Leaderboard

Not sure IRS would be interested in the OIC since the Federal government can go against the fiduciaries under R.S. 3466 and 3467. You might want to have a look at Fiduciary Liability Under the Federal Priority Statutes (duke.edu). Just saying.

I wouldn't bother. With PTPs, losses can only be taken against income from the same PTP. If no losses are deductible, they won't affect federal or state income in states that start with federal AGI. It will only make a difference when the shares are sold, and the worksheet the PTP provides at that time should show the state amounts. Does anyone ever pay attention to that long list of state amounts on the K-1s? There are not enough days in the year to do that. I figure if the states actually notice they'll tell us.

Jerry W is absolutely correct. No money is to be distributed from the estate until all the bills are paid. If the beneficiaries took the cash before the creditors, they are indeed liable for the bills. Don't even think OIC, the law is pretty clear. In this case, it may be that the money was distributed before the taxpayer died? If so, were gift tax returns filed? Gifts made within three years of death are included in the estate, so the heirs can't claim it only has $1k. Its bank account may only have $1k, but the rest is sitting in their bank accounts.

Isn't it possible that the executor might be liable if the heirs stonewall on paying the taxes? Sounds like the executor did a distribution to heirs before settling all the outstanding debts (including taxes).

I will have to check about who received how much but know that the money was distributed early in 2020, well before she died. Good point about gift tax returns but I did not realize about gifts within 3 years of death are estate assets. Again, nothing was ever mentioned to me until after death. So far as I know, all bills were paid, including mine, except for the attorney (no bill received as yet) and taxes. The attorney told the executor not to pay the credit card bill and I don't know of any others. As this is now getting more involved and taking more time, it may be time to send another engagement letter to address these issues. My original letter does state that IRS representation is a separate matter. I will mention that and see where it goes. This is a problem with new clients which I did not solicit. I was hoping to quietly muddle along with my steady regulars who have been 'trained' to contact me first not after money issues arise. All previous clients that have died have had either no complications with taxes or I have been trustee or executor or fully informed. Retirement continues to appeal...

I will look at this but my recommendation to the executor was for the family to pay up. They got the money. The executor has mentioned that the sibling recipients just may have to cough up the money. I noted again that the balance due is not that great, about $2100 or so. Whatever the cost of trying to finagle a delay or compromise, etc., the money is still owed, these folks had the use of it for over a year. Had there been planning, withholdings would have been appropriate and the shares would have been less by that much.

Disengage unless very profitable and paid in advance. Especially if this area of practice is not your norm. Your post shows the heirs are not cooperative, and that the estate is upside down already.