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Interest Income 2 years after death

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    Interest Income 2 years after death

    My client is the son. Here is the situation that I hope someone can help me with:

    2009 Mom died 01/26/2009
    2013 Dad died 03/31/2013
    2015 Globe Life Insurance paid life insurance on Mom and interest of $2215 to the beneficiary Dad (who died 2 years ago)

    The Globe Life Insurance check was issued 01/08/15 for "Benefits for Mom" date of loss 01/26/09 made out to "Estate of Dad"
    The 1099-Int form recipient is "Son for Estate of Dad" with Dad's SSN

    Nobody knew that Mom had a life insurance policy and they found out after dad died.

    There are 3 kids, my client and 2 sisters. One sister had a joint bank account with Dad so the bank allowed them to deposit the check. The son then had the bank issue 3 Official Checks to split the insurance and interest between the 3 kids. Dad didn't own anything and lived with his daughter. No will. No Probate.

    I'm thinking this should be put on a Form 1041 for estate and then 3 K-1's issued for interest. But is there a way around this? The daughters are not my clients. Could I have the son claim his share of the interest income which would be $738 (2215/3) and be done with it?

    #2
    I tend to agree with you even though not politically correct. Since dad's SS was used there should be no IRS follow up for the amount in question. And even if there is, through K-1 the income would be reported the same as you propose to do now.

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      #3
      Thank you Gretel

      I appreciate your response to my question.

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        #4
        A differing opinion

        Here was my case from 2015. Client owned a stock which was sold in 2011 due to a merger. He forgot he owned it. In 2015 the money was es-cheated by the state. They tracked him down and gave him the $70k. I researched this and because he never had access to the money until 2015 he paid tax on it in 2015. In your case no one had access to the money until 2015 so whoever got the money should report it. Since the money did not go into an estate account I would just tax it directly to the children who got it.

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          #5
          I agree. Forego any 1041 and split 3 ways between kids on 2015 returns.

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            #6
            Split 3 ways

            Thank you Kram, and Burke. Yes, I put one third of the interest income on client's tax return.

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              #7
              Same thing

              Originally posted by Kram BergGold View Post
              Here was my case from 2015. Client owned a stock which was sold in 2011 due to a merger. He forgot he owned it. In 2015 the money was es-cheated by the state. They tracked him down and gave him the $70k. I researched this and because he never had access to the money until 2015 he paid tax on it in 2015. In your case no one had access to the money until 2015 so whoever got the money should report it. Since the money did not go into an estate account I would just tax it directly to the children who got it.
              I wish somebody would track me down and give me $70K! Thanks for the vocabulary lesson today. I had to look up es-cheated-

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