How to handle this for 2013?

[artp]

Taxpayer, cash basis farmer got married in 2012;passed away suddenly in Feb 2013 from aggressive cancer. No income taxes due till 04/15/13 (extended due to IRS exception this year)-more than 2/3 of the gross income was from farming. Taxpayer had $200,000 of grain held over from 2012 harvest that will be sold in 2013. Widow was not active in farming operations.

Several questions arise:

1 Is the unsold grain considered income in respect of decedent? Or an asset in the estate that would get a step-up in basis and thus little or no gain to be reported when sold in 2013?

Per my reading of TTB 21-8 the unsold grain should not be considered IRD.

Assuming that the grain is included in the estate at FMV at date of death, the basis would be stepped-up to date of death value.

2 Could the 2013 return be filed and estimated tax paid under the estimated tax payment rules for farmers? ie no payments due till the return is filed 03/01/14?

Since the taxpayer qualified for the estimated tax penalty exception for 2012, he would automatically qualfiy for 2013 TTB 15-4 on the MFJ return.

Those are my thoughts. Anyone have offer comments or different opinions? Please respond. Thanks.

[kcjenkins]

1, Not IRD, but be careful to document FMV at DOD, as that could vary either way by the time it is actually sold. Grain prices can be volatile.

2. Yes, if the couple qualifies for the farmer rule in 2013, which it sounds like they will, no need to estimate tax as long as it is filed in time next March. UNLESS there are estate issues that make it wise to estimate taxes before making distributions. You know what I mean. Sometimes if there are multiple bene's, there is pressure on the executor to hurry and distribute funds. In cases like that, it is often wise to pay the estimated tax first, just to be safe. Tax law is not always the only thing we should consider.

[artp]

Thanks, KC.

Yes this could be a complicated estate as the son is disputing the will and there are other "family" issues involved with the step Mom. My main concern was the potentially large income from the grain sales should it not get a basis adjustment through the estate.