Section 965. Section 965(a) — 2025 Inst 1041 (PDF)

applicable for tax year 2021 and later years. However, section 965 may still apply to certain estates and trusts (including the S portion of ESBTs) where a section 965(h) or section 965(i) election has been made.

Interest on deferred tax attributable to installment sales of certain timeshares and residential lots and certain

nondealer real property installment obligations. If an obligation arising from the disposition of real property to which section 453(l) or 453A applies is outstanding at the close of the year, the estate or trust must include the interest due under section 453(l)(3)(B) or 453A(c), whichever is applicable, in the amount to be entered on Form 1041, Schedule G, line 8, with the notation “Section 453(l) interest” or “Section 453A(c) interest,” whichever is applicable. Attach a schedule showing the computation.

Form 4970, Tax on Accumulation Distribution of Trusts. Include on this line any tax due on an accumulation distribution from a trust. To the left of the entry space, enter “From Form 4970” and the amount of the tax.

Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Include the interest due under the look-back method of section 460(b) (2). To the left of the entry space, enter “From Form 8697” and the amount of interest due.

Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method. Include the interest due under the look-back method of section 167(g)(2). To the left of the entry space, enter “From Form 8866” and the amount of interest due.

Interest on deferral of gain from certain constructive ownership transactions. Include the interest due under section 1260(b) on any deferral of gain from certain constructive ownership transactions. To the left of the entry space, enter “1260(b)” and the amount of interest due.

Form 5329, Additional Taxes on Qualified Plans (Includ- ing IRAs) and Other Tax-Favored Accounts. If the estate or trust fails to receive the minimum distribution under section 4974, use Form 5329 to pay the excise tax. To the left of the entry space, enter “From Form 5329” and the amount of the tax.

Additional tax on the early disposition of noncash prop- erty for which a section 247(g)(3) election was made by an Alaska Native Settlement Trust. This additional 10% tax should only be shown on an amended return filed by a Settlement Trust for the year in which the Settlement Trust received a contribution of noncash property from an Alaska Native Corporation and elected to defer the recognition of income related to such property, but disposed of the property within the first tax year subsequent to the tax year the Settlement Trust received the property. Determine the increase in tax due to the inclusion of the deferred income and include on this line the additional tax due, equal to 10% of the increase in tax due to the inclusion of the deferred income. The increase in tax due to the inclusion of the deferred income, which is the base amount for the computation of the additional 10% tax shown on this line, should be shown elsewhere on Schedule G. If the amended return also shows changes to income, deductions, or credits unrelated to the inclusion of the deferred income, attach a schedule showing the computation of the additional tax due only to the inclusion of the deferred income. To the left of the entry space, enter “Section 247(g)(3) tax.”

Form 8978 Worksheet. If you have a negative amount from Form 8978, line 14, that was not used to reduce Schedule G, line 3, to zero, and you have chapter 1 taxes and/or tax and interest from Form 8621, then complete the Form 8978 Worksheet—Schedule G, Part I, Line 8 to figure the amount to enter on line 8.

36 Instructions for Form 1041 (2025)

Form 8978 Worksheet—Schedule G, Part I, Line 8 Keep for Your Records

Use this worksheet if (a) Schedule G, line 3, is zero; (b) after line 3 was reduced to zero, you have a negative amount from Form 8978, line 14, that was not used to reduce line 3 to zero; and (c) you have chapter 1 taxes entered on Schedule G, line 4; Schedule G, lines 6a–6c; and Schedule G, line 8; and/or tax and interest from Form 8621.

1. Enter the total amount of chapter 1 taxes from Schedule G, line 4; Schedule G, lines 6a–6c; and Schedule G, line 8; and tax and interest from Form 8621 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. Enter the negative amount from Form 8978, line 14, that has not already been used to reduce Schedule G, line 3, to zero . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. ⁽ )

3. Combine line 1 and line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Enter the amount of non-chapter 1 taxes included on Schedule G, line 8 . . . . . . . . . . . . . . . . . . . . . 4.

5. If line 3 is negative, enter as a negative the amount from line 1. Otherwise, enter the amount from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. ⁽ )

6. Combine line 4 and line 5. Enter the result on Schedule G, line 8. This amount may be a negative number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

Line 9—Total Tax Add Schedule G, Part I, lines 3 through 8. Enter the total on Schedule G, Part I, line 9; and page 1 of Form 1041, line 24.

Part II—Payments

Line 10—2025 Estimated Tax Payments and Amount Applied From 2024 Return Enter the amount of any estimated tax payment you made with Form 1041-ES for 2025 plus the amount of any overpayment from the 2024 return that was applied to the 2025 estimated tax. If the estate or trust is the beneficiary of another trust and received a payment of estimated tax that was credited to the trust (as reflected on the Schedule K-1 issued to the trust), then report this amount separately with the notation “Section 643(g)” in the space next to line 10 and include this amount in the amount entered on line 10.

Line 13—Tax Paid With Form 7004 If you filed Form 7004 to request an extension of time to file Form 1041, enter the amount that you paid with the extension request.

Line 14—Federal Income Tax Withheld Use line 14 to claim a credit for any federal income tax withheld (and not repaid) by (a) an employer on wages and salaries of a decedent received by the decedent’s estate; (b) a payer of certain gambling winnings (for example, state lottery winnings); or (c) a payer of distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc., received by a decedent’s estate or trust. Attach a copy of Form W-2, Form W-2G, or Form 1099-R to the front of the return.

Caution: Except for backup withholding (as explained below), withheld income tax can’t be passed through to beneficiaries on either Schedule K-1 or Form 1041-T.

Backup withholding. If the estate or trust received a 2025 Form 1099 showing federal income tax withheld (that is, backup withholding) on interest income, dividends, or other income, check the box and include the amount withheld on income retained by the estate or trust in the total for line 14.

Report in box 13, code B, of Schedule K-1 (Form 1041) any credit for backup withholding on income distributed to the beneficiary.

Line 15—Current Net 965 Tax Liability—Eligible for Installment Payment Election If you have a section 965(i) net tax liability for which a triggering event has occurred in the current year and you are making a section 965(h) election with respect to that section 965 net tax liability, enter this amount from column (f) of Form 965-A, Part I.

Line 16—Credit for Tax Paid on Undistributed Capital Gains Attach Copy B of Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains.