Decedents fiduciary return

[manceandpeters]

I need everyones brain! I don't do fiduciary returns often and have a client that passed away in 2010. IRD wages of 28000 and business loss of 800, no distributions were made in 2010. I thought there would be a tax liability to the estate since no distributions were made yet to beneficiaries, and no administrative expenses paid, however, executor informs me lawyer says nothing is due. Input anyone?

[Koss]

Estate Return

Is it possible that the lawyer is referring to Form 709, and not Form 1041?

"There is no estate tax due." Think about what that may mean to an attorney. He may be thinking about estate tax, not income tax.

Or does he expect the estate to issue Schedules K-1 to the beneficiaries, making the income taxable on a pass-through basis, even though it has not yet been distributed?

BMK

[manceandpeters]

estate tax

No, I know that he was refering to the income tax, his assets were under the exclusion amount. I have talked to the executor about the estate tax return. Do you know of any reason that no tax would be due on that income?

[Lion]

W/h

Was there adequate withholding on the wages to cover all the taxable income? Did some of the sources of income go directly to an individual(s) instead of into the estate? Was the lawyer talking about Form 706 instead of 1041?

[luke]

Lawyer probably doesnt do taxes.....
your OP indicates income and if that was not distributed on K1 then FORM 1041 would have tax due?

[Burke]

You said client died in 2010. Did anyone do a final 1040 for him? What was on it?

[manceandpeters]

final 1040

I am doing his final 1040 and everything up to date of death is going on it, His W-2 was issued and reported on final, but 1099-Misc was issued for wages paid after death. They did use his social, but I still thought it would be reported by estate, and since no distributions were made, then taxable.

[Burke]

Yes, the 1099MISC for wages paid after death should have had the EIN of the estate on it. Otherwise it was done correctly in that manner. And no SE tax. It goes on the 1041. Expenses of the estate could nullify any tax due. Go for a fiscal year on the estate to take advantage of that. What was date of death? Fiscal year would run from that date up to end of 12th month following date of death. (Ex: died 7/2/10 -- end of estate fiscal year 6/30/11.) Might still be able to claim expenses if paid before that date or make distributions to pass income through to bene's. Also, 1041 return would not be due until 3 1/2 months following end of fiscal year.