Deceased Client

[ljwalters]

I I have a client that needs a final 1040 filed for her mother. Mother died 08/24/06.

Her only income was from a stock account. She lived with her daughter and owned nothing else.

Daughter (executor) closed the accounts and distributed the funds to the heirs within 30 days.

My question is, since the 1099B came in the moms name and social, how do I report the amount withdrawn after death.

A little more information: The schedule D on the moms account would show a loss, not affecting the tax out come. (She would not have had to file except for this one time large withdrawal.) .

Thanks in advance

Linda

[joelgilb]

You need to report it in the mom's final return as a nominee to match the IRS's system this will back out the income and then you can put it on the estate tax return or related trust if there is one.

Also, might not be a bad idea to attach a disclosure statement or allocation spreadsheet.

[joelgilb]

Wait, I misread your question.

If it is on a 1099B, is any of it earned before her death? For instance you don't say if this is a Mutual Fund 1099B or a sale of stock on a regular 1099b that would all be after death.

If all after her death, then back out the entire amount on her return with an explanation/disclosure. You probably should also cross reference the Estate return by diclosing the FEIN on mom's 1040.

If it is a mutual fund, any sales during her life go to her return only.

It has nothing to do with how much is withdrawn by the heirs it has to do with when and who earned the income on the sale.

Also don't forget the "Step-Up" in basis on any portion that was sold after her death.

[ljwalters]

The 1099 B has 2 withdrawals before death, which I have already put on her return and the closing withdrawal after death. The 1099Div would be all hers since they closed the account so quickly. The account that they emptied after death was a California tax free mutual fund. No tax consequence as far as interest goes to any return.

How do you nominee out 1099B income on the schedule D. The money was not put into her estate. The $209,000 was disbursed directly to the heirs (sister and brother), hence no estate return. Nothing to claim on an Estate Return. There was no income earned on the sale because her basis was higher than the distribution. It would be a step down in basis not a step up in basis.

Linda

[joelgilb]

How do you nominee out 1099B income on the schedule D. The money was not put into her estate. The $209,000 was disbursed directly to the heirs (sister and brother), hence no estate return. Nothing to claim on an Estate Return. There was no income earned on the sale because her basis was higher than the distribution. It would be a step down in basis not a step up in basis.

Linda

How did the account legally transfer direct to the kids without going to through mom's estate yet still get 1099b'd to her. Were they on the account with her? did they do a small estate affidavit? Probate?

Also, am I right that the 209,000 was a sale of the balance of the assets?

[ljwalters]

Yes one of the children were on the account with her and they transfered the funds into moms checking account (non interest berring) and the executor distributed the funds from there.

Linda

[joelgilb]

Yes one of the children were on the account with her and they transfered the funds into moms checking account (non interest berring) and the executor distributed the funds from there.

Linda

Ok. Note I updated my previous post as you were posting

Then you need to match the 1099B in the system with IRS on Mom's return.

Then you could show the kids interest as a second transaction as negative, backing out the profit and transaction "as attributable to other taxpayers". Since the child was on the "stock Account" "With Right of Survivorship" I don't quite understand why it was taken from the kid, then put into an mom's checking account and distributed by the executor. It should have gone straight into the kids accounts.

With what you have laid out though I have to presume that mom's checking account was also an account with kid on it, so stop me if I am wrong here. If that is the case it looks like the kid already owned a portion of the account and inherited the balance on death. therefore the tax implications should be on her return.

Was there a Probate? If so you may need to speak with the lawyer to get his/her take on ownership and who the sale belonged to. Find out if this really belonged in the Estate, or went outside the estate, due to ownership. It makes a difference in who should really put this on their return, Estate or Kids.

[ljwalters]

No there was no probate. What I did was include all the separate interies on the Schedule D, then add back in the loss and subtracted out the small gain, marking each with a statement NO. explaining. I hope this was right.

Thanks for your help Joelglib

Linda