Table of Contents
A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve.
In general, an executor and an administrator perform the same duties and have the same responsibilities.
For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term executor includes anyone in actual or constructive possession of any property of the decedent. It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country.
A personal representative for a decedent's estate can be an executor, administrator, or anyone in charge of the decedent's property, so the term personal representative will be used throughout this publication.
The primary duties of a personal representative are to collect all the decedent's assets, pay the creditors, and distribute the remaining assets to the heirs or other beneficiaries.
The personal representative also must perform the following duties.
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Apply for an employer identification number (EIN) for the estate.
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File any income tax return and the estate tax return when due.
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Pay the tax determined up to the date of discharge from duties.
Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent.
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All personal representatives must include in their gross income fees paid to them from an estate. If paid to a professional executor or administrator, self-employment tax also applies to such fees. For a nonprofessional executor or administrator (a person serving in such capacity in an isolated instance, such as a friend or relative of the decedent), self-employment tax only applies if a trade or business is included in the estate's assets, the executor actively participates in the business, and the fees are related to operation of the business.
The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. A surviving spouse, under certain circumstances, may have to file the returns for the decedent. See Joint Return, later.
The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Gross income usually is all income received by an individual in the form of money, goods, property, and services that is not tax-exempt. It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. In general, filing status depends on whether the decedent was considered single or married at the time of death. See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information.
A return should be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not required to be filed. Also, the decedent may be entitled to other credits that result in a refund. These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments.
Example.
Mr. Green died before filing his tax return. You were appointed the personal representative for Mr. Green's estate, and you file his Form 1040 showing a refund due. You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative.
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If the decedent was a nonresident alien who would have had to file Form 1040NR, U.S. Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. See the instructions for Form 1040NR for the filing requirements, due date, and where to file.
Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return.
A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. The filing status of the decedent in this instance is married filing a separate return.
For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information.
The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. The method of accounting regularly used by the decedent before death also determines the income includible on the final return. This section explains how some types of income are reported on the final return.
For more information about accounting methods, see Publication 538, Accounting Periods and Methods.
If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included in the final return.
Generally, under an accrual method of accounting, income is reported when earned.
If the decedent used an accrual method, only the income items normally accrued before death are included in the final return.
The death of a partner closes the partnership's tax year for that partner. Generally, it does not close the partnership's tax year for the remaining partners. The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year.
On the decedent's final return, include the decedent's distributive share of partnership items for the following periods.
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The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death).
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The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death.
Example.
Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. The partnership uses a tax year ending June 30. Mary died August 31, 2007, and her estate established its tax year through August 31.
The distributive share of partnership items based on the decedent's partnership interest is reported as follows.
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Final Return for the Decedent—January 1 through August 31, 2007, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2007, and (b) the partnership tax year beginning July 1, 2007, and ending August 31, 2007 (the date of death).
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Income Tax Return of the Estate—September 1, 2007, through August 31, 2008, includes XYZ partnership items for the period September 1, 2007, through June 30, 2008.
If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods.
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The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death).
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The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death.
Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year.
If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. For more information, see Publication 555, Community Property.
A Form 1099 should be received for the decedent reporting interest and dividends earned before death and included on the decedent's final return. A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts.
For example, a Form 1099-INT reporting interest payable to the decedent may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report.
See U.S. savings bonds acquired from decedent under Income in Respect of the Decedent, later, for information on savings bond interest that may have to be reported on the final return.
Note. If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. See General Instructions for Forms 1099, 1098, 5498, and W-2G for more information on filing Forms 1099.
The treatment of a health savings account (HSA), an Archer MSA, or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. The estate tax deduction, discussed later, does not apply to this amount.
If a beneficiary acquires the interest, see the discussion under Income in Respect of the Decedent, later. For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Account and Other Tax-Favored Health Plans.
Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. The estate tax deduction, discussed later, does not apply to this amount. If a beneficiary acquires the interest, see the discussion under Income in Respect of the Decedent, later.
The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education.
For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education.
Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider.
Generally, if the decedent received accelerated death benefits either on his or her own life or on the life of another person, those benefits are not included in the decedent's income. This exclusion applies only if the insured was a terminally or chronically ill individual. For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later.
Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. This section contains a detailed discussion of medical expenses because, under certain conditions, the tax treatment can be different for the medical expenses of the decedent. See Medical Expenses, later.
You can claim the decedent's personal exemption on the final income tax return. If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return.
If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. For information on the appropriate standard deduction, see the income tax return instructions or Publication 501.
Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. This includes expenses for the decedent, as well as for the decedent's spouse and dependents.
Example.
Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Mr. Brown died on June 1, 2007, after incurring $800 in medical expenses. Of that amount, $500 was incurred in 2006 and $300 was incurred in 2007. Richard itemized his deductions when he filed his 2006 income tax return. The personal representative of the estate paid the entire $800 liability in August 2007.
The personal representative may file an amended return (Form 1040X) for 2006 claiming the $500 medical expense as a deduction, subject to the 7.5% limit. The $300 of expenses incurred in 2007 can be deducted on the final income tax return if deductions are itemized, subject to the 7.5% limit. The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future.
A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. A net operating loss on the decedent's final income tax return can be carried back to prior years. (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts.) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return.
This section includes brief discussions of some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments that are reported on the final return of a decedent.
You can claim on the final income tax return any tax credits that applied to the decedent before death. Some of these credits are discussed next.
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Was a “qualified individual,” and
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Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits.
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Adopted an eligible child and paid qualified adoption expenses or
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Has a carryforward of an adoption credit from a prior year.
Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040.
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Net earnings from self-employment (excluding income described in (2)) were $400 or more.
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Wages from services performed as a church employee were $108.28 or more.
The word “DECEASED,” the decedent's name, and the date of death should be written across the top of the tax return. If filing a joint return, you should write the name and address of the decedent and the surviving spouse in the name and address space. If a joint return is not being filed, write the decedent's name in the name space and the personal representative's name and address in the remaining space.
The final income tax return is due at the same time the decedent's return would have been due had death not occurred. A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day.
The tax return must be prepared on a form for the year of death regardless of when during the year death occurred.
Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. A tax return for a decedent can be electronically filed. A personal representative may also obtain an income tax filing extension on behalf of a decedent.
Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut.
If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. For this purpose, a qualified hazardous duty area is treated as a combat zone.
If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded.
Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Also, if any tax was collected after the date of death, that amount will be credited or refunded.
The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. This is true even if death actually occurred earlier.
For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide.
The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred:
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While a U.S. employee, and
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In a military or terrorist action.
The forgiveness applies to the tax year in which death occurred and for any prior tax year in the period beginning with the year before the year in which the wounds or injury occurred.
Example.
The income tax liability of a civilian employee of the United States who died in 2006 because of wounds incurred while a U.S. employee in a terrorist attack that occurred in 1998 will be forgiven for 2006 and for all prior tax years in the period 1997 through 2005. Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later.
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Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies.
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Any military action involving the U.S. Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression.
The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years.
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The April 19, 1995, terrorist attack on the Alfred P. Murrah Federal Building (Oklahoma City).
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The September 11, 2001, terrorist attacks.
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The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002.
The Act also exempts from federal income tax the following types of income.
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Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack.
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Certain disability payments received in tax years ending after September 10, 2001 for injuries sustained in a terrorist attack.
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Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack.
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Payments from the September 11th Victim Compensation Fund 2001.
The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information.
For astronauts who died in the line of duty after December 31, 2002, legislation extended the tax relief available under The Victims of Terrorism Tax Relief Act of 2001 (the Act). The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut rather than September 11, 2001).
For more information on the Act, see Publication 3920.
If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. If any tax is still due, it will be canceled. The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later.
If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by:
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The amount of time served in the combat zone (including any period in which the individual was in missing status), plus
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The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus
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The next 180 days.
Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years.
This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation.
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If a U.S. individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Form W-2, Wage and Tax Statement, must accompany all returns.
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If a U.S. individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. You must file a separate Form 1040X for each year in question.
