Client's mother dies in 2007

[Janitor Bob]

Client's mother had farm rental income and expenses (have been doing her return for a few years)...mother dies in 2007...now it is time to do client's taxes and taxes for deceased mother...Expenses (very little) are in mother's name...but income (1099-MISC) is in client's name and SSN...how do I report? This does not seem right.....if deceased mother reports income as she always has, it is almost all non-taxable...but if reported on son's return it is all taxable!

Please help...I have never dealt with this particular situation before.

[PapaJoe]

is the 1099 in son's name only because he is the heir? If this is the case, I would nominee the allocable portion to mother's 1040 for the period she was alive and report the rest on the son's return.

[GERALD]

When did she die, and when was the income received? Were they JTWROS? If so, the farm and the right to income passed to the son at DOD, except for income earned prior to her death. Depending on dates and circumstances, a 1041 may be required as well. If it was reported to him in error, then you could nominee it out to her return.

[Janitor Bob]

When did she die, and when was the income received? Were they JTWROS? If so, the farm and the right to income passed to the son at DOD, except for income earned prior to her death. Depending on dates and circumstances, a 1041 may be required as well. If it was reported to him in error, then you could nominee it out to her return.

client's mother dies on 06/05/07 and farm rental income (1099-MISC) was reported in his name and SSN only because he was the heir....How do I "nominee" part or all to her return?

[Janitor Bob]

client's mother dies on 06/05/07 and farm rental income (1099-MISC) was reported in his name and SSN only because he was the heir....How do I "nominee" part or all to her return?

What is JTWROS? How do I know if an estate return (1041) is needed. I just assumed that the attorneyd took care of all this last year.

....As you can tell...this entire area is new to me

[GERALD]

Joint Tenants With Right of Survivorship. You really need to talk to the attorney and see what is going on. Don't count on them to automatically do a 1041. Many don't touch them. If one was prepared for 2007, there should be a K-1, or he may be electing a fiscal year, or determined a 1041 is not necessary. You need to find out.

Nomineeing- two ways. Prepare a 1099 from son to mother(yes it would be late), or report 1099 income on son's return (probably 4835) and under other deductions list " less reported on return of ABC, SSN xxx-xx-xxxx".

1041 necessary? You have to know what assets, if any, are still in the estate, and what income, if any, they are generating.

Gerald

[jklcpa]

It sounds like the income on that 1099 should be split between the mother's return & ??. The amount after mother's DOD goes to either the estate or the son, depending on circumstances. Definitely you have to talk with the attorney. Depending on the split of this 1099, the estate might have to file a 1041, required when income is over $600

If mom died on 6/5/07, the estate could have a fiscal year ending as late as 5/31/08. And in that case, if a 1041 is required its due date isn't until 9/15/08. And then that due date can be extended another 6 mos to 3/15/09.

This one's prob needing an extension and paper filing too. Sorry JB

[Janitor Bob]

It sounds like the income on that 1099 should be split between the mother's return & ??. The amount after mother's DOD goes to either the estate or the son, depending on circumstances. Definitely you have to talk with the attorney. Depending on the split of this 1099, the estate might have to file a 1041, required when income is over $600

If mom died on 6/5/07, the estate could have a fiscal year ending as late as 5/31/08. And in that case, if a 1041 is required its due date isn't until 9/15/08. And then that due date can be extended another 6 mos to 3/15/09.

This one's prob needing an extension and paper filing too. Sorry JB

Thanks....How can I file son's taxes if they may be getting a K1 from the estate when the 1041 is complete...and that not complete until 09/15?

[jklcpa]

That's why you prob need an extension. But you need to talk with the attorney to find out what's going on with the estate and where this 1099 income is being reported.

[BulldogTom]

two choices - extend or amend

You can assume that the 1041 is not required and his return will be correct as prepared. File it and wait to see if you need to amend.

You can assume that there will be a 1041 and a K-1 for him, extend the return and file it when the K-1 arrives.

