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Deceased Client


Christian

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I am preparing the final return Form 1040 and a fiduciary return Form 1041 for a deceased client. I've got to indicate on Schedule B Form 1040 a division of dividends received prior to and those received after death. It's been ages since I have prepared one of these but if memory serves me I can indicate the payer and then in parenthesis indicate the total reported dividends subtracting out those reported on the Form 1041 indicating the estate EIN as the recipient of post death dividends. All dividends are reported under the client's social for 2017. I would assume 🤔 this will work ok. Your input is appreciated. Also, dividends received on the date of death I am reporting as received after death. I hope I am not assuming too much. 

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I believe everything you state is correct.  Often, interest/dividends during the estate probate period are so scant that for the sake of simplicity I will report everything under the deceased SS #.  This is technically incorrect, but even the IRS would prefer this to a 1041 with a paltry amount insufficient to exceed the estate tax deduction ($600).

Assuming the income is significant enough to desire correct treatment.  You are correct, especially in reporting estate-taxable amounts as nominee dividends on the deceased's return.  It's difficult to get the banks to change FEINs in a timely fashion, much easier to report dividends as nominee-received.  Some banks go overboard, and insist on a new FEIN even if no effect.

Obvious difference:  The amounts received after death will be taxable to the beneficiaries in the estate year received (if taxation is not erased by the estate tax deduction), whereas if no separation is made, they will be taxed to the deceased in the calendar year reported.

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I always have an estate accounting from the lawyer's office showing the income to the estate and just have to back out any amounts from the 1040 that I know are included on the estate accounting. Sometimes that's not possible because you don't have all the monthly statements and often the amounts are too small to be concerned with. And sometimes the lawyer doesn't split it accurately at the date of death and the chips just fall where they may.

If the final 1040 has zero tax due to high medical expenses, I don't get too worked up about it, either way.

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