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P.O. Box 4053
Woburn, MA 01888 Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. On Forms 1040 and 1040X, write the same phrase on the line for total tax. If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. An attachment should include a computation of the decedent's tax liability and a computation of the amount that is to be forgiven. On joint returns, you must make an allocation of the tax as described later under Joint returns. If you cannot make a proper allocation, you should attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. You must attach Form 1310 to all returns and claims for refund. However, for exceptions to filing Form 1310, see Form 1310 under Refund, earlier. You must also attach proof of death that includes a statement that the individual was a U.S. employee on the date of injury and on the date of death and died as the result of a military or terrorist action. For military and civilian employees of the Department of Defense, attach DD Form 1300. For other U.S. civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. For other U.S. civilian employees killed overseas, attach a certification from the Department of State. If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information.
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Figure the income tax for which the decedent would have been liable if a separate return had been filed.
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Figure the income tax for which the spouse would have been liable if a separate return had been filed.
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Multiply the joint tax liability by a fraction. The numerator of the fraction is the amount in (1), above. The denominator of the fraction is the total of (1) and (2).
To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures.
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Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return.
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If a personal representative has been appointed, the personal representative must sign the return. If it is a joint return, the surviving spouse must also sign it.
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If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return.
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If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative.”
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To claim a refund for the decedent, do the following.
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If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund.
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If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative.) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310).
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If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310.
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This section contains information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate.
Survivors can qualify for certain benefits when filing their own income tax returns.
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You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly.
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You did not remarry before the end of the current tax year.
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You have a child, stepchild, or foster child who qualifies as your dependent for the tax year.
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You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences.
Example.
William Burns' wife died in 2005. Mr. Burns has not remarried and continued throughout 2006 and 2007 to maintain a home for himself and his dependent child. For 2005, he was entitled to file a joint return for himself and his deceased wife. For 2006 and 2007, he qualifies to file as a qualifying widower with dependent child. For later years, he may qualify to file as a head of household.
All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent.
Income in respect of a decedent must be included in the income of one of the following:
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The decedent's estate, if the estate receives it;
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The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it; or
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Any person to whom the estate properly distributes the right to receive it.
Example 1.
Frank Johnson owned and operated an apple orchard. He used the cash method of accounting. He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. The proceeds from the sale are income in respect of a decedent. When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. When Frank's widow collects the $2,000, she must include that amount in her return. It is not reported on the final return of the decedent or on the return of the estate.
Example 2.
Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. The amount accrued from the sale of the apples would be included on his final return. Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid.
Example 3.
On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. His adjusted basis in the tractor was $2,000. Mr. High died on February 15, before receiving payment. The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived.
Example 4.
Cathy O'Neil was entitled to a large salary payment at the date of her death. The amount was to be paid in five annual installments. The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. The payments are income in respect of a decedent. None of the payments were includible on Cathy's final return. The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them.
Example 5.
You inherited the right to receive renewal commissions on life insurance sold by your father before his death. You inherited the right from your mother, who acquired it by bequest from your father. Your mother died before she received all the commissions she had the right to receive, so you received the rest. The commissions are income in respect of a decedent. None of these commissions were includible in your father's final return. The commissions received by your mother were included in her income. The commissions you received are not includible in your mother's income, even on her final return. You must include them in your income.
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The amount you receive for the right or
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The fair market value of the right you transfer.
This section explains and provides examples of some specific types of income in respect of a decedent.
Example.
Alonzo Roberts, who used the cash method of accounting, leased part of his farm for a 1-year period beginning March 1. The rental was one-third of the crop, payable in cash when the crop share is sold at the direction of Roberts. Roberts died on June 30 and was alive during 122 days of the rental period. Seven months later, Roberts' personal representative ordered the crop to be sold and was paid $1,500. Of the $1,500, 122/365, or $501, is income in respect of a decedent. The balance of the $1,500 received by the estate, $999, is income to the estate.
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www.treasurydirect.gov. If the bonds transferred because of death were owned by a cash method individual who had not chosen to report the interest each year and had purchased the bonds entirely with personal funds, interest earned before death must be reported in one of the following ways.
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The person (executor, administrator, etc.) who must file the final income tax return of the decedent can elect to include in it all of the interest earned on the bonds before the decedent's death. The transferee (estate or beneficiary) then includes in its return only the interest earned after the date of death.
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If the election in (1), above, was not made, the interest earned to the date of death is income in respect of the decedent and is not included in the decedent's final return. In this case, all of the interest earned before and after the decedent's death is income to the transferee (estate or beneficiary). A transferee who uses the cash method of accounting and who has not chosen to report the interest annually may defer reporting any of it until the bonds are cashed or the date of maturity, whichever is earlier. In the year the interest is reported, the transferee may claim a deduction for any federal estate tax paid that arose because of the part of interest (if any) included in the decedent's estate.
Example 1.
Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. He had bought the bond for $500 and had not chosen to report the increase in value each year. At the date of death, interest of $94 had accrued on the bond, and its value of $594 at date of death was included in your uncle's estate. Your uncle's personal representative did not choose to include the $94 accrued interest in the decedent's final income tax return. You are a cash method taxpayer and do not choose to report the increase in value each year as it is earned. Assuming you cash it when it reaches maturity value of $1,000, you would report $500 interest income (the difference between maturity value of $1,000 and the original cost of $500) in that year. You also are entitled to claim, in that year, a deduction for any federal estate tax resulting from the inclusion in your uncle's estate of the $94 increase in value.
Example 2.
If, in Example 1, the personal representative had chosen to include the $94 interest earned on the bond before death in the final income tax return of your uncle, you would report $406 ($500 - $94) as interest when you cashed the bond at maturity. This $406 represents the interest earned after your uncle's death and was not included in his estate, so no deduction for federal estate tax is allowable for this amount.
Example 3.
Your uncle died owning series HH bonds that he acquired in exchange for series EE bonds. You were the beneficiary on these bonds. Your uncle used the cash method of accounting and had not chosen to report the increase in redemption price of the series EE bonds each year as it accrued. Your uncle's personal representative made no election to include any interest earned before death in the decedent's final return. Your income in respect of the decedent is the sum of the unreported increase in value of the series EE bonds, which constituted part of the amount paid for series HH bonds, and the interest, if any, payable on the series HH bonds but not received as of the date of the decedent's death.
Example 1.
At the time of his death, Greg owned a traditional IRA. All of the contributions by Greg to the IRA had been deductible contributions. Greg's nephew, Mark, was the sole beneficiary of the IRA. The entire balance of the IRA, including income accruing before and after Greg's death, was distributed to Mark in a lump sum. Mark must include the total amount received in his income. The portion of the lump-sum distribution that equals the amount of the balance in the IRA at Greg's death, including the income earned before death, is income in respect of the decedent. Mark may take a deduction for any federal estate taxes that were paid on that portion.
Example 2.
Assume the same facts as in Example 1, except that some of Greg's contributions to the IRA had been nondeductible contributions. To determine the amount to include in income, Mark must subtract the total nondeductible contributions made by Greg from the total amount received (including the income that was earned in the IRA both before and after Greg's death). Income in respect of a decedent is the total amount included in income less the income earned after Greg's death.
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Items such as business expenses, income-producing expenses, interest, and taxes, for which the decedent was liable but that are not properly allowable as deductions on the decedent's final income tax return will be allowed as a deduction to one of the following when paid:
-
The estate or
-
The person who acquired an interest in the decedent's property (subject to such obligations) because of the decedent's death, if the estate was not liable for the obligation.
Similar treatment is given to the foreign tax credit. A beneficiary who must pay a foreign tax on income in respect of a decedent will be entitled to claim the foreign tax credit.
Income that a decedent had a right to receive is included in the decedent's gross estate and is subject to estate tax. This income in respect of a decedent is also taxed when received by the recipient (estate or beneficiary). However, an income tax deduction is allowed to the recipient for the estate tax paid on the income.
The deduction for estate tax can be claimed only for the same tax year in which the income in respect of a decedent must be included in the recipient's income. (This also is true for income in respect of a prior decedent.)
Individuals can claim this deduction only as an itemized deduction on line 28 of Schedule A (Form 1040). This deduction is not subject to the 2% limit on miscellaneous itemized deductions. Estates can claim the deduction on the line provided for the deduction on Form 1041. For the alternative minimum tax computation, the deduction is not included in the itemized deductions that are an adjustment to taxable income.
If income in respect of a decedent is capital gain income, you must reduce the gain, but not below zero, by any deduction for estate tax paid on such gain. This applies in figuring the following:
-
The maximum tax on net capital gain,
-
The 50% exclusion for gain on small business stock, and
-
The limitation on capital losses.
To figure a recipient's estate tax deduction, determine:
-
The estate tax that qualifies for the deduction and
-
The recipient's part of the deductible tax.
