Administrative Expenses on Form 1041

[sali]

Filed Form 1041 for estate. Did not have to file Form 706. Did take administrative expenses as deductions on Form 1041. Did not attach two copies of a statement signed by personal rep waiving rights to claim deductions on Form 706 to Form 1041. Do I have to send a waiver even if no Form 706 required? If so, how do I now send in the waiver statements for Form 1041 since Form 1041 has been filed?

Thanks.

[Bees Knees]

IRS instructions for Form 1041, page 18 say: “Administration expenses and casualty and theft losses deductible on Form 706 may be deducted, to the extent otherwise deductible for income tax purposes, on Form 1041 if the fiduciary files a statement waiving the right to deduct the expenses and losses on Form 706.”

I presume that means that such expenses are NOT allowed on Form 1041 if such statement waiving the right to deduct the expenses and losses on Form 706 is not filed with the return. It says nothing about whether a 706 is actually filed or not. The statement refers to waiving the right to deduct the expense on Form 706. Since it is talking about waiving a right to a deduction, rather than actually claiming a deduction, I would think that the requirement applies regardless of whether a 706 is actually filed or not. I would simply do it every time just to be on the safe side.

How to correct it if no statement was attached? You could file an amended 1041 with the statement attached. That way you have something to show IRS if the 1041 is ever audited.

[Roland Slugg]

Amended return

Dear sali

Yes, that statement must be filed. (See Regs §1.642(g)-1) I would do this by filing an amended return. There is no separate form for this. Instead, file another F-1041, checking the "Amended return" box thereon. The Reg cited above describes the required declarations to include in the statement.