Preparing Form 1041? Help!

[anu31402]

My client brought his w2. He also brought a piece of paper containing a $3,434 he withdrew as (as executor of an Estate) of which $2,500 was paid to the Estate Lawyer leaving him with $934. Please, how do I report this a Form 1041 and on his Form 1040?

Thanks
Ojo, EA

[Snaggletooth]

More Info

I don't think this situation is that much out-of-norm, it's just maybe awkward.

Are there other beneficiaries? Was the personal withdrawal for services as an executor or could it be considered a distribution? If a distribution is it equitable with other beneficiaries?

[Burke]

If he took an executor's fee, it is taxable income and is reportable on Line 21 of his 1040. However, if he had to pay an estate lawyer, that is an expense of the estate. Is there any money left in the estate? He can treat the $934 as a distribution if he is the only heir, and that is not taxable. Need more info on this situation. Why is a 1041 being prepared? Does the estate have income to report?

[anu31402]

If he took an executor's fee, it is taxable income and is reportable on Line 21 of his 1040. However, if he had to pay an estate lawyer, that is an expense of the estate. Is there any money left in the estate? He can treat the $934 as a distribution if he is the only heir, and that is not taxable. Need more info on this situation. Why is a 1041 being prepared? Does the estate have income to report?

The Estate didn't have any income to report in 2012 just these expenses.

Thanks

[Burke]

Assuming the estate is closed, and there are no more funds, then a first and final tax return 1041 should be completed, showing the attorney's fees (and anything else paid that can be considered an estate administrative expense -- who is paying you?). There will be no tax, but if you account for distributions to the beneficiary(ies) on Page 2, then the excess deductions on the final return will pass through to the bene(s) on the K-1 as deductions. You never said whether there were other beneficiaries. That may make a difference on the "executor fee" thing. It would not be a smart thing to do to take a taxable executor's fee if he is the only bene.