1041 Estate

[littleman]

I am attempting to file a 1041 for the first time. I am helping a distant acquaintance file a 1041 for his mother who passed away in 2003. The house was sold in 2006 along with some firearms. There have been no 1041's filed since the mother passed away. The estate is far below the $2Million threshhold.

There is no interest or dividends to report as well as no business income. However, the information I received has several items detailing property taxes, homeowners insurance, utilities, and maintenance that have been paid over the course of 2003, 2004, 2005 and 2006. Should these items be listed as "deductions not subjetc to the 2% floor"?

The estate has received property tax refunds, insurance premium rebates, and gratuities from the funeral. Should these items be listed as "Other Income"?

Additionally, the estate paid for the funeral expenses, but I thought I saw something about not listing funeral expenses on the 1041. Is this correct?

I am confident that the house and firearms need to be reported on Schedule D, but the other items I listed above are a bit more foggy to me.


Thanks for the help in advance.

[John of PA]

some answers

Report the income on the sale of the house & firearms, using the FMV at date of death as the cost basis. Sch A type items such as the real estate taxes can be deducted as "items subject to 2% floor". utiltities and repairs & insurance cannot, except you can add improvements made to the house or "fix-up" for the sale, type repairs, to the cost basis of the house.
Hope this helps.

[Roland Slugg]

Two added comments

Dear littleman

Two additional points ....

The estate tax threshhold is $2,000,000 now, but in 2003 when your acquaintance's mother died, it was only $1,000,000. (In 2004 and 2005 it was $1,500,000.)

The estate income tax return is an annual form, and all taxable income and deductible expenses must be reported on the return for the year in which they were received or paid. By waiting so long before filing the first F-1041, the estate in question must now use the calendar year for income reporting purposes, so be sure and allocate all income and expenses to the correct year.