You know what happens when we ASSUME.

I would personally extend, because it seems there will be some type of reporting coming from the estate. This is just a suspicion without all the fact. When a lawyer is involved in the closing of an estate, I worry about the taxes. Not all lawyers are tax law challenged (is that the PC way to say it?), but many are. I would wait and do it right once.

Good luck.

Tom

Lodi, CA

[Lion EA]

a K-1 from a fiscal year estate would go on the son's return for the year the K-1 ENDS, so you don't have to wait for a 2008 K-1 to prepare his 2007 individual return. listen to all the other stuff, though, and talk to the lawyer...

[jklcpa]

That's why I suggested it prob needs an extension. Easier to do it right the first time rather than amending.

Also, estates can file a short year & be a calendar year for filing. Then the due date of the 1041 if needed would be 4/15. If that's the case then the estate would need an extension too. But that's not likely because the attorney would want as much time as possible to drag it out. An estate can choose any month end to end it's reporting year as long as the estate's year isn't > 12 mos. That's why I initially said that it's fiscal year could be as late as 5/31/08.

JB, you have lots of questions for the attorney. I agree with Bulldog Tom about the attorneys & taxes. Hopefully the attorney has the estate set up with the IRS & has gotten an EIN & the year-end date has been decided. At least that info will help you decide on how to proceed.

[BulldogTom]

a K-1 from a fiscal year estate would go on the son's return for the year the K-1 ENDS, so you don't have to wait for a 2008 K-1 to prepare his 2007 individual return. listen to all the other stuff, though, and talk to the lawyer...

Agreed, but JB doesn't know when the estate year ended. Safer to extend HIS client, the kid, and ask the questions of the attorney in about 8 days and 15 hours.

Tom

Lodi, CA

[GERALD]

NO, NO, NO!!!!! NINE days and 15 hours. April 16 is national "Hair of the dog that bit you" day!!!!!

[Linda Mathey]

The K-1 (if a 1041 is required) would be a 2007 K-1. However if we assume that the 1041 would have a year-end after 12/31/07 then any income would not be reported until the 2008 tax return.

Listen to the others and ask your client for permission to contact the attorney. Find out from him whether a 1041 will be filed and if yes, who will be responsible for filing it. Find out what year-end he selected for the estate.

With such a short time frame, extend his return while you figure it all out.

[Janitor Bob]

The K-1 (if a 1041 is required) would be a 2007 K-1. However if we assume that the 1041 would have a year-end after 12/31/07 then any income would not be reported until the 2008 tax return.

Listen to the others and ask your client for permission to contact the attorney. Find out from him whether a 1041 will be filed and if yes, who will be responsible for filing it. Find out what year-end he selected for the estate.

With such a short time frame, extend his return while you figure it all out.

I received the following in an e-mail from the attorney....."Just file Alice's taxes as if she were still alive."

WHAT THE HELL?!

[BulldogTom]

Is this the same attorney who wrote the divorce decree that specifies MFJ for divorced couple?

I know lawyers think they are special, but now they are trying to raise the dead.

Tom

Lodi, CA

[kcjenkins]

I received the following in an e-mail from the attorney....."Just file Alice's taxes as if she were still alive."

WHAT THE HELL?!

Well, actually that is somewhat helpful, JB, because it tells you that the attorney is totally tax-challenged. It's good to know that up front, because now you know not to rely on anything he says about the taxes. Extend your client's return, and Mom's, and after the 18th, you can start reading up on IRD, 1041s, etc. This is a good chance to learn something new, help your client, and maybe even teach a lawyer something! It would be nice if it were that simple, but it's not.

On the bright side, Son gets a step up in basis on any equipment he inherited from Mom, and gets to start brand new depreciation on that basis. Don't forget, that includes wells, fences, barns, storage sheds, etc. If they were jointly owned by Mom and Son, then he gets a step up on Mom's half. All good reasons to extend, so that you have time to get him the maximum tax benefit from his loss of his Mom.