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schirallicpa

1041?? for decedents estate

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My former client died in 2016.  She was sitting on a pile of money.  All the greedy beneficiaries couldn't wait to get their hands on some money.  Distributions were made in 2017.  Now tax return needs to be finished.  The estate has income from annuities, cap gains, and int and div.  The lawyer, (who is not my favorite person) doesn't want the beneficiaries to have to amend returns and pay tax.  Which we all know is way cheaper than the estate tax.  But regardless has apparently told them they didn't have to pay tax and doesn't want to lose face.  BUT - when you include the distributions, the respective income amounts are automatically allocated to K-1s.  Only by not entering distribution will the estate retain the income and take the tax.  So my question is, can I not report the distributions. Or am I missing some other way to keep the tax on the estate side.

I know - I don't like my question either....

 

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Does the trust have any money remaining to pay the taxes?

 

The way we handle it and if you read the instructions you'll see - Schedule B line 7 says distributable income - not distributed. Line 9 and 10 say REQUIRED to be distributed. Was it required? Unlikely (it depends upon the type of trust and wording) and if the attorney is saying it wasn't legally required, note it and have him sign a letter or send you an email noting this. If an attorney wants to tell me his client's trust income was not legally required to be distributed, that's fine with me because I'm not an attorney and I'm not practicing the law.

 

JMO but the IRS isn't going to want to get into a legal battle in a STATE COURT over who rightfully should have paid them after they've been paid the tax due.

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18 hours ago, Abby Normal said:

You have to report what actually happened, lawyer be damned. Did the lawyer provide you the final accounting for the estate?

 

No - I have the executors green pad of income and disbursements.  I have not received the accounting of the assets at the dod.  I was put in my place by this attorney, that "maybe I was not aware that it is not necessary to do an exact accounting of assets anymore."  To which I replied that regardless there should be a fiduciary responsibility to account for what she owned and what needed to be distributed.  Surely it wasn't a hat throw.

Like I said, I don't like the attorney and I don't think he's worth the $30000 they have given him. 

Regardless, if the money were required or not required to be distributed, as long as it was, it triggers reporting of the income - right?

 

 

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16 hours ago, Roberts said:

Does the trust have any money remaining to pay the taxes?

 

The way we handle it and if you read the instructions you'll see - Schedule B line 7 says distributable income - not distributed. Line 9 and 10 say REQUIRED to be distributed. Was it required? Unlikely (it depends upon the type of trust and wording) and if the attorney is saying it wasn't legally required, note it and have him sign a letter or send you an email noting this. If an attorney wants to tell me his client's trust income was not legally required to be distributed, that's fine with me because I'm not an attorney and I'm not practicing the law.

 

JMO but the IRS isn't going to want to get into a legal battle in a STATE COURT over who rightfully should have paid them after they've been paid the tax due.

The attorney thinks we are getting out of tax by distributing the income.  My thoughts are he has told everyone that there will be no tax.  He is trying to bully me by saying the distribution will wipe out the income on the estate and eliminate tax to the estate.  But unless I have been missing something for years - I understand that the distribution triggers the movement of taxable income from the estate to the K-1.  

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18 hours ago, jasdlm said:

Is there a will? 

When I asked to get copy of will, I just got big blow of smoke about everything is to be distributed - what do I need the will for.

 

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7 minutes ago, Abby Normal said:

You have to report what actually happened, lawyer be damned. Did the lawyer provide you the final accounting for the estate?

 

Agree with this 100%.  Distributions come first from income.  I still think you should get a copy of the will to check for any anomalies before you sign off.

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1 hour ago, schirallicpa said:

 I understand that the distribution triggers the movement of taxable income from the estate to the K-1.  

That's actually a state law issue and not dictated by the IRS (as I understand it).

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Another attorney who thinks he knows taxes, but doesn't know his azz from a bale of hay.

The statements he has made are totally ludicrous.  He may be a good trust atty, but he needs to bone up on tax law.

I would ask him to back up his statements with cites from the tax code.

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You prepared tax returns for the deceased right?

Then the attorney steps in for $30k to prepare the estate work, right?

Prepare the return correctly.  Let him explain to the Bene's why they have to pay tax, because he distributed the $$ to soon.  ANd did not retain an amount to pay the taxes.  And yes, the Bene's are at a probably lower tax bracket.

Rich

 

 

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On 4/26/2018 at 9:47 AM, schirallicpa said:

No - I have the executors green pad of income and disbursements.  I have not received the accounting of the assets at the dod.  I was put in my place by this attorney, that "maybe I was not aware that it is not necessary to do an exact accounting of assets anymore."  To which I replied that regardless there should be a fiduciary responsibility to account for what she owned and what needed to be distributed.  Surely it wasn't a hat throw.

Like I said, I don't like the attorney and I don't think he's worth the $30000 they have given him. 

Regardless, if the money were required or not required to be distributed, as long as it was, it triggers reporting of the income - right?

 

 

1 "maybe [you] were not aware that it is not necessary to do an exact accounting of assets anymore."     The jurisdiction that applies here is the local probate court and their instructions.  I see you are in NY.  Has anyone checked with the local court?  In VA, accountings to a court can be waived in the will if all beneficiaries sign off on it; however, they still have the right to demand an accounting from the [preparer/executor/administrator/personal representative] if so desired. 

2.  Note post reply above says Line 9 & 10 say "required to be distributed."  This is not correct.  Line 9 says "required to be distributed currently." (Where the will or trust specifies it, and that is whether or not it is received by the beneficiaries).  Line 10 says "Other amounts paid, credited.....etc"  Note the comma!  If the income was paid (distributed), your software will compute DNI and the adjusted income flows through to the beneficiaries.  So do the return as it is supposed to be, and send the K-1's and then let the benes put this monkey on their back.  

3.  Yes, if the money was required, (or not required to be distributed --   as long as it was  -- ), it triggers reporting of the income.

Edited by jklcpa
moved reply to outside of quote box
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Please see my post above.  I did not type it in the correct place.  Haven't been on this forum in quite a while and stuff has changed.

 

jklcpa note -  I fixed it by moving the reply to outside of the quote box. 

Edited by jklcpa
see notation above
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