Example 1.
Jack Sage used the cash method of accounting. At the time of his death, he was entitled to receive $12,000 from clients for his services and he had accrued bond interest of $8,000, for a total income in respect of a decedent of $20,000. He also owed $5,000 for business expenses for which his estate is liable. The income and expenses are reported on Jack's estate tax return.
The tax on Jack's estate is $9,460 after credits. The net value of the items included as income in respect of the decedent is $15,000 ($20,000 - $5,000). The estate tax determined without including the $15,000 in the taxable estate is $4,840, after credits. The estate tax that qualifies for the deduction is $4,620 ($9,460 - $4,840).
Example 2.
As the beneficiary of Jack's estate (Example 1), you collect the $12,000 accounts receivable from his clients. You will include the $12,000 in your income in the tax year you receive it. If you itemize your deductions in that tax year, you can claim an estate tax deduction of $2,772 figured as follows:
Value included in your income | X | Estate tax qualifying for deduction |
Total value of income in respect of decedent |
$12,000 |
X |
$4,620 |
= |
$2,772 |
|
$20,000 |
If the amount you collected for the accounts receivable was more than $12,000, you would still claim $2,772 as an estate tax deduction because only the $12,000 actually reported on the estate tax return can be used in the above computation. However, if you collected less than the $12,000 reported on the estate tax return, use the smaller amount to figure the estate tax deduction.
Property received as a gift, bequest, or inheritance is not included in your income. However, if property you receive in this manner later produces income, such as interest, dividends, or rents, that income is taxable to you. The income from property donated to a trust that is paid, credited, or distributed to you is taxable income to you. If the gift, bequest, or inheritance is the income from property, that income is taxable to you.
If you receive property from a decedent's estate in satisfaction of your right to the income of the estate, it is treated as a bequest or inheritance of income from property. See Distributions to Beneficiaries From an Estate, later.
The proceeds from a decedent's life insurance policy paid by reason of his or her death generally are excluded from income. The exclusion applies to any beneficiary, whether a family member or other individual, a corporation, or a partnership.
-
An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to a loss of functional capacity, or
-
An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
Example.
The face amount of the policy is $200,000, and as beneficiary you choose to receive annual installments of $12,000. The insurer's settlement option guarantees you this amount for 20 years based on a guaranteed rate of interest. It also provides that extra interest may be credited to the principal balance according to the insurer's earnings. The excludable part of each guaranteed installment is $10,000 ($200,000 ÷ 20 years). The balance of each guaranteed installment, $2,000, is interest income to you. The full amount of any additional payment for interest is income to you.
Example.
As beneficiary, you choose to receive the $50,000 proceeds from a life insurance contract under a life-income-with-
cash-refund option. You are guaranteed $2,700 a year for the rest of your life (which is estimated by use of mortality tables
to be 25 years from
the insured's death). The actuarial value of the refund feature is $9,000. The amount held by the insurance company, reduced
by the value of the
guarantee, is $41,000 ($50,000 - $9,000) and the excludable part of each installment representing a return of principal is
$1,640 ($41,000
÷ 25). The remaining $1,060 ($2,700 - $1,640) is interest income to you. If you should die before receiving the entire $50,000,
the
refund payable to the refund beneficiary is not taxable.
Your basis in property you inherit from a decedent is generally one of the following:
-
The FMV of the property at the date of the individual's death;
-
The FMV on the alternate valuation date (discussed in the instructions for Form 706), if so elected by the personal representative for the estate;
-
The value under the special-use valuation method for real property used in farming or other closely held business (see Special-use valuation, later), if so elected by the personal representative; or
-
The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement (discussed in the instructions for Form 706).
Example.
Fred and Anne Maple (brother and sister) owned, as joint tenants with right of survivorship, rental property they purchased for $60,000. Anne paid $15,000 of the purchase price and Fred paid $45,000. Under local law, each had a half interest in the income from the property. When Fred died, the FMV of the property was $100,000. Depreciation deductions allowed before Fred's death were $20,000. Anne's basis in the property is $80,000 figured as follows:
Anne's original basis | $15,000 | |
Interest acquired from Fred (¾ of $100,000) | 75,000 | $90,000 |
Minus: ½ of $20,000 depreciation | 10,000 | |
Anne's basis | $80,000 |
Example.
Dan and Diane Gilbert owned, as tenants by the entirety, rental property they purchased for $60,000. Dan paid $15,000 of the purchase price and Diane paid $45,000. Under local law, each had a half interest in the income from the property. When Diane died, the FMV of the property was $100,000. Depreciation deductions allowed before Diane's death were $20,000. Dan's basis in the property is $70,000 figured as follows:
One-half of cost basis (½ of
$60,000) |
$30,000 | |
Interest acquired from Diane (½ of $100,000) | 50,000 | $80,000 |
Minus: ½ of $20,000 depreciation | 10,000 | |
Dan's basis | $70,000 |
-
The first computation is for your original basis in the property.
-
The second computation is for the inherited part of the property.
-
The claimed value of the property was based on a qualified appraisal made by a qualified appraiser and
-
In addition to obtaining such appraisal, the taxpayer made a good faith investigation of the value of the contributed property.
-
Donated property for which a deduction of more than $5,000 is claimed and
-
Returns filed after August 17, 2006.
-
A specific bequest (unless it must be distributed in more than three installments); or
-
Real property, the title to which passes directly to you under local law.
Some other items of income that you, as a survivor or beneficiary, may receive are discussed below. Lump-sum payments you receive as the surviving spouse or beneficiary of a deceased employee may represent:
-
Accrued salary payments;
-
Distributions from employee profit-sharing, pension, annuity, and stock bonus plans; or
-
Other items that should be treated separately for tax purposes.
The treatment of these lump-sum payments depends on what the payments represent.
-
The death was caused by the intentional misconduct of the officer or by the officer's intention to cause such death.
-
The officer was voluntarily intoxicated at the time of death.
-
The officer was performing his or her duties in a grossly negligent manner at the time of death.
An estate is a taxable entity separate from the decedent and comes into being with the death of the individual. It exists until the final distribution of its assets to the heirs and other beneficiaries. The income earned by the assets during this period must be reported by the estate under the conditions described in this publication. The tax generally is figured in the same manner and on the same basis as for individuals, with certain differences in the computation of deductions and credits, as explained later.
The estate's income, like an individual's income, must be reported annually on either a calendar or fiscal year basis. As the personal representative, you choose the estate's accounting period when you file its first Form 1041. The estate's first tax year can be any period that ends on the last day of a month and does not exceed 12 months.
Once you choose the tax year, you generally cannot change it without IRS approval. Also, on the first income tax return, you must choose the accounting method (cash, accrual, or other) you will use to report the estate's income. Once you have used a method, you ordinarily cannot change it without IRS approval. For a more complete discussion of accounting periods and methods, see Publication 538.
Every domestic estate with gross income of $600 or more during a tax year must file a Form 1041. If one or more of the beneficiaries of the domestic estate are nonresident alien individuals, the personal representative must file Form 1041, even if the gross income of the estate is less than $600.
A fiduciary for a nonresident alien estate with U.S. source income, including any income that is effectively connected with the conduct of a trade or business in the United States, must file Form 1040NR, U.S. Nonresident Alien Income Tax Return, as the income tax return of the estate.
A nonresident alien who was a resident of Puerto Rico, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands for the entire tax year will, for this purpose, be treated as a resident alien of the United States.
As personal representative, you must file a separate Schedule K-1 (Form 1041), or an acceptable substitute (described below), for each beneficiary. File these schedules with Form 1041.
You must show each beneficiary's taxpayer identification number. A $50 penalty is charged for each failure to provide the identifying number of each beneficiary unless reasonable cause is established for not providing it. When you assume your duties as the personal representative, you must ask each beneficiary to give you a taxpayer identification number (TIN). A nonresident alien beneficiary that gives you a withholding certificate generally must provide you with a TIN (see Publication 515). A TIN is not required for an executor or administrator of the estate unless that person is also a beneficiary.
As personal representative, you must also furnish a Schedule K-1 (Form 1041), or a substitute, to the beneficiary by the date on which the Form 1041 is filed. Failure to provide this payee statement can result in a penalty of $50 for each failure. This penalty also applies if you omit information or include incorrect information on the payee statement.
