Need to file 1041

[Snaggletooth]

This is the same estate I recently asked about the need for a FEIN #. This question is somewhat different, thus asking on a fresh thread.

Part I: Decedent had rental income from real estate. Under state law, title to all realty immediately upon death passes to heirs as undivided interest. Since ownership of state law defines real estate as NOT in the estate, does it follow for Federal purposes that the income from rental thereof is not reportable on the 1041?

Part 2: If interest income (monetary funds do NOT immediately pass to heirs) exceeds $600 but the entirety of the monetary funds is distributed to the heirs, allowing the exemption for distribution, does a 1041 still need to be filed even though no tax is due? Remember the K-1s for such a 1041 would generate an information return reporting requirement for the beneficiaries.

However, if all of the interest was reported under the decedent's SS#, and nominee 1099s were sent to the heirs, would this suffice instead of filing a 1041? I don't want to offend those "purists" among you because I acknowledge this is out-of-protocol, but there is STILL the wishes of the IRS that 1041s not be filed if unnecessary.

[appelman]

Just speaking for myself...

Just speaking for myself, I would file the 1041, include the rental and interest income, and distribute it to the beneficiaries on K-1's.

[Davc]

Part I: Decedent had rental income from real estate. Under state law, title to all realty immediately upon death passes to heirs as undivided interest. Since ownership of state law defines real estate as NOT in the estate, does it follow for Federal purposes that the income from rental thereof is not reportable on the 1041.

Assuming that it's a "Transfer on Death" situation and there is no court approval of any kind required, then I would not put the rental on the 1041.

Part 2: If interest income (monetary funds do NOT immediately pass to heirs) exceeds $600 but the entirety of the monetary funds is distributed to the heirs, allowing the exemption for distribution, does a 1041 still need to be filed even though no tax is due? .

Yes.

However, if all of the interest was reported under the decedent's SS#, and nominee 1099s were sent to the heirs, would this suffice instead of filing a 1041? I don't want to offend those "purists" among you because I acknowledge this is out-of-protocol, but there is STILL the wishes of the IRS that 1041s not be filed if unnecessary.

But by definition the 1041 is necessary. It's also the only way to avoid a 2% haircut on estate expenses.