form 1041

[TAX4US]

Need advice from MA preparers. I have a Virginia TP filing a 1041 for the state of VA. One of the heirs live in MA. Does MA have an inheritance tax on the amount received by the heir other than the taxable amount showing on the 1041?

[appelman]

Here's everything you ever wanted to know.

http://www.mass.gov/dor/individuals/taxpayer-help-and-resources/tax-guides/estate-tax-information/estate-tax-guide.html

The short answer is that an estate tax is levied (surprise!) on the estate of a decedent, not on a beneficiary. If the decedent is not an MA resident and did not own or transfer real estate or tangible personal property located in Massachusetts, MA should not be concerned.

[Gary2]

As far as I know, the 1041 would be irrelevant even for states with both estate and inheritance taxes (except perhaps for assisting with IRD issues). The 1041 deals with the estate's income, not its assets as of the date of death.

On the other hand, you may have to pay attention to differences in taxation of the income. For example, if the estate distributed income from Commonwealth of Virginia bonds, that income would be exempt from both federal and VA taxes, but the MA heir would be subject to taxation by the Commonwealth of Massachusetts on his or her share of that amount .

[Kram BergGold]

MA incmoe for a Beni

MA does not allow deductions on a 1041. What this means is the MA Beni usually has higher MA income on his MA K-1 than on his Federal. EG. 1041 has $4,000 of income and $1,000 of expenses like tax prep fee. There are two 50% beni's. One is MA and one is VA. The VA beni will show $1500 of income on the Federal and VA K-1 Forms. The MA beni will have $1500 on Federal but on MA there will be $500 added to the $1500 for a total of $2,000. If you look at a MA K-1 Form you will see the column for additions and subtractions.

[ATSMAN]

MA does not allow deductions on a 1041. What this means is the MA Beni usually has higher MA income on his MA K-1 than on his Federal. EG. 1041 has $4,000 of income and $1,000 of expenses like tax prep fee. There are two 50% beni's. One is MA and one is VA. The VA beni will show $1500 of income on the Federal and VA K-1 Forms. The MA beni will have $1500 on Federal but on MA there will be $500 added to the $1500 for a total of $2,000. If you look at a MA K-1 Form you will see the column for additions and subtractions.

MA also differs from Federal on depreciation expense and a few other. Please get a copy of Form 2 and instructions from the Mass DOR website.

[TAX4US]

OK many thanks. I now know how to advise tp as to what may happen.