You do not need prior approval for a substitute Schedule K-1 (Form 1041) that is an exact copy of the official schedule or that follows the specifications in Publication 1167, General Rules and Specifications for Substitute Forms and Schedules. You must have prior approval for any other substitute Schedule K-1 (Form 1041).
If you have to file an amended Form 1041, use a copy of the form for the appropriate year and check the Amended return box. Complete the entire return, correct the appropriate lines with the new information, and refigure the tax liability. On an attached sheet, explain the reason for the changes and identify the lines and amounts changed.
If the amended return results in a change to income, or a change in distribution of any income or other information provided to a beneficiary, you must file an amended Schedule K-1 (Form 1041) and give a copy to each beneficiary. Check the “Amended K-1” box at the top of Schedule K-1.
Even though you may not have to file an income tax return for the estate, you may have to file Form 1099-DIV, Form 1099-INT, or Form 1099-MISC if you receive the income as a nominee or middleman for another person. For more information on filing information returns, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.
You will not have to file information returns for the estate if the estate is the owner of record and you file an income tax return for the estate on Form 1041 giving the name, address, and identifying number of each actual owner and furnish a completed Schedule K-1 (Form 1041) to each actual owner.
If property is located outside the state in which the decedent's home was located, more than one personal representative may be designated by the will or appointed by the court. The person designated or appointed to administer the estate in the state of the decedent's permanent home is called the “domiciliary representative.” The person designated or appointed to administer property in a state other than that of the decedent's permanent home is called an “ancillary representative.”
-
The name and address of the domiciliary representative,
-
The amount of gross income received by the ancillary representative, and
-
The deductions claimed against that income (including any income properly paid or credited by the ancillary representative to a beneficiary).
You do not have to file a copy of the decedent's will unless requested by the IRS. If requested, you must attach a statement to it indicating the provisions that, in your opinion, determine how much of the estate's income is taxable to the estate or to the beneficiaries. You should also attach a statement signed by you under penalties of perjury that the will is a true and complete copy.
The estate's taxable income generally is figured the same way as an individual's income, except as explained in the following discussions.
Gross income of an estate consists of all items of income received or accrued during the tax year. It includes dividends, interest, rents, royalties, gain from the sale of property, and income from business, partnerships, trusts, and any other sources. For a discussion of income from dividends, interest, and other investment income as well as gains and losses from the sale of investment property, see Publication 550. For a discussion of gains and losses from the sale of other property, including business property, see Publication 544, Sales and Other Dispositions of Assets.
If, as the personal representative, your duties include the operation of the decedent's business, see Publication 334. That publication provides general information about the tax laws that apply to a sole proprietorship.
-
The distribution satisfies the beneficiary's right to receive either:
-
A specific dollar amount (whether payable in cash, in unspecified property, or in both); or
-
A specific property other than the property distributed.
-
-
You choose to recognize the gain or loss on the estate's income tax return (section 643(e)(3) election).
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In figuring taxable income, an estate is generally allowed the same deductions as an individual. Special rules, however, apply to some deductions for an estate. This section includes discussions of those deductions affected by the special rules.
An estate is allowed an exemption deduction of $600 in figuring its taxable income. No exemption for dependents is allowed to an estate. Even though the first return of an estate may be for a period of less than 12 months, the exemption is $600. If, however, the estate was given permission to change its accounting period, the exemption is $50 for each month of the short year.
An estate qualifies for a deduction for amounts of gross income paid or permanently set aside for qualified charitable organizations. The adjusted gross income limits for individuals do not apply. However, to be deductible by an estate, the contribution must be specifically provided for in the decedent's will. If there is no will, or if the will makes no provision for the payment to a charitable organization, then a deduction will not be allowed even though all of the beneficiaries may agree to the gift.
You cannot deduct any contribution from income not included in the estate's gross income. If the will specifically provides that the contributions are to be paid out of the estate's gross income, the contributions are fully deductible. However, if the will contains no specific provisions, the contributions are considered to have been paid and are deductible in the same proportion as the gross income bears to the total of all classes (taxable and nontaxable) of income.
You cannot deduct a qualified conservation easement granted after the date of death and before the due date of the estate tax return. A contribution deduction is allowed to the estate for estate tax purposes.
For more information about contributions, see Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property.
Generally, an estate can claim a deduction for a loss it sustains on the sale of property. This includes a loss from the sale of property (other than stock) to a personal representative of the estate, unless that person is a beneficiary of the estate.
For a discussion of an estate's recognized loss on a distribution of property in kind to a beneficiary, see Income To Include, earlier.
Expenses of administering an estate can be deducted either from the gross estate in figuring the federal estate tax on Form 706 or from the estate's gross income in figuring the estate's income tax on Form 1041. However, these expenses cannot be claimed for both estate tax and income tax purposes. In most cases, this rule also applies to expenses incurred in the sale of property by an estate (not as a dealer).
To prevent a double deduction, amounts otherwise allowable in figuring the decedent's taxable estate for federal estate tax on Form 706 will not be allowed as a deduction in figuring the income tax of the estate or of any other person unless the personal representative files a statement, in duplicate, that the items of expense, as listed in the statement, have not been claimed as deductions for federal estate tax purposes and that all rights to claim such deductions are waived. One deduction or part of a deduction can be claimed for income tax purposes if the appropriate statement is filed, while another deduction or part is claimed for estate tax purposes. Claiming a deduction in figuring the estate income tax is not prevented when the same deduction is claimed on the estate tax return so long as the estate tax deduction is not finally allowed and the preceding statement is filed. The statement can be filed with the income tax return or at any time before the expiration of the statute of limitations that applies to the tax year for which the deduction is sought. This waiver procedure also applies to casualty losses incurred during administration of the estate.
The allowable deductions for depreciation and depletion that accrue after the decedent's death must be apportioned between the estate and the beneficiaries, depending on the income of the estate that is allocable to each.
Example.
In 2007, the decedent's estate realized $3,000 of business income during the administration of the estate. The personal representative distributed $1,000 of the income to the decedent's son, Ned, and $2,000 to another son, Bill. The allowable depreciation on the business property is $300. Ned can take a deduction of $100 [($1,000 ÷ $3,000) × $300], and Bill can take a deduction of $200 [($2,000 ÷ $3,000) × $300].
An estate is allowed a deduction for the tax year for any income that must be distributed currently and for other amounts that are properly paid, credited, or required to be distributed to beneficiaries. The deduction is limited to the distributable net income of the estate.
For special rules that apply in figuring the estate's distribution deduction, see Bequest under Distributions to Beneficiaries From an Estate, later.
-
The gain is allocated to income in the accounts of the estate or by notice to the beneficiaries under the terms of the will or by local law.
-
The gain is allocated to the corpus or principal of the estate and is actually distributed to the beneficiaries during the tax year.
-
The gain is used, under either the terms of the will or the practice of the personal representative, to determine the amount that is distributed or must be distributed.
-
Charitable contributions are made out of capital gains.
-
The expenses that were not allowed in computing the estate's taxable income because they were attributable to tax-exempt interest (see Expenses allocable to tax-
exempt income under Administration Expenses, earlier). -
The part of the tax-exempt interest deemed to have been used to make a charitable contribution. See Contributions, earlier.
-
The estate has more than one beneficiary.
-
The economic interest of a beneficiary does not affect and is not affected by the economic interest of another beneficiary.
Example.
Patrick's will directs you, the executor, to distribute ABC Corporation stock and all dividends from that stock to his son, Edward, and the residue of the estate to his son, Michael. The estate has two separate shares consisting of the dividends on the stock left to Edward and the residue of the estate left to Michael. The distribution of the ABC Corporation stock qualifies as a bequest, so it is not a separate share.
If any distributions, other than the ABC Corporation stock, are made during the year to either Edward or Michael, you must determine the distributable net income for each separate share. The distributable net income for Edward's separate share includes only the dividends attributable to the ABC Corporation stock. The distributable net income for Michael's separate share includes all other income.
Example 1.
Frank's will directs you, the executor, to divide the residue of his estate (valued at $900,000) equally between his two children, Judy and Ann. Under the will, you must fund Judy's share first with the proceeds of Frank's traditional IRA. The $90,000 balance in the IRA was distributed to the estate during the year. This amount is included in the estate's gross income as income in respect of a decedent and is allocated to the corpus of the estate. The estate has two separate shares, one for the benefit of Judy and one for the benefit of Ann. If any distributions are made to either Judy or Ann during the year, then, for purposes of determining the distributable net income for each separate share, the $90,000 of income in respect of a decedent must be allocated only to Judy's share.
