1099-B for decedent

[BP.]

Client passed away, and her Edw Jones 1099-B (her SSN) shows many pages of sales, and all but two trades were made three months after client's DOD.

There are also dividends posted to her account after her death.

TTB p. 21-8 & Pub 559 discuss how to treat a Schedule B for 1099s INT & DIV after death, but not sure how to handle the stock sales post death. Ask for corrected 1099B?

[FEDUKE404]

Income to estate

I would forward the information to the executor/executrix for inclusion in the estate tax return, to include eventual Schedules K-1.

Whoever was making those post-death trades has created a problem. The investment firm should have been notified of the death of the person as soon as reasonably possible and, within the constraints of how that account was registered, closed the account or reopened with a different owner pursuant to valid transfer instructions and presentation of a death certificate.

As you noted, had this been merely "income" the easiest repair may well have been the "nominee distribution" route, e.g. "nominee distribution to estate of Jane Doe."

I would look into the registration on the original account(s), such as TOD/POD/joint etc. And I bet the investment firm might have some "issues" if they became aware that a deceased person was trading securities.......

FE

[Burke]

Client passed away, and her Edw Jones 1099-B (her SSN) shows many pages of sales, and all but two trades were made three months after client's DOD.
There are also dividends posted to her account after her death.
TTB p. 21-8 & Pub 559 discuss how to treat a Schedule B for 1099s INT & DIV after death, but not sure how to handle the stock sales post death. Ask for corrected 1099B?

You handle the 1099-B's the same way. Show in-and-out (sales = basis) on the decedent's final 1040 for no gain or loss for the post-death trades. Then put all of those on the 1041 estate income tax return, or notify the TOD bene's (if there were any) that they report on their returns. Forget the correct 1099. It would take forever, and they probably would not do it anyway.

[BP.]

You handle the 1099-B's the same way. Show in-and-out (sales = basis) on the decedent's final 1040 for no gain or loss for the post-death trades. Then put all of those on the 1041 estate income tax return, or notify the TOD bene's (if there were any) that they report on their returns. Forget the correct 1099. It would take forever, and they probably would not do it anyway.

Thanks, FE & Burke. No Fed estate tax req'd, but a state inheritance tax return, where these sales belong. Exexutor would need to ascertain DOD values for that purpose.

[Gary2]

Thanks, FE & Burke. No Fed estate tax req'd, but a state inheritance tax return, where these sales belong. Exexutor would need to ascertain DOD values for that purpose.

I wouldn't expect this to be on either a state inheritance tax return, for the same reason it's not on the Federal estate tax return (i.e. 706), but since it may go on the estate's income tax return (i.e., federal 1041), it would go on the state's equivalent.

[FEDUKE404]

Slight clarification

Many/most people I deal with do not have to deal with estate tax considerations. (Well, of course Washington seems to change "the rules" just about every year.) Many states now use the federal estate tax numbers as a starting point.

But that is an entirely different matter from the responsibility of the executor to collect income for the decedent and eventually to distribute that income to the eligible persons along with the proper tax paperwork.

As I mentioned earlier, it is fairly common for some "left over" income to slide into an account after death. But in this case stock trades had to be initiated by someone - obviously not the decedent! - and I'm not sure if that does or does not present a potential problem.

FE

[Burke]

Thanks, FE & Burke. No Fed estate tax req'd, but a state inheritance tax return, where these sales belong. Exexutor would need to ascertain DOD values for that purpose.

You are confusing Estate Taxes (Form 706) with Fiduciary Income Tax which is reported on Form 1041 if gross income (including the sales proceeds of stocks) exceeded $600 for the (estate) tax year. You may choose fiscal year or calendar year, but all income is reported on this return until it is distributed to the beneficiaries. What state are you in?

[BP.]

You are confusing Estate Taxes (Form 706) with Fiduciary Income Tax which is reported on Form 1041 if gross income (including the sales proceeds of stocks) exceeded $600 for the (estate) tax year. You may choose fiscal year or calendar year, but all income is reported on this return until it is distributed to the beneficiaries. What state are you in?

Yes I already meant to say thanks for the posts clarifying that. Realized after I posted that I was mixing up a few things there! Thanks. In PA.

[Burke]

Right. In Pennsylvania, the post-death income would go on PA-41.

[Gary2]

As I mentioned earlier, it is fairly common for some "left over" income to slide into an account after death. But in this case stock trades had to be initiated by someone - obviously not the decedent! - and I'm not sure if that does or does not present a potential problem.

Might there have been limit or stop loss sales placed before death and triggering after?