1040 & 1041 in the same year

[Taxadvisor VA]

Client's mother passed away 9.27.12. She received ss benefits, had interest income from savings/MM acct/checking account. My client obtained an EIN # creating an estate for her mother. She went to her county court house to receive a letter of qualification that she is the executor of her mom's estate.

I prepared a final tax return for her mom on income prior to her death.

I stated preparing a 1041 b/c her deceased mom had savings bonds that were cashed before the end of 2012. There is also a mutual fund that was liquidated after her mom's death and before the end of the year.

1) Should a 1041 be filed now as I'm not sure all assets have been liquidated? ________
2) It looks like the exemption is just $600 which seems really low. can this be right? ______________
3) I have read the will and it looks like the daughter is to receive the entire estate. In the papers provided, it does look like some of the assets were given to her grandson. Since he is not beneficiary, does this income have to go through his mom on the 1041? ______

Any advice would be helpful.

Thanks,

Taxadvisor VA

[appelman]

600 is right

You probably do need a 1041 for income after September 27, at least for whatever has been reported to the EIN. Technically, all income after September 27 should be reported to the estate.

[DexEA]

Similar issue

Lump Sum Pension received after death was reported in the estate FEIN, but passed thru to surviving spouse. I'm not sure why it didn't just pass to the spouse, possibly not listed as the beneficiary. Because this amount, $1,200 +/- is greater than $600 does a 1041 need to be filed for this one form? It was deposited into an account created to cash the check and then distributed to the surviving spouse, so if a 1041 needs to be filed it would be distributed income which is then taxed to the spouse. Is there a a simpler alternative to filing the 1041?

By community property state laws all other assets where transferred and no probate issues so this is the one and only item in the estate.

[Taxadvisor VA]

1040 & 1041

You probably do need a 1041 for income after September 27, at least for whatever has been reported to the EIN. Technically, all income after September 27 should be reported to the estate.

Thanks for the confirmation on the $600. The estate owes tax of $2,470.

Since her daughter was 100% beneficiary, she reports the income on her 1040 through a K1 and gets taxed. Now, it seems that this income get taxed twice.

Doesn't sound right?

Your read???

Taxadvisor VA

[AJsTax]

select fiscal year

Client's mother passed away 9.27.12. She received ss benefits, had interest income from savings/MM acct/checking account. My client obtained an EIN # creating an estate for her mother. She went to her county court house to receive a letter of qualification that she is the executor of her mom's estate.

I prepared a final tax return for her mom on income prior to her death.

I stated preparing a 1041 b/c her deceased mom had savings bonds that were cashed before the end of 2012. There is also a mutual fund that was liquidated after her mom's death and before the end of the year.

1) Should a 1041 be filed now as I'm not sure all assets have been liquidated? ________
2) It looks like the exemption is just $600 which seems really low. can this be right? ______________
3) I have read the will and it looks like the daughter is to receive the entire estate. In the papers provided, it does look like some of the assets were given to her grandson. Since he is not beneficiary, does this income have to go through his mom on the 1041? ______

Any advice would be helpful.

Thanks,

Taxadvisor VA

You can select a fiscal year ending any at the end of any full month up to date of death. We would normally select Aug 31, 2013 to file the first 1041 for the estate, and if all is finished, the final return on the same form. You do not need to rush and file year ending dec 31, 2012.

[AJsTax]

passed through

Thanks for the confirmation on the $600. The estate owes tax of $2,470.

Since her daughter was 100% beneficiary, she reports the income on her 1040 through a K1 and gets taxed. Now, it seems that this income get taxed twice.

Doesn't sound right?

Your read???

Taxadvisor VA

any income passed through to the bene on a k-1 is a deduction to the estate for taxes.

[Taxadvisor VA]

Aj-ea

Estate wasn't created till after mom died. How can you use a date to file the estate before the person died? I thought you file the final 1040 up to the date of death and then subsequent to this filing when the estate is established you prepare the 1041.
I do like the point of not having to rush and file a 1041 now since all assets may not have been liquidated.

Thanks for your help.

Taxadvisor VA

[Burke]

You said mother died 9/27/12. An estate fiscal year, if elected, will run from 9/27/12 to 8/31/13, as AJ said. All income and deductions will go on that tax return during this period which you will file in the current year - 2013 --, which is due by 12/15/13. You do not file the 1041 now. Hopefully, everything will be sold, closed out, paid and done by then. If the estate has any net income, and distributions are made to the beneficiary -- daughter -- it will all pass through to her on a K-1 and the estate will not have any taxable income at all.
If everything is over and done with and distributed earlier, then the tax year ends on that earlier date. And the return is due 3 1/2 months following that date.

[Burke]

Thanks for the confirmation on the $600. The estate owes tax of $2,470.
Since her daughter was 100% beneficiary, she reports the income on her 1040 through a K1 and gets taxed. Now, it seems that this income get taxed twice. Doesn't sound right?Your read???Taxadvisor VA

Just to be clear, it does not get taxed twice. The income passes to the daughter on a K-1, only if it is distributed to her. If it is not distributed to her, then the estate may owe tax.

[Burke]

3) I have read the will and it looks like the daughter is to receive the entire estate. In the papers provided, it does look like some of the assets were given to her grandson. Since he is not beneficiary, does this income have to go through his mom on the 1041? ______
Taxadvisor VA

The will may designate certain bequests of property and/or cash to certain persons. These do not go on the 1041 nor do they get K-1's. The heir(s) are the ones who get the residual estate.

[Taxadvisor VA]

1041 Question

You said mother died 9/27/12. An estate fiscal year, if elected, will run from 9/27/12 to 8/31/13, as AJ said. All income and deductions will go on that tax return during this period which you will file in the current year - 2013 --, which is due by 12/15/13. You do not file the 1041 now. Hopefully, everything will be sold, closed out, paid and done by then. If the estate has any net income, and distributions are made to the beneficiary -- daughter -- it will all pass through to her on a K-1 and the estate will not have any taxable income at all.
If everything is over and done with and distributed earlier, then the tax year ends on that earlier date. And the return is due 3 1/2 months following that date.

Thank you for all your help with this filing of the 1041.

Now, some of the assets have been distributed already in 2012. For this reason, is it required to file a 1st 1041 now @ 12.31.12 and issue a K1 to the sole beneficiary? Can it wait till the final return is filed which more than likely will be sometime soon during this 2013 year? In this case, the beneficiary would not be reporting her taxable income from the estate until the filing of her 2013 Income tax return.

I assume that this is okay.

Thanks for letting me know.

Taxadvisor VA

[Burke]

You will only file a 1041 now if you (the executor actually) elects a calendar year, regardless of whether distributions have been made or not. A calendar year ends 12/31/xx. It does not appear to the TP's advantage to do this. I recommend a fiscal year, then all taxable income goes on the 1041 tax return that falls during the time period for the fiscal year, which you will prepare in 2013.

[taxea]

Thanks for the confirmation on the $600. The estate owes tax of $2,470.

Since her daughter was 100% beneficiary, she reports the income on her 1040 through a K1 and gets taxed. Now, it seems that this income get taxed twice.

Doesn't sound right?

Your read???

Taxadvisor VA

was the estate worth more than 3.5 million?
Was the investment income distributed to the estate? If it was then the disbursement to the daughter was a cash inheritance not a transfer of the investment. Withholding, if any taxes owed, should have come out of the disbursment and paid as an estimated payment on the daughter's behalf.