Deceased TP

[Super Mom]

Ok, this is a first for me. The TP was MFJ and I know the spouse can file that way this year as he died in 2010. My only question is a few rental houses were involved, not real big money. Do I need to be concerned about any income for the spouse in addition to the normal that I know about, she will claim the rental income. No increase in income for inheritance or anything for the spouse, correct???

[Burke]

She will file a MFJ return as she would have done had he not died, including all the rental income, etc. Inheritances are not taxable income on the 1040, if that is what you mean. Otherwise I am not sure what you may be referring to.

[Super Mom]

aren't distributions from life insurance for the death of a spouse completely not taxable?

[Burke]

Yes, proceeds from the life insurance company that are for death benefits are tax-free. However, it usually includes interest from the date of death, and she would have received a 1099-INT for that.

[Super Mom]

She will file a MFJ return as she would have done had he not died, including all the rental income, etc. Inheritances are not taxable income on the 1040, if that is what you mean. Otherwise I am not sure what you may be referring to.

I mean there's no inheritances to report for a spouse right?

[taxmandan]

I mean there's no inheritances to report for a spouse right?

The only inheritance that might be taxable would be distributions from qualified retirement plans, 401K, IRAs, etc. She would get 1099R with code 4 if that's the case.

[Super Mom]

The only inheritance that might be taxable would be distributions from qualified retirement plans, 401K, IRAs, etc. She would get 1099R with code 4 if that's the case.

She does have a 1099 R with a code 4 on it, but when I talk to her if that's life insurance as a death benefit, that's not taxable right? And if so, is there a place to put that on the return so the IRS doesn't send her a CP2000 saying she had unreported income?

[Burke]

If she got a 1099R, that is NOT a life insurance policy payout of death proceeds. More likely, it is an IRA or annuity, and that IS taxable. They do not issue 1099-R's for a life insurance policy payable at the insured's death. The 1099-R will have an account number or policy number on it, the check is usually accompanied by a letter when paid, and the 1099-R usually has a phone number on it she can call if you want to clarify for her benefit.

[Super Mom]

Great, thanks!!!!!!

[Bill Tubbs]

1099r

If she got a 1099R, that is NOT a life insurance policy payout of death proceeds. More likely, it is an IRA or annuity, and that IS taxable. They do not issue 1099-R's for a life insurance policy payable at the insured's death. The 1099-R will have an account number or policy number on it, the check is usually accompanied by a letter when paid, and the 1099-R usually has a phone number on it she can call if you want to clarify for her benefit.

I have seen a 1099R for life insurance proceeds... Box 2 (taxable) was $0 though, so no big deal.

Bill

[S T]

Life Ins from Employer

I have received T/p form 1099R from deceased Employers on death benefits.

Example an employee from the State of ---- - Employer provided base life insurance at Employer Cost - employee passed away - beneficiary receives the $ 2,000 - $4,000 (whatever the benefit amount is) paid to the beneficiary on file.
1099R coded Box 7 distribution code as 4 - it is fully taxable.

Sandy

[Lion]

Depreciation

Who owned the rental houses? Did she inherit them from him, or inherit half, and need to start depreciation on her new basis?

[Burke]

I have received T/p form 1099R from deceased Employers on death benefits.

Example an employee from the State of ---- - Employer provided base life insurance at Employer Cost - employee passed away - beneficiary receives the $ 2,000 - $4,000 (whatever the benefit amount is) paid to the beneficiary on file. 1099R coded Box 7 distribution code as 4 - it is fully taxable.Sandy

I do not believe that is correct. If it were a true death benefit, even of group life proceeds, there should not be any taxation of the payout due to death. The cost of group life ins (over $50K) is on a TP's W-2 as taxable income. Anything under that is a tax-free fringe benefit. Either the 1099R was issued in error, or it was something else. It does not matter that the employer paid for it.

[S T]

This one is

The one that I have seen is taxable - State Employee - from their website

"Is the Basic Death Benefit taxable?
All of the Basic Death Benefit is taxable, except for any previously taxed contributions. The taxable portion of the Basic Death Benefit is subject to a mandatory 20 percent federal tax withholding amount. However, this can be avoided by electing to have the taxable portion of the benefit rolled over to an IRA."

Sandy