Example 2.
Assume the same facts as in Example 1, except that you must fund Judy's share first with DEF Corporation stock valued at $300,000, rather than the IRA proceeds. To determine the distributable net income for each separate share, the $90,000 of income in respect of a decedent must be allocated between the two shares to the extent they could potentially be funded with that income. The maximum amount of Judy's share that could be funded with that income is $150,000 ($450,000 value of share less $300,000 funded with stock). The maximum amount of Ann's share that could be funded is $450,000. Based on the relative values, Judy's distributable net income includes $22,500 ($150,000/$600,000 X $90,000) of the income in respect of a decedent and Ann's distributable net income includes $67,500 ($450,000/$600,000 X $90,000).
If the personal representative has discretion as to when the income is distributed, the deduction is allowed only in the year of distribution.
The personal representative can elect to treat distributions paid or credited within 65 days after the close of the estate's tax year as having been paid or credited on the last day of that tax year. The election is made by completing line 6 in the “Other Information” section of Form 1041. If a tax return is not required, the election is made on a statement filed with the IRS office where the return would have been filed. The election is irrevocable for the tax year and is only effective for the year of the election.
-
A specific bequest (unless it must be distributed in more than three installments) or
-
Real property, the title to which passes directly to the beneficiary under local law.
Example.
An estate has distributable net income of $2,000, consisting of $1,000 of taxable interest and $1,000 of rental income. Distributions to the beneficiary total $1,500. The distribution deduction consists of $750 of taxable interest and $750 of rental income, unless the will or local law provides a different allocation.
Example.
An estate has distributable net income of $2,000, consisting of $1,000 of dividends and $1,000 of tax-exempt interest. Distributions to the beneficiary total $1,500. Except for this rule, the distribution deduction would be $1,500 ($750 of dividends and $750 of tax-exempt interest). However, as the result of this rule, the distribution deduction is limited to $750, because no deduction is allowed for the tax-exempt interest distributed.
Example.
The decedent's will provides that the estate must distribute currently all of its income to a beneficiary. For administrative convenience, the personal representative did not make a distribution of a part of the income for the tax year until the first month of the next tax year. The amount must be deducted by the estate in the first tax year, and must be included in the income of the beneficiary in that year. This amount cannot be deducted again by the estate in the following year when it is paid to the beneficiary, nor must the beneficiary again include the amount in income in that year.
No deduction can be taken for funeral expenses or medical and dental expenses on the estate's income tax return, Form 1041.
This section includes brief discussions of some of the tax credits, types of taxes that may be owed, and estimated tax payments reported on the estate's income tax return, Form 1041.
Estates generally are allowed some of the same tax credits that are allowed to individuals. The credits generally are allocated between the estate and the beneficiaries. However, estates are not allowed the credit for the elderly or the disabled, the child tax credit, or the earned income credit discussed earlier under Final Return for Decedent.
An estate cannot use the Tax Table that applies to individuals. The tax rate schedule to use is in the instructions for Form 1041.
The estate's income tax liability must be paid in full when the return is filed. You may have to pay estimated tax, however, as explained below.
-
90% of the tax to be shown on the 2008 return or
-
100% of the tax shown on the 2007 return (assuming the return covered all 12 months).
In the top space of the name and address area of Form 1041, enter the exact name of the estate used to apply for the estate's employer identification number. In the remaining spaces, enter the name and address of the personal representative (fiduciary) of the estate.
When you file Form 1041 (or Form 1040NR if it applies) depends on whether you choose a calendar year or a fiscal year as the estate's accounting period. Where you file Form 1041 depends on where you, as the personal representative, live or have your principal office.
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215, U.S.A.
If you are the beneficiary of an estate that must distribute all its income currently, you must report your share of the distributable net income whether or not you have actually received it.
If you are the beneficiary of an estate that does not have to distribute all its income currently, you must report all income that must be distributed to you (whether or not actually distributed) plus all other amounts paid, credited, or required to be distributed to you, up to your share of distributable net income. As explained earlier in Distributions Deduction under Income Tax Return of an Estate—Form 1041, for an amount to be currently distributable income, there must be a specific requirement for current distribution either under local law or the terms of the decedent's will. If there is no such requirement, the income is reportable only when distributed.
If the estate has more than one beneficiary, the separate shares rule discussed earlier under Distributions Deduction may have to be used to determine the distributable net income allocable to each beneficiary. The beneficiaries in the examples shown next do not meet the requirements of the separate shares rule.
Beneficiaries who are entitled to receive currently distributable income generally must include in gross income the entire amount due them. However, if the currently distributable income is more than the estate's distributable net income figured without deducting charitable contributions, each beneficiary must include in gross income a ratable part of the distributable net income.
Example.
Under the terms of the will of Gerald Peters, $5,000 a year is to be paid to his widow and $2,500 a year is to be paid to his daughter out of the estate's income during the period of administration. There are no charitable contributions. For the year, the estate's distributable net income is only $6,000. The distributable net income is less than the currently distributable income, so the widow must include in her gross income only $4,000 [($5,000 ÷ $7,500) × $6,000], and the daughter must include in her gross income only $2,000 [($2,500 ÷ $7,500) × $6,000].
Example 1.
Henry Frank's will provides that $500 be paid to the local Community Chest out of income each year. It also provides that $2,000 a year is currently distributable out of income to his brother, Fred, and an annuity of $3,000 is to be paid to his sister, Sharon, out of income or corpus. Capital gains are allocable to corpus, but all expenses are to be charged against income. Last year, the estate had income of $6,000 and expenses of $3,000. The personal representative paid the $500 to the Community Chest and made the distributions to Fred and Sharon as required by the will.
The estate's distributable net income (figured before the charitable contribution) is $3,000. The currently distributable income totals $2,500 ($2,000 to Fred and $500 to Sharon). The income available for Sharon's annuity is only $500 because the will requires that the charitable contribution be paid out of current income. The $2,500 treated as distributed currently is less than the $3,000 distributable net income (before the contribution), so Fred must include $2,000 in his gross income and Sharon must include $500 in her gross income.
Example 2.
Assume the same facts as in Example 1 except that the estate has an additional $1,000 of administration expenses, commissions, etc., that are chargeable to corpus. The estate's distributable net income (figured before the charitable contribution) is now $2,000 ($3,000 - $1,000 additional expense). The amount treated as currently distributable income is still $2,500 ($2,000 to Fred and $500 to Sharon). The $2,500, treated as distributed currently, is more than the $2,000 distributable net income, so Fred has to include only $1,600 [($2,000 ÷ $2,500) × $2,000] in his gross income and Sharon has to include only $400 [($500 ÷ $2,500) × $2,000] in her gross income. Fred and Sharon are beneficiaries of amounts that must be distributed currently, so they do not benefit from the reduction of distributable net income by the charitable contribution deduction.
Any other amount paid, credited, or required to be distributed to the beneficiary for the tax year also must be included in the beneficiary's gross income. Such an amount is in addition to those amounts that must be distributed currently, as discussed earlier. It does not include gifts or bequests of specific sums of money or specific property if such sums are paid in three or fewer installments. However, amounts that can be paid only out of income are not excluded under this rule. If the sum of the income that must be distributed currently and other amounts paid, credited, or required to be distributed exceeds distributable net income, these other amounts are included in the beneficiary's gross income only to the extent distributable net income exceeds the income that must be distributed currently. If there is more than one beneficiary, each will include in gross income only a pro rata share of such amounts.
The personal representative can elect to treat distributions paid or credited by the estate within 65 days after the close of the estate's tax year as having been paid or credited on the last day of that tax year.
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Distributions made at the discretion of the personal representative.
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Distributions required by the terms of the will upon the happening of a specific event.
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Annuities that must be paid in any event, but only out of corpus (principal).
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Distributions of property in kind as defined earlier in Distributions Deduction under Income Tax Return of an Estate—Form 1041.
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Distributions required for the support of the decedent's surviving spouse or other dependent for a limited period, but only out of corpus (principal).
Example.
The terms of Michael Scott's will require the distribution of $2,500 of income annually to his wife, Susan. If any income remains, it may be accumulated or distributed to his two children, Joe and Alice, in amounts at the discretion of the personal representative. The personal representative also may invade the corpus (principal) for the benefit of Scott's wife and children.
