gambling Winnings amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Gambling Winnings together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instructions.

4.119.4.8.11.2  (09-17-2014)
Form 1041 Gambling Winnings - Miscellaneous

  1. If Gambling winnings is U/R, enter the following on the CP 2030:

    1. Select GAMBLING INCOME from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Gambling winning IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.12  (09-17-2014)
Form 1041 Substitute Payments in Lieu of Dividends or Interest - General

  1. Substitute Payments in lieu of dividends or interest are made by a broker who transfers a taxpayer’s securities for use in a short sale or in securities lending transaction and receives certain substitute dividend or interest payments on the taxpayer’s behalf while the short sale or securities lending transaction is open.

  2. Substitute Payments in lieu of dividends or interest are identified on IDRS CC:IRPTR as Document Type "1099-MISC" and Amount Type (IRPTR Literal) SUB PAYMTS.

4.119.4.8.12.1  (09-17-2014)
Form 1041 Substitute Payments in Lieu of Dividends or Interest - Analyzation

  1. Compare Amount Type SUB PAYMTS. with entries on Form 1041, line 8. Taxpayers are instructed to identify any amounts reported on Form 1041, line 8. DO NOT give credit for any unidentified amounts reported on line 8, unless there is a $1 match.

  2. When more than one information return containing Substitute Payments in Lieu of Dividends or Interest amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Substitute Payments in Lieu of Dividends or Interest together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instructions.

4.119.4.8.12.2  (09-17-2014)
Form 1041 Substitute Payments in Lieu of Dividends or Interest - Miscellaneous

  1. If Substitute Payments in Lieu of Dividends or Interest is U/R, enter the following on the CP 2030:

    1. Select PAYMENTS IN LIEU OF DIVIDENDS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Substitute Payments in Lieu of Dividends or Interest IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

4.119.4.8.13  (09-17-2014)
Form 1041 Qualified Education Program Payments - General

  1. Qualified Education Program Payments consist of Qualified Tuition Program (QTP) and are reported to IRS on Form 1099-Q. Amount indicators on the Form 1099-Q reflects Gross Distribution (Box 1); Earnings (Box 2); and Qualified Tuition Basis (Basis) (Box 3).

  2. Qualified Education Program Payments are reported on Form 1099-Q and displays on IDRS CC:IRPTR as Amount Type (IRPTR Literal) QTP EARNGS.

    Note:

    QTP DIST & QTP BASIS is for information purposes only.

4.119.4.8.13.1  (09-17-2014)
Form 1041 Qualified Education Program Payments - Analyzation

  1. If there is an indication of a Trustee to Trustee transfer (Form 1099-Q, Box 4 is checked), the distribution is nontaxable. Do not pursue the issue.

  2. Only pursue net positive EARNGS. When there are multiple Form 1099-Q IR(s), combine positive EARNGS with any negative EARNGS. If the combined net EARNGS is negative, do not pursue the EARNGS issue.

  3. Form 1099-Q IRs display a Distribution Type Indicator based on the information in Form 1099-Q Box 5: If the indicator is blank, the payer did not specify the type of distribution. Consider the IR valid and continue processing:

    1. IND "1" - Qualified Tuition Program (QTP) from a private educational institution.

    2. IND "2" - QTP from a State (or state agent/instrumentality).

    3. IND "3" - Coverdell ESA.

  4. Generally, QTP distributions are nontaxable if they are less than the designated beneficiary's qualified education expenses. The taxable amount is reported on Form 1041, line 8. Consider the Form 1099-Q distribution(s) reported when:

    1. The taxpayer identifies the amount reported on line 8 as the taxable portion of the Form 1099-Q distribution.

    2. The taxpayer indicates the designated beneficiary's qualified education expenses were greater than the Form 1099-Q distribution.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient for further instructions.

4.119.4.8.13.2  (09-17-2014)
Form 1041 Qualified Education Program Payments - Miscellaneous

  1. If Qualified Education Program Payments is U/R, enter the following on the CP 2030:

    1. Select QUALIFIED EDUCATION PROGRAM PAYMENTS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Qualified Education Program Payments IRs PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 9 when Qualified Education Program Payments is U/R.

4.119.4.9  (09-17-2014)
Form 1120 Recomputation of Tax

  1. Most corporations figure their tax by using the tax rate schedule below:

    If taxable income is over But not over Tax is Of the
    amount over
    $0 $50,000 15% $0
    $50,000 $75,000 $7,500 + 25% $50,000
    $75,000 $100,000 $13,750 + 34% $75,000
    $100,000 $335,000 $22,250 + 39% $100,000
    $335,000 $10,000,000 $113,900 + 34% $335,000
    $10,000,000 $15,000,000 $3,400,000 + 35% $10,000,000
    $15,000,000 $18,333,333 $5,150,000 + 38% $15,000,000
    $18,333,333 ---------- 35% 0

4.119.4.9.1  (09-17-2014)
Form 1120 Qualified Personal Service Corporation (QPSC) Tax Rate

  1. A corporation is considered a Qualified Personal Service Corporation (QPSC) when it meets both of the following conditions:

    1. Substantially all of the corporation’s activities involve the performance of services in the fields of: health, law, engineering, architecture, accounting, actuarial science, performing arts or consulting AND

    2. At least 95% of the corporation’s stock is directly or indirectly owned by its employees retired employees, and the estate or legatees of those persons, or any other person who acquired such stock by reason of the death of an employee or retired employee (but only for the 2-year period beginning on the date of the death of such individual).

