IRD Question

[Nashville]

Mortimer dies in 2011. He sold land several years ago to Perk. At the time of Mortimer's death, Perk still owes him $75.000 and Mortimer has been recognizing income on the installment method every year. There is still $60,000 profit buried in the $75,000 receivable. This is income in respect of a decedent (IRD) which will be taxable in the hands of the beneficiary.

Assuming the estate tax returns in 2011 and Mortimer has significant assets enough to file: since the $75,000 is now owed to the estate, does it get valued on Mortimer's estate tax return? Even though the income will be taxable to the beneficiaries?

[Maribeth]

"Assuming the estate tax returns in 2011 and Mortimer has significant assets enough to file: since the $75,000 is now owed to the estate, does it get valued on Mortimer's estate tax return?" YES

"Even though the income will be taxable to the beneficiaries?" YES

[ChEAr$]

I see no reason why the value of the receivable would not be listed among assets.

Looks like estate returns will be due when estate is over 5 million according to the last report of negotiations. However, who KNOWS what the liberal demicracks will actually do to botch things up.

[appelman]

I believe the beneficiary gets a credit...

I believe the beneficiary is entitled to a credit for any estate tax allocated to the double-taxed income.

[Nashville]

Thanks

Thanks to all. I have thought so for years, but have now wondered about double taxation.

Appleman, if there is a credit, how is it claimed mechanically (i.e. what forms, pass-through if this is the case, etc.)?

[appelman]

I misspoke: It's a deduction, not a credit.

For an individual, it is a Tier I (no threshold) miscellaneous itemized deduction.

[OtisMozzetti]

I see no reason why the value of the receivable would not be listed among assets.
...

Maybe there should be, or is, some provision that there will be no further capital gain or other income recognized on subsequent installment payments, because of a step-up in the basis in the installment contract when the decedent passed away.

[Jesse]

Maybe there should be, or is, some provision that there will be no further capital gain or other income recognized on subsequent installment payments, because of a step-up in the basis in the installment contract when the decedent passed away.

Otis,
I recall trying that stratagy several years ago and inquired with a research service. It didn't fly because the asset is no longer the the decedents as it was sold, but the A/R is the asset and does not receive any step up.

Something like that, as I said it was several years ago and I need to start taking my Fish Oil and Vitament E!

[appelman]

So far as I know...

It is still IRD, and no step up is allowed. I believe there may have been some court cases on this.

[Davc]

It is still IRD, and no step up is allowed. I believe there may have been some court cases on this.

Agree......