Last year, the estate had income of $6,000 after deduction of all expenses. Its distributable net income is also $6,000. The personal representative distributed the required $2,500 of income to Susan. In addition, the personal representative distributed $1,500 each to Joe and Alice and an additional $2,000 to Susan.
Susan includes in her gross income the $2,500 of currently distributable income. The other amounts distributed totaled $5,000 ($1,500 + $1,500 + $2,000) and are includible in the income of Susan, Joe, and Alice to the extent of $3,500 (distributable net income of $6,000 minus currently distributable income to Susan of $2,500). Susan will include an additional $1,400 [($2,000 ÷ $5,000) × $3,500] in her gross income. Joe and Alice each will include $1,050 [($1,500 ÷ $5,000) × $3,500] in their gross incomes.
If an estate, under the terms of a will, discharges a legal obligation of a beneficiary, the discharge is included in that beneficiary's income as either currently distributable income or other amount paid. This does not apply to the discharge of a beneficiary's obligation to pay alimony or separate maintenance.
The beneficiary's legal obligations include a legal obligation of support, for example, of a minor child. Local law determines a legal obligation of support.
An amount distributed to a beneficiary for inclusion in gross income retains the same character for the beneficiary that it had for the estate.
Example 1.
An estate has distributable net income of $3,000, consisting of $1,800 in rents and $1,200 in taxable interest. There is no provision in the will or local law for the allocation of income. The personal representative distributes $1,500 each to Jim and Ted, beneficiaries under their father's will. Each will be treated as having received $900 in rents and $600 of taxable interest.
Example 2.
Assume in Example 1 that the will provides for the payment of the taxable interest to Jim and the rental income to Ted and that the personal representative distributed the income under those provisions. Jim is treated as having received $1,200 in taxable interest and Ted is treated as having received $1,800 of rental income.
Example.
The will of Harry Thomas requires a current distribution out of income of $3,000 a year to his wife, Betty, during the administration of the estate. The will also provides that the personal representative, using discretion, may distribute the balance of the current earnings either to Harry's son, Tim, or to one or more of certain designated charities. Last year, the estate's income consisted of $4,000 of taxable interest and $1,000 of tax-exempt interest. There were no deductible expenses. The personal representative distributed the $3,000 to Betty, made a contribution of $2,500 to the local heart association, and paid $1,500 to Tim.
The distributable net income for determining the character of the distribution to Betty is $3,000. The charitable contribution deduction to be taken into account for this computation is $2,000 (the estate's income ($5,000) minus the currently distributable income ($3,000)). The $2,000 charitable contribution deduction must be allocated: $1,600 [($4,000 ÷ $5,000) × $2,000] to taxable interest and $400 [($1,000 ÷ $5,000) × $2,000] to tax-exempt interest. Betty is considered to have received $2,400 ($4,000 - $1,600) of taxable interest and $600 ($1,000 - $400) of tax-exempt interest. She must include the $2,400 in her gross income. She must report the $600 of tax-exempt interest, but it is not taxable.
To determine the amount to be included in Tim's gross income, however, take into account the entire charitable contribution deduction. The currently distributable income is greater than the estate's income after taking into account the charitable contribution deduction, so none of the amount paid to Tim must be included in his gross income for the year.
How you report your income from the estate depends on the character of the income in the hands of the estate. When you report the income depends on whether it represents amounts credited or required to be distributed to you or other amounts.
A bequest is the act of giving or leaving property to another through the last will and testament. Generally, any distribution of income (or property in kind) to a beneficiary is an allowable deduction to the estate and is includible in the beneficiary's gross income to the extent of the estate's distributable net income. However, a distribution will not be an allowable deduction to the estate and will not be includible in the beneficiary's gross income if the distribution meets the following requirements.
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It is required by the terms of the will.
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It is a gift or bequest of a specific sum of money or property.
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It is paid out in three or fewer installments under the terms of the will.
Example 1.
Dave Rogers' will provided that his son, Ed, receive Dave's interest in the Rogers-Jones partnership. Dave's daughter, Marie, would receive a sum of money equal to the value of the partnership interest given to Ed. The bequest to Ed is a gift of a specific property ascertainable at the date of Dave Rogers' death. The bequest of a specific sum of money to Marie is determinable on the same date.
Example 2.
Mike Jenkins' will provided that his widow, Helen, would receive money or property to be selected by the personal representative equal in value to half of his adjusted gross estate. The identity of the property and the money in the bequest are dependent on the personal representative's discretion and the payment of administration expenses and other charges, which are not determinable at the date of Mike's death. As a result, the provision is not a bequest of a specific sum of money or of specific property, and any distribution under that provision is a deduction for the estate and income to the beneficiary (to the extent of the estate's distributable net income). The fact that the bequest will be specific sometime before distribution is immaterial. It is not ascertainable by the terms of the will as of the date of death.
The termination of an estate generally is marked by the end of the period of administration and by the distribution of the assets to the beneficiaries under the terms of the will or under the laws of succession of the state if there is no will. These beneficiaries may or may not be the same persons as the beneficiaries of the estate's income.
The period of administration is the time actually required by the personal representative to assemble all of the decedent's assets, pay all the expenses and obligations, and distribute the assets to the beneficiaries. This may be longer or shorter than the time provided by local law for the administration of estates.
If the estate has unused loss carryovers or excess deductions for its last tax year, they are allowed to those beneficiaries who succeed to the estate's property. See Successor beneficiary, later.
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A beneficiary of a fraction of the decedent's net estate after payment of debts, expenses, and specific bequests.
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A nonresiduary beneficiary, when the estate is unable to satisfy the bequest in full.
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A surviving spouse receiving a fractional share of the estate in fee under a statutory right of election when the losses or deductions are taken into account in determining the share. However, such a beneficiary does not include a recipient of a dower or curtesy, or a beneficiary who receives any income from the estate from which the loss or excess deduction is carried over.
Example.
Under his father's will, Arthur is to receive $20,000. The remainder of the estate is to be divided equally between his brothers, Mark and Tom. After all expenses are paid, the estate has sufficient funds to pay Arthur only $15,000, with nothing to Mark and Tom. In the estate's last tax year, there are excess deductions of $5,000 and $10,000 of unused loss carryovers. The total of the excess deductions and unused loss carryovers is $15,000 and Arthur is considered a successor beneficiary to the extent of $5,000, so he is entitled to one-third of the unused loss carryover and one-third of the excess deductions. His brothers may divide the other two-thirds of the excess deductions and the unused loss carryovers between them.
When an estate terminates, the personal representative can choose to transfer to the beneficiaries the credit for all or part of the estate's estimated tax payments for the last tax year. To make this choice, the personal representative must complete Form 1041-T, Allocation of Estimated Tax Payments to Beneficiaries, and file it either separately or with the estate's final Form 1041. The Form 1041-T must be filed by the 65th day after the close of the estate's tax year.
The estimated tax allocated to each beneficiary is treated as paid or credited to the beneficiary on the last day of the estate's final tax year and must be reported in box 13, Schedule K-1 (Form 1041) using code A. If the estate terminated in 2007, this amount is treated as a payment of 2007 estimated tax made by the beneficiary on January 15, 2008.
Generally, for estate tax purposes, you must file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. If death occurs in 2007, Form 706 must be filed if the gross estate is more than $2,000,000.
If you must file Form 706, it has to be done within 9 months after the date of the decedent's death unless you receive an extension of time to file. Use Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, to apply for an automatic 6-month extension of time.
The following is an example of a typical situation. All figures on the filled-in forms have been rounded to the nearest whole dollar.
On April 9, 2007, your father, John R. Smith, died at the age of 62. He had not resided in a community property state. His will named you to serve as his executor (personal representative). Except for specific bequests to your mother, Mary, of your parents' home and your father's automobile and a bequest of $5,000 to his church, your father's will named your mother and his brother as beneficiaries.
After the court has approved your appointment as the executor, you should obtain an employer identification number for the estate. (See Duties under Personal Representatives, earlier.) Next, you use Form 56 to notify the Internal Revenue Service that you have been appointed executor of your father's estate.
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His checking account balance was $2,550 and his savings account balance was $53,650.
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Your father inherited your parents' home from his parents on March 5, 1979. At that time it was worth $42,000, but was appraised at the time of your father's death at $150,000. The home was free of existing debts (or mortgages) at the time of his death.
