Distribution deduction on a fiduciary tax return
Posted: 6-Dec-2018 5:25pm
A fellow accountant asked me a question about a 1041 that he is doing one pro bono for a small estate. His question made me doubt my own understanding about this topic. Here are the facts:
An elderly woman died with a relatively small estate. About $10,000 in principal, and another $200,000 that came in from a pre-tax retirement account that had no beneficiary. Hence why it all came into the estate. The executor distributed it all into an estate bank account.
The deceased woman left a simple will that splits her estate 50/50 between a friend and a church. There are a couple of small complications not worth getting into. The main thing left to do is to file the 1041 and K-1s and pay the beneficiaries.
The client, who is the executor, is convinced the estate will owe taxes on all $200,000 regardless. The accountant says it will all be deducted and pass through to the beneficiaries if the executor actually distributes the $200,000 before the year ends. I agree with the accountant, but I'm fairly certain the 65 day rule would apply here as well.
Is there anyone with more 1041 experience who can chime in? Much gratitude!
An elderly woman died with a relatively small estate. About $10,000 in principal, and another $200,000 that came in from a pre-tax retirement account that had no beneficiary. Hence why it all came into the estate. The executor distributed it all into an estate bank account.
The deceased woman left a simple will that splits her estate 50/50 between a friend and a church. There are a couple of small complications not worth getting into. The main thing left to do is to file the 1041 and K-1s and pay the beneficiaries.
The client, who is the executor, is convinced the estate will owe taxes on all $200,000 regardless. The accountant says it will all be deducted and pass through to the beneficiaries if the executor actually distributes the $200,000 before the year ends. I agree with the accountant, but I'm fairly certain the 65 day rule would apply here as well.
Is there anyone with more 1041 experience who can chime in? Much gratitude!