42A741(I) (10-23) Page 1 of 5
INSTRUCTIONS—FORM 741
KENTUCKY FIDUCIARY INCOME TAX RETURN
WHO MUST FILE
A return must be led by the following:
• Every resident estate with gross income for the taxable year
of $1,200 or more; and ever y resident trust with gross income
for the taxable year of $100 or more.
• Every nonresident estate with gross income for the taxable
year from Kentucky sources of $1,200 or more; and every
nonresident trust with gross income for the taxable year from
Kentucky sources of $100 or more.
WHEN AND WHERE TO FILE
Taxpayers must le by the 15
th
day of the 4
th
month following the
close of the tax year. Mail the return to:
Kentucky Department of Revenue
Frankfort, KY 40620-0016
FIDUCIARY INCOME
Kentucky income tax law is based on the federal income tax law
in eect on December 31, 2022. The Department of Revenue
generally follows the administrative regulations and rulings of
the Internal Revenue Service in those areas where no specic
Kentucky law exists. Kentucky law requires taxpayers to report
income on the same calendar or scal year and to use the
same methods of accounting as required for federal income tax
purposes. Eective for taxable years ending after September 10,
2001, a duciary that for federal income tax purposes elects to use
the 30 percent or the 50 percent special depreciation allowance
will have a depreciation dierence for Kentucky purposes. See
Form 740 and Schedule M instructions or contact the Department
of Revenue for more information.
ADMINISTRATION EXPENSES
In the case of a decedent’s estate, if the election was made not to
deduct costs of administration, including attorney’s fees actually
allowed and paid, on a Kentucky inheritance tax return, these
expenses may be deducted on Form 741. A statement waiving
the right to deduct these expenses for inheritance tax purposes
must also be led with Form 741.
If the same administration expenses that were claimed on the
Kentucky Inheritance Tax Return, Form 92 A 200 or Form 92 A 205,
are also claimed on the federal duciary income tax return, Form
1041, an adjustment must be made to add these expenses to
the Kentucky adjusted total income on the Kentucky Form 741,
Schedule M, line 3.
ELECTING SMALL BUSINESS TRUST (ESBT)
An ESBT must report income, losses, and deductions allocated
to the ESBT as an S corporation shareholder and the gain and
loss from the disposition of S corporation stock on the Kentucky
duciary return, and pay income tax accordingly. All S corporation
income is reported on the return as regular income and is taxed at
the same rates as all other income. Enter the S corporation income
on Schedule M, Part I, line 3 and identify the income as “ESBT
– S corporation income.” A separate schedule must be attached
to the return to show the income and deductions applicable to
S corporation portion of the ESBT. When computing income
of the S corporation portion of the ESBT, the following must be
considered: (1) Capital losses are allowed in computing income
only to the extent of capital gains; (2) Passive losses and ordinary
losses are deductible only against passive income and ordinary
income, respectively; (3) No deduction is allowed for amounts
distributed to beneciaries; and (4) No additional deductions are
allowed for state taxes.
LINE-BY-LINE INSTRUCTIONS
Line 1—Enter the amount shown as federal adjusted total income
from federal Form 1041, line 17. Enclose a complete copy of
the federal return.
Line 3—Enter the portion of deductions that are allocated to the
additional Kentucky income reported on line 2. These deductions
are in addition to the deductions claimed on your federal Form
1041.
Line 7—Enter the portion of deductions on federal Form 1041
allocable to Kentucky tax-exempt income reported on line 6.
To compute unallowable deductions, divide the Kentucky tax
exempt income by the entire income of the duciary. Multiply total
deductions by this percentage. Report the amount of unallowable
deductions on line 7.
Line 10, Beneciaries’ Shares of Income and Deductions—
Income distribution deduction. Enter amount.
Each beneciary’s share of income, deductions, credits, etc.,
must be reported on a separate Schedule K-1 and led with
Form 741. A copy must be given to the beneciary and a copy
retained by the duciary.
The income distributed or distributable to beneciaries is the
amount on page 1, line 10. Each beneciary is required to include
the distributed or distributable share of income, as shown on
Schedule K-1, on the individual income tax return. The name and
identication number of each beneciary should be entered as it
appears on the individual return. Estate returns should also identify
the beneciary class of each beneciary by checking the box for
the beneciary class as determined by Kentucky inheritance laws.
Beneciary classes are listed below:
CLASS A
(1) Surviving spouse, parent
(2) Child (adult or infant)
child by blood, stepchild, child adopted during infancy, or a child
adopted during adulthood who was reared by decedent during
infancy
(3) Grandchild
issue of child by blood, stepchild, child adopted during infancy, or
of a child adopted during adulthood who was reared by decedent
during infancy
(4) Brother, sister (whole or half)
741
Commonwealth of Kentucky
Department of Revenue
INSTRUCTIONS
2023