1041 distribution deduction

[Kram BergGold]

I am preparing a first and final 1041 for an estate. The net income before the distribution deduction is $488. As this is below $600 there would be no tax. However the distribution deduction will cause the $488 to be shown as income split among the 7 beni's which is alot of paperwork for a small amount. Can I legally skip the distribution deduction? My guess is not, but I thought I would ask.

[John of PA]

K-1 is all zeros

I am preparing a first and final 1041 for an estate. The net income before the distribution deduction is $488. As this is below $600 there would be no tax. However the distribution deduction will cause the $488 to be shown as income split among the 7 beni's which is alot of paperwork for a small amount. Can I legally skip the distribution deduction? My guess is not, but I thought I would ask.

My thought here is, if you take the distribution deduction, which you should; the K-1's would be all zero's anyway, so you do not have to prepare them (for practical purposes). The taxable income being distributed to the beneficiaries is zero. I would take the deduction and skip the K-1's. One other idea is to keep the estate open into a second year and do not make the final distrution until the second year. Now you do not have to take the distribution deduction in year 1. And year 2 would have no gross income at all.

[Bees Knees]

This was discussed earlier in this thread: http://www.thetaxbook.com/forums/sho...tion+deduction

If there is a distribution from an estate or a trust, section 662 requires it to be included in the income of the esate beneficiaries.

You can, of course, net the 1041 expenses with the income being passed through on the K-1.