Simple estate: Is 1041 filing is required.

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
DelcoEE
Posts: 33
Joined: Thu Feb 02, 2017 9:54 pm

Simple estate: Is 1041 filing is required.

Post by DelcoEE » Thu Aug 16, 2018 10:23 am

I am helping a family friend (executor) settle a simple estate and we are trying to figure out if a 1041 filing is required.
Here are the facts.

• No probate property.
• All decedent assets were in CDs and Vanguard GNMA. All have named beneficiaries.
• Date of death was 7-25-17 and all assets were distributed by 10-15-17 except for a small amount set aside in an estate account with EIN in good faith for contingent liabilities. The account is still open as of today.
• Final 2017 tax return of decedent was completed and included all 1099 income that was generated before transfer to beneficiaries.
• All beneficiaries (transferees ) included any income generated from inherited assets (after transfer) in their 2017 tax returns (income from time of transfer to end of 2017)

In short, the estate assets did not generate any income between time of death and transfer other than interest and dividends. All that 1099 income was included in the 2017 returns.

Does the income generated from the CDs and Vanguard GNMA between date of death and transfer to beneficiaries have to be declared on 1041? I don’t think so because I don think it is characterized as IRD (income in respect of death) since it was included in decedent final return.

My friend is worried because the IRS sent him a notice after he opened the estate account stating he MUST file a form 1041 by October 2018. Could a mistake have been made filing for the estate account?

Thanks in advance for your feed back

DelcoEE
Posts: 33
Joined: Thu Feb 02, 2017 9:54 pm

Re: Simple estate: Is 1041 filing is required.

Post by DelcoEE » Thu Oct 04, 2018 6:34 pm

I am bumping this topic in hopes that someone will comment. As it stands today I am not going to submit a 1041.

bac
Posts: 31
Joined: Sun Apr 01, 2018 6:19 pm

Re: Simple estate: Is 1041 filing is required.

Post by bac » Thu Oct 04, 2018 7:29 pm

IANAL, but have been an executor of three estates (with lots of help from a pricey law firm).

The final 1040 should include income only up to the date of death. The 1041 reports income received after the date of death (with the 1041's tax year beginning on the first of the month in which the person died).

According to the following, the threshold for filing is $600 of income in the tax year:

<https://www.irs.gov/businesses/small-bu ... -form-1041>

Edit: If more than $600 in income was received between death and transfer, it would appear that a) A 1041 is required; b) the decedent's 2017 return was wrong because it included estate income; and c) the beneficiaries' 2018 tax returns will be wrong if they don't receive Schedule K-1's passing along the 1041 income for them to include.
Last edited by bac on Thu Oct 04, 2018 7:54 pm, edited 2 times in total.

Gill
Posts: 4728
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Simple estate: Is 1041 filing is required.

Post by Gill » Thu Oct 04, 2018 7:34 pm

No, there is no return required. All income earned after death should have been reported by the beneficiaries of the inherited assets which were deemed to pass as of date of death. Why was an estate account opened when there was no probate estate?
Gill

DelcoEE
Posts: 33
Joined: Thu Feb 02, 2017 9:54 pm

Re: Simple estate: Is 1041 filing is required.

Post by DelcoEE » Mon Oct 15, 2018 8:48 am

Gill wrote:
Thu Oct 04, 2018 7:34 pm
Why was an estate account opened when there was no probate estate?
Thanks for your response. We were told by her apartment management company that they could only refund the rent deposit to an estate account ( not sure if that was good information) So we decided to open an estate account in case there were any other outstanding debits or debts that could only be processed via an estate account. Also, at that time we were not sure there was no probate assets.

Post Reply