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Your father owned 500 shares of ABC Company stock that had cost him $10.20 a share in 1983. The stock had a mean selling price (midpoint between highest and lowest selling price) of $25 a share on the day he died. He also owned 500 shares of XYZ Company stock that had cost him $30 a share in 1988. The stock had a mean selling price on the date of death of $22.
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The appraiser valued your father's automobile at $6,300 and the household effects at $18,500.
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Your father owned a coin collection and a stamp collection. The face value of the coins in the collection was only $600, but the appraiser valued it at $2,800. The stamp collection was valued at $3,500.
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Your father's employer sent a check to your mother for $11,082 ($12,000 - $918 for social security and Medicare taxes), representing unpaid salary and payment for accrued vacation time. The statement that came with the check indicated that no amount was withheld for income tax. The check was made out to the estate, so your mother gave you the check.
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The Easy Life Insurance Company gave your mother a check for $275,000 because she was the beneficiary of his life insurance policy.
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Your father was the owner of several series EE U.S. savings bonds on which he named your mother as co-owner. Your father purchased the bonds during the past several years. The cost of these bonds totaled $2,500. After referring to the appropriate table of redemption values (see U.S. savings bonds acquired from decedent, earlier), you determine that interest of $840 had accrued on the bonds at the date of your father's death. You must include the redemption value of these bonds at date of death, $3,340, in your father's gross estate.
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On July 1, 1993, your parents purchased a house for $90,000. They have held the property for rental purposes continuously since its purchase. Your mother paid one-third of the purchase price, or $30,000, and your father paid $60,000. They owned the property, however, as joint tenants with right of survivorship. An appraiser valued the property at $120,000. You include $60,000, one-half of the value, in your father's gross estate because your parents owned the property as joint tenants with right of survivorship and they were the only joint tenants.
From the papers in your father's files, you determine that the $11,000 paid to him by his employer (as shown on the Form W-2), rental income, and interest are the only items of income he received between January 1 and the date of his death. You will have to file an income tax return for him for the period during which he lived. (You determine that he timely filed his 2006 income tax return before he died.) The final return is not due until April 15, 2008, the same date it would have been due had your father lived during all of 2007.
The check representing unpaid salary and earned but unused vacation time was not paid to your father before he died, so the $12,000 is not reported as income on his final return. It is reported on the income tax return for the estate (Form 1041) for 2007. The only taxable income to be reported for your father will be the $11,000 salary (as shown on the Form W-2), the $1,900 interest, and his portion of the rental income that he received in 2007.
Your father was a cash basis taxpayer and did not report the interest accrued on the series EE U.S. savings bonds on prior tax returns that he filed jointly with your mother. As the personal representative of your father's estate, you choose to report the interest earned on these bonds before your father's death ($840) on the final income tax return.
The rental property was leased the entire year of 2007 for $1,000 per month. Under local law, your parents (as joint tenants) each had a half interest in the income from the property. Your father's will, however, stipulates that the entire rental income is to be paid directly to your mother. None of the rental income will be reported on the income tax return for the estate. Instead, your mother will report all the rental income and expenses on Form 1040. Checking the records and prior tax returns of your parents, you find that they previously elected to use the alternative depreciation system (ADS) with the mid-month convention. Under ADS, the rental house is depreciated using the straight-line method over a 40-year recovery period. They allocated $15,000 of the cost to the land (which is never depreciable) and $75,000 to the rental house. Salvage value was disregarded for the depreciation computation. Before 2007, $23,359 had been allowed as depreciation. (For information on ADS, see Publication 946.)
Health insurance | $4,250 |
State income tax paid | 891 |
Real estate tax on home | 1,600 |
Contributions to church | 3,830 |
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For the period before your father's death, depreciate the property using the same method, basis, and life used by your parents in previous years. They used the mid-month convention, so the amount deductible for three and a half months is $547. (This brings the total depreciation to $23,906 ($23,359 + $547) at the time of your father's death.)
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For the period after your father's death, you must make two computations.
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Your mother's cost basis ($45,000) minus one-half of the amount allocated to the land ($7,500) is her depreciable basis ($37,500) for half of the property. She continues to use the same life and depreciation method as was originally used for the property. The amount deductible for the remaining eight and a half months is $664.
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The other half of the property must be depreciated using a depreciation method that is acceptable for property placed in service in 2007. You chose to use ADS with the mid-month convention. The value included in the estate ($60,000) less the value allocable to the land ($10,000) is the depreciable basis ($50,000) for this half of the property. The amount deductible for this half of the property is $886 ($50,000 × .01771). See chapter 4 and Table A-13 in Publication 946.
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Income: | ||
Salary (per Form W-2) | $11,000 | |
Interest income | 3,140 | |
Net rental income | 8,183 | |
Adjusted gross income | $22,323 | |
Minus: Itemized deductions | 10,708 | |
Balance | $11,615 | |
Minus: Exemptions (2) | 6,800 | |
Taxable Income | $4,815 | |
Income tax from tax table | $483 | |
Minus: Tax withheld | $845 | |
Refund of taxes | $362 |
The illustrations of Form 1041 and the related schedules for 2007 appear near the end of this publication. These illustrations are based on the information that follows.
Gross income: | ||
Income in respect of a decedent | $12,000 | |
Dividends | 750 | |
Interest | 2,250 | |
Capital gain | 200 | |
$15,200 | ||
Minus: Deductions and income distribution | ||
Real estate taxes | $2,250 | |
Attorney's fee | 325 | |
Exemption | 600 | |
Distribution | 2,000 | 5,175 |
Taxable income | $10,025 |
Gross income for 2008: | |
Dividends | $500 |
Interest | 350 |
$850 | |
Less deductions: | |
Administration expense | $1,650 |
Loss | ($800) |
Page 1 of Form 1040 for John R. Smith
Page 2 of Form 1040 for John R. Smith
Schedule A (Form 1040) for John R. Smith
Schedule B (Form 1040) for John R. Smith
Schedule E (Form 1040) for John R. Smith
Form 4562 for John R. Smith
Form 1041 for the estate of John R. Smith
Page 2 of Form 1041 for the estate of John R. Smith
Page 3 of Form 1041 for the estate of John R. Smith
Page 4 of Form 1041 for the estate of John R. Smith
Page 1 of Schedule D (Form 1041) for the estate of John R. Smith
Schedule D, page 2, Form 1041
Schedule K-1 (Form 1041) for the estate of John R. Smith
Schedule D Tax Worksheet
Complete this worksheet only if:
Exception: Do not use this worksheet to figure the estate's or trust's tax if line 14a, column (2), or line 15, column (2), of Schedule D or Form 1041, line 22 is zero or less; instead, see the instructions for Schedule G, line 1a of Form 1041. |
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1. | Enter the estate's or trust's taxable income from Form 1041, line 22 | 1. | 10,025 | |||||||||||
2. | Enter qualified dividends, if any, from Form 1041, line 2b(2) | 2. | 629 | |||||||||||
3. | Enter the amount from Form 4952, line 4g | 3. | ||||||||||||
4. | Enter the amount from Form 4952, line 4e* | 4. | ||||||||||||
5. | Subtract line 4 from line 3. If zero or less, enter -0- | 5. | -0- | |||||||||||
6. | Subtract line 5 from line 2. If zero or less, enter -0- | 6. | 629 | |||||||||||
7. | Enter the smaller of line 14a, col. (2) or line 15, col. (2) from Sch. D | 7. | 200 | |||||||||||
8. | Enter the smaller of line 3 or line 4 | 8. | -0- | |||||||||||
9. | Subtract line 8 from line 7. If zero or less, enter -0- | 9. | 200 | |||||||||||
10. | Add lines 6 and 9 | 10. | 829 | |||||||||||
11. | Add lines 14b, column (2) and 14c, column (2) from Schedule D | 11. | 200 | |||||||||||
12. | Enter the smaller of line 9 or line 11 | 12. | 200 | |||||||||||
13. | Subtract line 12 from line 10. | 13. | 629 | |||||||||||
14. | Subtract line 13 from line 1. If zero or less, enter -0-. | 14. | 9,396 | |||||||||||
15. | Enter the smaller of line 1 or $2,150 | 15. | 2,150 | |||||||||||
16. | Enter the smaller of line 14 or line 15 | 16. | 2,150 | |||||||||||
17. | Subtract line 10 from line 1. If zero or less, enter -0- | 17. | 9,196 | |||||||||||
18. | Enter the larger of line 16 or line 17 | ▶ | 18. | 9,196 | ||||||||||
If lines 15 and 16 are the same, skip lines 19 through 20 and go to line 21.
