663(b) election

Technical topics regarding tax preparation.
#1
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Estate made income distributions to beneficiaries within 65 days of estate's first fiscal year (full year) for income attributable to that fiscal year ending in 2022. Within that same 65 days and still in 2022, estate received remainder of expected income to estate and promptly disbursed that to beneficiaries in 2022, so that income is recognized and those distributions were made in next fiscal year. Only nominal assets remain in the estate. Working on extended 1041 for first fiscal year, then will be ready to file final short year 1041 for the estate for income and distributions attributable.

Is the 65 day election all or nothing distributed within the 65 days, or can we say $xxx amount of distributions were for the first fiscal year income, and remaining amount of distributions made within that same time frame for income distributed for the short final fiscal year? That income would be reported on the 2023 returns of the benes. Does it matter if all income came in 2022 and distributions were made in 2022, and no other income is expected? Since I have not filed first year, I can still elect a different fiscal year for the first year, although it would be late if date is too early.

There is an expected refund on the anticipated short fiscal year ending Feb 2023, but I understand that if there is no other expected income, I can mark the year ending Feb 2023 final. Executor met with probate clerk in February, who said the estate could stay open to receive the refunds, but I am not deducting the state income tax withheld. Is there something else I should be taking into consideration? This is one of those where nothing went as planned.

Thanks to all you overworked tax pros for taking the time to help.

Edited a few times as that is just what I do. Can't help myself.
Last edited by Yellowdog on 18-Mar-2023 7:51pm, edited 5 times in total.
 

#2
sjrcpa  
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Yellowdog wrote:Is the 65 day election all or nothing distributed within the 65 days

No.
Yellowdog wrote:can we say $xxx amount of distributions were for the first fiscal year income

Yes.

In my software when you make the election you say for how much and when the distribution was made.
 

#3
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Thanks. I saw the checkbox on the form and have a checkbox beside an election in Drake, but don't see where it allows me to enter a specific amount. The election resulting from the software says, "We elect to treat any amount paid or credited to a beneficiary as being made under Section 663(b) of the Internal Revenue Code."

Since it said "any amount," that is why I was worried it was all or nothing. The majority of the distributions were all made within the same month in 2022.

I use Drake if anyone knows of something I'm overlooking. I've had that problem this year with things that are in front of my face.
 

#4
sjrcpa  
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I do not use Drake, but presumably you have to enter the amount distributed somewhere o it appears on Schedule B. You would include the amount elected under 663(b) in that figure.
 

#5
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Yes, I have it on Schedule B, Line 10. I thought you were talking about on the election itself. Thanks.

That makes sense to me now.
 

#6
sjrcpa  
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I was talking about the election itself-my software generates a statement and I am to fill in the amount and date for the elected distribution.
 

#7
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Thanks. I think I’ll attach a pdf with the additional information.
 


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