Form 1041 Questions & Form 706

[Bjorn]

Single tax payer died owning a commercial buildling.

Can I just copy and assets over from his 1040 Schedule E and claim any depreciation on the 1041? His estate received rent and have expenses on this building. There will be a Schedule E and F on his 1041. My understanding is the income retains its character.

Form 706
This same taxpayer has a check coming from US AG dept for some gov't program. Is this an asset to be listed on schedule F of 706?
Once received is this US AG dept to be income on the 1041 as well?
If it goes on the 1041 may I attached a schedule F and pass it through to the beneficiaries on the k1s?

Thanks!
Bjorn

[jainen]

Depreciation

Depreciation for the decedent's share of the property starts over for 39 more years with a basis of FMV on date of death.

The check is income in respect of the decedent. The estate or the beneficiary, whoever receives it, reports it as income. Although it is not an estate asset, it is a probate asset so there is a credit for any probate tax paid on it.

[Roland Slugg]

Your estate questions

Dear Bjorn

Agree with jainen regarding depreciation. Don't forget to make an allocation to land.

Regarding the Dept of Ag check, the amount goes on F-706 only if it was a receivable on or before the DOD. It's taxable on F-1041 when received, however, whether or not it was a receivable as of the DOD. If it is reportable on F-706, then it's also IRD on the fiduciary return, so there would be a deduction for IRD on F-1041 if there was estate tax paid.

The Dept of Ag income will not retain its character when taxed to the fiduciary or the benes. The income that's taxed to the benes depends on how much is paid out to them (except in the estate's final year), and the rest is taxed on F-1041.