Otherwise,
go to line 19. |
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19. | Subtract line 16 from line 15 | ▶ | 19. | |||||||||||
20. | Multiply line 19 by 5% (.05) | 20. | ||||||||||||
If lines 1 and 15 are the same, skip lines 21 through 33 and go to line 34. Otherwise, go to line 21. | ||||||||||||||
21. | Enter the smaller of line 1 or line 13 | 21. | 629 | |||||||||||
22. | Enter the amount from line 19 (if line 19 is blank, enter -0-) | 22. | -0- | |||||||||||
23. | Subtract line 22 from line 21. If zero or less, enter -0- | ▶ | 23. | 629 | ||||||||||
24. | Multiply line 23 by 15% (.15) | 24. | 94 | |||||||||||
If Schedule D, line 14b, column (2) is zero or blank, skip lines 25 through 30 and go to
line 31. Otherwise, go to
line 25. |
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25. | Enter the smaller of line 9 (above) or line 14b, col. (2) (from Schedule D) | 25. | ||||||||||||
26. | Add lines 10 and 18 | 26. | ||||||||||||
27. | Enter the amount from line 1 above | 27. | ||||||||||||
28. | Subtract line 27 from line 26. If zero or less, enter -0- | 28. | ||||||||||||
29. | Subtract line 28 from line 25. If zero or less, enter -0- | ▶ | 29. | |||||||||||
30. | Multiply line 29 by 25% (.25) | 30. | ||||||||||||
If Schedule D, line 14c, column (2) is zero or blank, skip lines 31 through 33 and go to line 34. Otherwise, go to line 31. | ||||||||||||||
31. | Add lines 18, 19, 23, and 29 | 31. | 9,825 | |||||||||||
32. | Subtract line 31 from line 1 | 32. | 200 | |||||||||||
33. | Multiply line 32 by 28% (.28) | 33 | 56 | |||||||||||
34. | Figure the tax on the amount on line 18. Use the 2007 Tax Rate Schedule on page 27 | 34. | 2,287 | |||||||||||
35. | Add lines 20, 24, 30, 33, and 34 | 35. | 2,437 | |||||||||||
36. | Figure the tax on the amount on line 1. Use 2007 Tax Rate Schedule on page 27 | 36. | 2,561 | |||||||||||
37. | Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 35 or line 36 here and on line 1a of Sch. G, Form 1041 | 37. | 2,437 | |||||||||||
*If applicable, enter instead the smaller amount entered on the dotted line next to line 4e of Form 4952. |
Table A. Checklist of Forms and Due Dates For Executor, Administrator, or Personal Representative
Form No. | Title | Due Date** | ||
SS-4 | Application for Employer Identification Number | As soon as possible. The identification number must be included in returns, statements, and other documents. | ||
56 | Notice Concerning Fiduciary Relationship | As soon as all necessary information is available.* | ||
706 | United States Estate (and Generation-Skipping Transfer) Tax Return | 9 months after date of decedent's death. | ||
706-A | United States Additional Estate Tax Return | 6 months after cessation or disposition of special-use valuation property. | ||
706-GS(D) | Generation-Skipping Transfer Tax Return for Distributions | See form instructions. | ||
706-GS(D-1) | Notification of Distribution From a Generation-Skipping Trust | See form instructions. | ||
706-GS(T) | Generation-Skipping Transfer Tax Return for Terminations | See form instructions. | ||
706-NA | United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States | 9 months after date of decedent's death. | ||
712 | Life Insurance Statement | Part I to be filed with estate tax return. | ||
1040 | U.S. Individual Income Tax Return | Generally, April 15th of the year after death.** | ||
1040NR | U.S. Nonresident Alien Income Tax Return | See form instructions. | ||
1041 | U.S. Income Tax Return for Estates and Trusts | 15th day of 4th month after end of estate's tax year.** | ||
1041-A | U.S. Information Return—Trust Accumulation of Charitable Amounts | April 15th.** | ||
1041-T | Allocation of Estimated Tax Payments to Beneficiaries | 65th day after end of estate's tax year. | ||
1041-ES | Estimated Income Tax for Estates and Trusts | Generally, April 15, June 15, Sept. 15, and Jan. 15 for calendar-year filers.** | ||
1042 | Annual Withholding Tax Return for U.S. Source Income of Foreign Persons | March 15th.** | ||
1042-S | Foreign Person's U.S. Source Income Subject to Withholding | March 15th.** | ||
1310 | Statement of Person Claiming Refund Due a Deceased Taxpayer | See form instructions. | ||
4768 | Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes | See form instructions. | ||
4810 | Request for Prompt Assessment Under Internal Revenue Code Section 6501(d) | As soon as possible after filing Form 1040 or Form 1041. | ||
4868 | Application for Automatic Extension of Time To File U.S. Individual Income Tax Return | April 15th.** | ||
5495 | Request for Discharge from Personal Liability Under Internal Revenue Code Section 2204 or 6905 | See form instructions. | ||
8300 | Report of Cash Payments Over $10,000 Received in a Trade or Business | 15th day after the date of the transaction. | ||
8822 | Change of Address | As soon as the address is changed. | ||
* A personal representative must report the termination of the estate, in writing, to the
Internal Revenue Service. Form 56 can be used for this purpose.
** If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. |
Table B. Worksheet To Reconcile Amounts Reported in Name of Decedent on Information Returns (Forms W-2, 1099-INT, 1099-DIV, etc.)
Name of Decedent
|
Date of Death | Decedent's Social Security Number | ||
Name of Personal Representative, Executor, or
Administrator |
Estate's Employer Identification Number (If Any) | |||
Source
(list each payer) |
A
Enter total amount shown on information return |
B
Enter part of amount in column A reportable on decedent's final return |
C
Amount reportable on estate's or beneficiary's income tax return (column A minus column B) |
D
Part of column C that is income in respect of a decedent |
1. Wages | ||||
2. Interest income | ||||
3. Dividends | ||||
4. State income tax refund | ||||
5. Capital gains | ||||
6. Pension income | ||||
7. Rents, royalties | ||||
8. Taxes withheld* | ||||
9. Other items, such as social security, business and farm income or loss, unemployment compensation, etc. | ||||
* List each withholding agent (employer, etc.) |
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
www.improveirs.org.
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E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
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Check the status of your 2007 refund. Click on Where's My Refund. Wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2007 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.
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Download forms, instructions, and publications.
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Order IRS products online.
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Research your tax questions online.
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Search publications online by topic or keyword.
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View Internal Revenue Bulletins (IRBs) published in the last few years.
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Figure your withholding allowances using the withholding calculator online at
www.irs.gov/individuals. -
Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant.
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Sign up to receive local and national tax news by email.
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Get information on starting and operating a small business.
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Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
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Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
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Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
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TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
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TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
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Refund information. To check the status of your 2007 refund, call 1-800-829-4477 and press 1 for automated refund information or call 1-800-829-1954. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2007 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random telephone calls. Another is to ask some callers to complete a short survey at the end of the call.
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Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
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Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary, but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
National Distribution Center
P.O. Box 8903
Bloomington, IL 61702-8903
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Bonus: Historical Tax Products DVD — Ships with the final release.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
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The CD/DVD which is released twice during the year.
- The first release will ship the beginning of January 2008.
- The final release will ship the beginning of March 2008.
Purchase the CD/DVD from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $35 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the CD/DVD for $35 (plus a $5 handling fee). Price is subject to change.
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Helpful information, such as how to prepare a business plan, find financing for your business, and much more.
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All the business tax forms, instructions, and publications needed to successfully manage a business.
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Tax law changes.
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Tax Map: an electronic research tool and finding aid.
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Web links to various government agencies, business associations, and IRS organizations.
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“Rate the Product” survey—your opportunity to suggest changes for future editions.
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A site map of the CD to help you navigate the pages of the CD with ease.
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An interactive “Teens in Biz” module that gives practical tips for teens about starting their own business, creating a business plan, and filing taxes.
An updated version of this CD is available each year in early April. You can get a free copy by calling 1-800-829-3676 or by visiting www.irs.gov/smallbiz.
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