MARYLAND
TAX PREPARER'S CHECKLIST FOR
FORM
2019
FIDUCIARY NONRESIDENT INCOME
504NR
TAX CALCULATION
Use this checklist before submitting a Fiduciary
Nonresident Return Form 504 & 504NR
• Complete your federal Form 1041 first. Maryland uses
information from the federal return to determine the proper tax
due. We also recommend that you begin your Maryland Form
504 before you start Form 504NR, as a number of line items
come from Form 504.
• Enter the income items from lines 1 through 9 of federal Form
1041 on the respective lines 1-9 of Column A of Form 504NR.
• Enter the sum of your federal deductions from line 16 of Form
1041 onto line 10 of Form 504NR. Note: the federal deductions
are grouped together on the Form 504NR.
• Check to ensure that line 17 of Form 1041, Adjusted Total
Income or (Loss) corresponds with line 11 of Form 504NR,
which is named, “Federal Adjusted Taxable Income.” Both lines
are the result of subtracting deductions from total income.
• Enter the amount of your federal distribution deduction from
line 18 of Form 1041 onto line 12 of Form 504NR.
• Enter any estate tax deduction taken on line 19 of Form 1041
onto line 13 of Form 504NR.
• Enter any qualified business deduction taken on line 20 of Form
1041 onto line 14 of Form 504NR.
• Subtract lines 12, 13, and 14 from line 11 to yield the federal
taxable income before exemption, Form 504NR, line 15.
On line 1 of Fiduciary Form 504, enter the federal taxable
income from line 23 of Form 1041. On Form 504, line 2, enter
the exemption amount. The sum of lines 1 and 2 of Form 504
MUST equal Form 504NR, line 15, Column A. If these figures
do not match, find the error before continuing any further.
• Allocate the federal income into its four component parts. The
federal income must equal the Maryland income plus the non-
Maryland income. The Maryland income, as well as the non-
Maryland income, is broken down into Distributable Income
and Non-Distributable Income. It is essential that the totals
of Column B through Column E equal Column A;
otherwise, the taxpayer may receive an error notice or the
Maryland Form 504 may be returned.
Non-distributable income is the income which cannot be
distributed to the beneficiaries because of federal or state law,
or because of the terms of the trust instrument or other legal
documents. Distributable income is the income with no
restrictions as to whether the income can pass on to the
beneficiaries. When allocating income between Maryland and
non-Maryland you must follow the federal guidelines as to
whether income is recognized. For example, if a loss is limited
at the federal level, the sum of the Maryland and non-Maryland
income must reflect the loss limitation. Do not leave Form
504NR, line 15 incomplete.
You may allocate the federal income between Maryland and
non-Maryland sources in any fair, consistent, and reasonable
manner. Note that Maryland does not tax the interest and
dividends of a nonresident, so this type of income should not
be reflected in the Maryland columns. Any income which is
being reflected as Maryland source income distributed to a
beneficiary should appear on Maryland Schedules K-1(504)
issued to the beneficiaries.
• After allocating the income, deductions and distributions
among their respective columns, compute the non-Maryland
income factor on Form 504NR, line 16. Use the information
entered on Form 504NR, line 15. This factor is derived by
taking the sum of the Distributable and Non-Distributable Non-
Maryland income on Form 504NR, line 15 (Columns B and C)
and dividing it by the federal income on line 15, Column A. If
the result is 1 or greater, it means that all of the income is
from non-Maryland sources and a factor of 1.000000 is
entered. If the result is 0 or negative, it means that none of
the income is from a non-Maryland source and a factor of
0.000000 is entered.
• Enter the amount from line 5 of Maryland Form 504 onto Form
504NR, line 16a. This represents the fiduciary’s share of net
modifications. The computation to arrive at this figure came
from applying the percentage of the fiduciary’s federal
Distributable Net Income (DNI) to the total modifications on
Form 504 Schedule A.
• Enter on line 16b of Form 504NR the portion of the
modifications on Form 504NR, line 16a that is attributable from
non-Maryland sources. This is determined in one of two ways:
the standard method is to multiply Form 504NR, line 16a by
the non-Maryland factor computed on line 16. The alternate
method may be elected if the fiduciary believes that the non-
Maryland factor will not accurately reflect the proper allocation
of modifications.
• Subtract line 16b from 16a on Form 504NR and enter the
difference on line 16c.
• Enter the amount of Electing Small Business Trust (ESBT)
income from Form 504, line 3 onto Form 504NR, line 16d.
• Enter the amount of non-Maryland ESBT income on Form
504NR, line 16e. Use the alternate method when a trust is an
ESBT as the Fiduciary return instructions indicate that entities
may not apply the non-Maryland factor against ESBT income.
Attach a schedule supporting the calculation of non-Maryland
ESBT income.
• Subtract line 16e from 16d to yield the Net Maryland ESBT
income on line 16f. If the amount is less than 0, enter 0.
• Enter the amount from Form 504NR, line 15, Column D onto
Form 504NR, line 17a. This is the fiduciary's share of
Distributable Maryland income.
• Enter the amount from Form 504NR, line 15, Column E onto
Form 504NR, line 17b. This is the fiduciary’s share of non-
Distributable Maryland income.
• Combine the Maryland modifications with the two types of
Maryland income by entering the sum of lines 16c, 16f, 17a,
and 17b onto line 17c of Form 504NR.
• Enter the amount of the Maryland exemption from line 9 of
Maryland Fiduciary Form 504 onto Form 504NR, line 17d.
• Subtract line 17d of Form 504NR from line 17c and enter this
amount on Form 504NR, line 17e. This is the taxable net
income from Maryland sources.
• Enter on Form 504NR, line 18 the amount of taxable net
income shown on Form 504, line 10.
• Use the fiduciary tax rate schedule from the Fiduciary return
instructions to calculate the tax to be entered on Form 504NR,
line 19 based on the income shown on Form 504NR, line 18.
• To calculate the Nonresident factor on line 20 of Form 504NR,
divide line 17e by line 18 of Form 504NR. If the factor equals
or exceeds 1, use 1.000000 as the factor. If it is equal to or
less than 0, use 0.000000 as the factor.
• Calculate the State tax on Form 504NR, line 21 by multiplying
the tax shown on Form 504NR, line 19 by the factor calculated
on Form 504NR, line 20. Enter the result on Form 504NR, line
21 and on Form 504, line 11.
• Multiply the Maryland taxable net income on Form 504NR, line
17e by 1.75% (0.0175) to generate the Special Nonresident
Tax. This figure is entered on Form 504NR, line 22 and on
Form 504, line 12.
• This completes the Form 504NR. Continue the calculations on
Form 504. Form 504NR is always submitted with Form 504
when a nonresident fiduciary return is filed or the Comptroller
will calculate the tax at the higher resident rate.
COM/RAD-319
