Distributions1041

[TAXMAN]

Client died 3-2011. Mostly cash went into estate account 135K. Heirs pulled partial distribution in Oct 2011. Estate will file final return in April 2012. As some income has been earned thru an interest account. I believe even though a partial was taken the taxable amount cannot be determined untill 2012 when the final is done, therefore none of the partial should be taxable in 2011? Am I thinking this out ok? Thanks for replies.

[OldJack]

Distributions are not reported to a beneficiary on a 1041-K1 as they are not what is taxable. The reason is that only taxable income (usually interest, dividends, rent, etc) is reported on the 1041-K1 and therefore taxable to the 1040.

[TaxCPANY]

Unless a fiscal year, ending no later than 2/29/12, was "elected" for the estate, there seem to be two calendar-year Forms 1041 to file -- and "taxable estate" pertains to Form 706, is *not* pertinent to your question, "apples vs. oranges." The October distributions to the beneficiaries would seem to require Form 1041 Schedules K-1 reporting of their shares of the interest income -- in either a 2011 form, if a calendar year, or a 2012 form, if fiscal.

I.e., TAXMAN, I think you've got work to do. Form 1041 reports income (& deductions) of *any sort,* whether taxable or not; and its timing depends upon what was elected when the estate's Form SS-4 was filed

I scarcely understand OldJack's response, at all, I'm afraid.

Very truly yours, TaxCPANY

[OldJack]

>>The October distributions to the beneficiaries would seem to require Form 1041 Schedules K-1 reporting of their shares of the interest income<<

>> scarcely understand OldJack's response, at all, I'm afraid.<<

@TaxCPANY: I'm afraid you do not understand estates and trusts reporting - Schedule K-1 reporting of taxable income for 1040 is as a result of the estate/trust filing form 1041 and electing (or if required by the trust) to PASS taxable items through to the beneficiaries. Taxable income may NOT be reported on any K-1's if the estate/trust elects to pay all tax on the 1041 from the estate/trust funds on the first 1041 timely filed. The only thing distributions play in anything is a credit on the 1041. Of course, if the estate fails to timely report, or file, the IRS has authority to "collect" its taxes from the beneficiaries that received distributions, but the beneficiaries have NO requirement to try to calculate taxable income from distributions and report them on the 1040.

>>Estates: Day after death is the beginning of the first tax year. The first year can cover any period of 12 months or less that ends on the last day of a month. The executor chooses a tax year when the FIRST fiduciary return is filed. Filing deadlines for Fiscal year - The 15th day of the fourth month following the close of the tax year. [2010 Small Business Quickfinder Handbook page G-1.]<<