1041 questions

[JenMO]

Client died 6/09. No 1041 filed, under $600.
2010- $700 income, but no 1041 filed yet.
Estate closed 4-30-2011. Can I file a fiscal year 5-1-10 to 4-30-11 as my initial and final return? If I do this way, I can catch some of the 2010 income, eliminating the need to file a calendar 2010. As I read, the fiscal or calendar year is determined by the first tax return filed.
Also, client owned home, estate didn't sell for two years and paid maintenance on home til it sold - insurance, taxes, mowing, utilities. Is this a deduction somewhere?

[JenMO]

Have had lots of lookers, but no replies. Can anyone give an opinion?

[Burke]

If client died "6/09", then first fiscal year would have run from date of death to 5/31/10. Maybe no requirement to file due to income less than $600, but what about expenses? (i.e, real estate taxes, mortgage interest, probate fees, administration expenses, etc, etc.) Probably should have filed so that these would have passed through to the bene(s). 2nd year of estate then runs from 6/1/10 to 4/30/11 -- (date estate closed.) Was house actively for sale? Did anyone live there? Maintenance & upkeep + insurance if not used as a principal residence would be deductions of the estate. Sale of the residence goes on Schedule D 1041 in order to pass thru to bene(s.)

[Davc]

If client died "6/09", then first fiscal year would have run from date of death to 5/31/10. Maybe no requirement to file due to income less than $600, but what about expenses? (i.e, real estate taxes, mortgage interest, probate fees, administration expenses, etc, etc.) Probably should have filed so that these would have passed through to the bene(s).

Excess expenses only pass through in the final year.

[Burke]

Yes, but a return would have to have been filed to establish what they were.

[JON]

I think

you need to file both years.

[Davc]

Yes, but a return would have to have been filed to establish what they were.

Only if they create an NOL. Otherwise they don't carry over so the magnitude is not relevant.

[JenMO]

what are the penalties for filing a late return. Would not be any taxable income because income less expenses minus the $600 exemption would be 0.

[Burke]

Penalties are based on tax owed. Since tax is zero, and income is below filing threshold, no penalty or interest.

[Kram BergGold]

My take

The property was not rental it was just held for investment so the first fiscal year deductions will not carry over. So I see no need to file a return for the first fiscal year unless using a fiscal year pushes the estate over $600 of income. I would just file an initial and final return for fiscal year 2.