SEE Part 2 specialized returns explained

Specialized Returns and Taxpayers is the smallest SEE Part 2 domain — 18 of the 85 scored questions, about 21% — and the broadest. It covers five unrelated topics: trust and estate income tax, exempt organisations, retirement plans, farmers, and rental property. At three or four questions per topic you cannot skip any, but you do not need the depth the entity rules require: learn each topic’s core rules, filing requirements and signature traps. All dollar figures are 2025 figures from the 2025 IRS instructions and publications.

Trusts and estates (Form 1041)

Trust types. A simple trust must distribute all income currently, has no charitable provision and distributes no corpus in the year; any other trust is complex for that year. In a grantor trust, powers the grantor keeps make the income taxable to the grantor. The outline also names foreign and fraudulent trusts and tax shelters.

Accounting income versus DNI. Fiduciary accounting income, set by the governing instrument and state law, decides what beneficiaries are entitled to. Distributable net income caps both the distribution deduction and the amount beneficiaries are taxed on; capital gains usually go to corpus and stay out of DNI. Beneficiaries get their share on Schedule K-1.

Exempt organisations

• Qualifying and keeping status under section 501(c): operating for the exempt purpose, no private inurement.
• Applying: Form 1023 for 501(c)(3) organisations, Form 1024 for most other subsections.
• Annual filing, the Form 990 series: Form 990 is required when gross receipts are $200,000 or more or total assets are $500,000 or more; Form 990-N is available to organisations whose gross receipts are normally $50,000 or less; Form 990-EZ sits between. Due by the 15th day of the 5th month after year-end.
• Unrelated business income: income from a trade or business regularly carried on and not substantially related to the exempt purpose. Gross income from unrelated business of $1,000 or more requires Form 990-T.

Retirement plans

Also in scope: qualified versus non-qualified plans, prohibited transactions between a plan and disqualified persons, nondiscrimination rules, and reporting.

Farmers

• Farm income on Schedule F: livestock, crop insurance proceeds, subsidies, patronage dividends, conservation payments.
• Crop insurance deferral: a cash-method farmer who receives proceeds in the year the crop was damaged, and would normally have reported more than half of that crop’s income in a later year, can elect to report the proceeds the following year.
• Weather-related livestock sales: gain on livestock sold in excess of the normal number because of drought, flood or other weather conditions can in some cases be postponed a year.
• Form 4835 reports farm rental income for a landowner who does not materially participate; the result flows to Schedule E.
• Estimated tax: if at least two-thirds of gross income for 2024 or 2025 was from farming, no estimated payments are needed for 2025 if the return is filed and the tax paid by March 2, 2026; otherwise a single payment by January 15, 2026.

Rental property

• Passive activity rules. Rental activities are generally passive. An individual who actively participates can deduct up to $25,000 of rental real estate loss against nonpassive income, reduced by 50% of modified AGI above $100,000 and gone at $150,000. Married filing separately and living apart all year: $12,500. Living together at any time: no allowance.
• Real estate professionals escape the passive rule for rentals in which they materially participate, if more than half of their personal services and more than 750 hours in the year were in real property trades or businesses in which they materially participated.
• Rental income: advance rent is income when received; a security deposit you intend to return is not; a deposit to be applied as the final month’s rent is advance rent.
• Mixed-use and vacation homes: if you use a dwelling as your home and rent it for fewer than 15 days in the year, the rent is not reported. Personal use of more than the greater of 14 days or 10% of rental days makes it a residence, and expenses must be allocated.

Sample questions

What to practise

Write one single-sided fact sheet per topic: the return, the due date, who must file, three key 2025 figures and the trap. Work the passive-loss phase-out and the simple versus complex trust test several times, then take the practice test.