  2. A QPSC is taxed at a flat rate of 35% on their taxable income.

    Note:

    Due to Original Processing errors, it is possible that the taxpayer indicated that they are a QPSC but did not use the 35% tax rate to calculate their base tax.

  3. A taxpayer is identified as a QPSC by:

    1. Checking box 3 (Personal service corp) on Form 1120, Section A and

    2. Checking the "qualified personal service corporation" box on Form 1120, Schedule J, line 2.

    Note:

    When both of these boxes are checked and the taxpayer uses the 35% tax rate, the tax return is flagged and the following codes are uploaded to Masterfile: ALBM CD 400 and CONTROL GRP CD 2.

    Note:

    If the taxpayer also checks the "member of a controlled group" box 1 on Form 1120, Schedule J, the QPSC takes priority.

  4. When the taxpayer has checked both the "Personal Service Corp" box 3 on Form 1120, Section A and the "qualified personal service corporation" box on Form 1120, Schedule J, line 2 take the following actions:

    1. Verify that the "PSC Ind" box on the DCI contains a "check mark" . Remove if incorrectly marked.

    2. If the "PSC Ind" box on the DCI is blank, enter a "check mark" in the "PSC Ind" box on the DCI.

    Reminder:

    Take into consideration any prior adjustments for tax and taxable income when preparing a notice.

  5. Include PARAGRAPH 35 on the CP 2030 notice and use the QPSC version to calculate the 35% tax rate when the "PSC Ind" box on the DCI was blank and a "check mark" was entered.

  6. Based on the taxpayer’s response, it may be necessary to recalculate the QPSC tax to the applicable tax schedule rate.

4.119.4.9.2  (09-17-2014)
Form 1120 Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group

  1. A corporation that is a member of a controlled group uses Form 1120, Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, to report the distribution of taxable income and income tax (including certain tax benefits) between all members of the group. The Schedule O includes all of the control group members and lists them in Part II and Part III.

  2. For each member of the control group, taxable income is allocated to the following tax rate brackets:

    • 15% tax rate - limited to $50,000

    • 25% tax rate - limited to $25,000

    • 34% tax rate - limited to $9,925,000

  3. For each member of the control group, certain tax benefits are allocated to the following tax rate brackets:

    • 5% tax rate - limited to $11,750

    • 3% tax rate - limited to $100,000

  4. Taxpayers filing Form 1120, Schedule O are instructed to check Form 1120, Schedule J, box 1.

    Note:

    If the taxpayer also checks the "qualified personal service corporation" box on Form 1120, Schedule J, line 2, the QPSC indicator takes priority.

  5. If the taxpayer uses a Schedule O to determine tax, refer to the Lead Tax Examiner who will determine if the case should be transferred to the TCO when a response (or no response to CP 2531) requires a CP 2030 (or recomputed CP 2030).

    Reminder:

    Issue a CP 2531 as the initial taxpayer contact notice. See IRM 4.119.4.6Determination of CP 2531 Issuance.

  6. Include PARAGRAPH 36 when issuing a notice.

4.119.4.10  (09-17-2014)
Form 1120 Non - Refundable Credits

  1. Non-Refundable credits are used to reduce tax. They include the following credits reported on:

    1. Form 1118, Foreign Tax Credit, reported on Form 1120, Schedule J, line 5a.

    2. Form 8834, Qualified Electric and Plug-in Electric Vehicle Credit, reported on Form 1120, Schedule J, line 5b.

    3. Form 5735, American Samoa Economic Development Credit, reported on Form 1120, Schedule J, line 5b.

      Note:

      Although not listed on Form 1120, Schedule J, the Form 1120, reporting instructions direct the taxpayer to include any credit from Form 5735 on Schedule J, line 5b.

    4. Form 3800, General Business Credit, reported on Form 1120, Schedule J, line 5c.

    5. Form 8827, Credit for Prior Year Minimum Tax, reported on Form 1120, Schedule J, line 5d.

    6. Form 8912, Bond Credit reported on Form 1120, Schedule J, line 5e.

  2. Include PARAGRAPH 40 when the tax return shows any entries on Form 1120 Schedule J lines 5a - 5e (other than zero).

4.119.4.10.1  (09-17-2014)
Form 1120 Carryforward Credits

  1. The following credits are carryforward credits:

    1. Form 1118, Foreign Tax Credit, Schedule K (Foreign Tax Carryover Reconciliation Schedule).

    2. Form 3800, General Business Credit.

    3. Form 8827, Credit for Prior Year Minimum Tax.

      Note:

      Taxpayer can claim the unused portion of a carryforward credit on their subsequent year's tax return.

      Note:

      Both Form 3800, General Business Credit and Form 8827, Credit for Prior Year Minimum Tax have a refundable credit component which can be claimed on Form 1120, Schedule J, line 19c.

  2. Based on the taxpayer's response it may be necessary to revise the amount of carryforward credits claimed. Ensure that carryback/carryforward guidelines are followed if the taxpayer responds requesting change(s) to the amount of previously reported credit(s). See IRM 4.119.4.21.7.3, NOL Carryback/Carryforward for additional instructions.


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