Tax Treatment of an Electing ANST

Adjusted Gross Income (AGI) Figure the AGI of an electing ANST by subtracting from total income (line 5) administrative costs (lines 7 through 9) and the exemption amount (line 11). Administrative costs are

deductible to the extent they would not have been incurred if the property were not held by the ANST.

Taxable Income In general, an electing ANST's taxable income is figured in the same manner as any other taxable trust (see Internal Revenue Code subchapter J). However, the electing ANST isn't allowed to take an income distribution deduction, though it can claim an exemption deduction, the amount of which depends on the terms of the trust.

See the Schedule K instructions for information on the beneficiaries' tax treatment of distributions received from the ANST.

Income Assignment From a Native Corporation

The ANST reports income assignments from an ANC on the appropriate income line consistent with the type of income assigned to the ANST. See Part III—Other Information, Question 1, later, for the information required to be attached to the form.

Tax An electing ANST pays tax on its taxable income at the lowest rate specified for single individuals (10%). If the ANST has net capital gain or qualified dividends, use the tax computation in Part IV of Schedule D, which applies a 0% rate on its adjusted net capital gain.

2. The section 646 tax treatment won't apply to the trust for that tax year or in any subsequent tax years; and

3. The distributable net income of the trust will be increased by the current or accumulated earnings and profits of the sponsoring ANC as of the close of the tax year, after adjustment is made for all distributions made by the sponsoring ANC during the tax year. However, this increase is limited to the fair market value (FMV) of the trust's assets as of the date the beneficial interest of the trust first becomes disposable.

If stock in the sponsoring ANC may be disposed of to a person in a manner that isn't allowed by section 7(h) of the ANCSA (if the stock were settlement common stock) and at any time after such disposition of stock is first allowed, the corporation transfers assets to an ANST, then items 1, 2, and 3 above will apply to the ANST in the same manner as if the

Disqualifying Acts If, at any time, a beneficial interest in an ANST may be disposed of to a person in a manner that isn't permitted by section 7(h) of the ANCSA (if the interest were settlement common stock), then:

• If no election has previously been made, the ANST can't elect special tax treatment under section 646 for the trust and its beneficiaries; or

• If the election is in effect at that time:

1. The election won't apply as of the first day of the tax year in which a prohibited disposition is first allowed;

Instructions for Form 1041-N (Rev. 12-2025) Catalog Number 38105U Dec 29, 2025 Department of the Treasury Internal Revenue Service www.irs.gov

ANST allowed dispositions of beneficial interests in the ANST in a manner not allowed by section 7(h) of the ANCSA.

The surrender of an interest in an ANC or an electing ANST by the shareholder or beneficiary, for a whole or partial redemption or for the whole or partial liquidation of the corporation or trust, will be considered a transfer allowed by section 7(h) of the ANCSA.