Christian Posted January 20, 2016 Report Share Posted January 20, 2016 As mentioned in earlier posts I am having to prepare a Form 1041 for a now deceased client's family. They have chosen to pay the tax due on any income with the Form 1041. In other 1041s I have prepared the heirs elected to take distributions which were reported on individual K-1 forms and paid the tax due on their returns. Since these heirs want the tax paid with the 1041 I can find no reason to fill out Schedule B on the 1041 nor prepare any K-1 forms. Is this correct ? Quote Link to comment Share on other sites More sharing options...
Christian Posted January 20, 2016 Author Report Share Posted January 20, 2016 I went back and tried to delete this post but too late. I see now I will not need to send forms K-1s but will need to complete Schedule B and G. Quote Link to comment Share on other sites More sharing options...
WITAXLADY Posted January 21, 2016 Report Share Posted January 21, 2016 thank you for providing the answer! 1 Quote Link to comment Share on other sites More sharing options...
SaraEA Posted January 21, 2016 Report Share Posted January 21, 2016 If there is still time for them to take distributions (and if probate will allow), I would strongly advise it. Estate tax rates are extremely high. I'm doing one right now that is subject to the highest 39.6% tax rate, which kicks in at not much over $12k taxable income. Ouch! Unless the beneficiaries are in that bracket, there will be more money for them if they choose to take some income now. 1 Quote Link to comment Share on other sites More sharing options...
Christian Posted January 21, 2016 Author Report Share Posted January 21, 2016 Thanks Taxlady for confirming my reading on this. For my part a second or third opinion never hurts when you deal with the convoluted tax code we face. And Sarah I have discussed that very point with the two executors but some other family members file early and would not agree to waiting for the K-1s to come out in March. So they agreed to letting the tax be paid with the Form 1041 filing. Quote Link to comment Share on other sites More sharing options...
SFA Posted January 21, 2016 Report Share Posted January 21, 2016 Since it is the executors duty to protect and preserve the estate assets, in my opinion, the executors have the complete authority to determine if the estate will pay the taxes or distribute the income. The beneficiaries do not control the ultimate decision. If the estate pays the tax, then ALL of the beneficiaries are affected because there is less money to actually pay out. Some decisions are not to be made committee style. 3 Quote Link to comment Share on other sites More sharing options...
SaraEA Posted January 22, 2016 Report Share Posted January 22, 2016 Is it possible to put the estate on a fiscal year? If the person died in 2015, the first 1041 won't be due until sometime in 2016 and will go on the beneficiaries' 2016 returns. Just say the person died in May 2015. Fiscal year will end April 30 2016 and the return will be due Aug 15. The beneficiaries will have their K-1s months before tax season even opens. Of course, then there is the risk they will lose them by the time they get around to filing. 3 Quote Link to comment Share on other sites More sharing options...
Christian Posted January 22, 2016 Author Report Share Posted January 22, 2016 After reading the points made in the last two replies I have decided to take another bite at the apple. Of course it's true the executors have the final say. My guess is they simply don't want to listen to a lot of yipping and yapping from other family members. Even so, as pointed out by Sarah (a fact I overlooked) the K-1s will apply to 2016. Still I will bet a dollar to a dime they will opt for the estate to pay because " I don't want to pay no more tax". The 1041 will encompass the final period of farm operation and the profit likely will not be that much so happily I won't need to address this until a little later. Again thanks for your input. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.