Estate Tax Year

[Christian]

A client died on January 13, 2019. I get a bit confused about estate tax years but as I read it her year would be January through December 31, 2019. Is this correct ? Any income received after January 13th would fall into her estate as well ? I really dislike a 1041 and do very few of them.

[Sara EA]

You are correct.  In this case you will have a calendar year because a fiscal year can end in any month but December (because December ends a calendar year).  All income after the date of death goes on the 1041.  This should be an easy one because, provided the executor moves the assets to the estate EIN promptly, you won't have to weed through bank and brokerage statements dividing up what was earned before and after death.  It's likely you won't have to do a final 1040 either, unless that person made a heck of a lot in the final 13 days.

[Christian]

Thanks so much for your info. She does not need to file a final 1040 as her income level is below the requirement. However, after death a brokerage account received some $3,900 in dividends which means I'll need to prepare the 1041. Now comes the real head scratcher. She passed her entire estate to one son by TOD. I am sure his POA lapsed with her death. What do I do if he simply moved the assets over TOD and there is no executor. Who will sign the return ? 

[Lion EA]

What does her will say? What does her state law say? Court appointed representative?

[Sara EA]

This was a TOD account (transfer on death, not six months later), so the income is her son's and should be reported on his return.  He can ask the brokerage to correct the 1099, or just put it on his return.  You can file a 1041 and pass it through, which has the advantage of deducting attorney/probate/accountant fees.  If you don't the IRS computer may send a notice, but the son will just have to show that the income was reported on his return.  I'd let him decide if he wants the 1041 or not.  It goes on his return one way or the other, the IRS only cares that the one who got the money reports it, and he can avoid the extra tax prep fee.  If there is no court appointed rep, the son can sign as personal representative.

[Christian]

I guess he would sign as personal representative. I am always concerned the Service will kick it back with no court document. If he merely adds the dividends to his return how will you square his mother's social. Some sort of additional entry on his Schedule B such as reported under and indicate his mother's name and social security number ? That appears to me a simple solution if it works. Of course, I am his taxman as well. He could get the broker to issue an amended 1099 but they will likely balk since his name was not on the account until late March.

[DANRVAN]

2 hours ago, Christian said:

how will you square his mother's social

As Sara pointed out, it is most likely deceased mom will be under the filing threshold.  In that case there would not be any concern about a cp 2000.  But if there was a concern you could report it and a back it out on mom's final Schedule B.

Also agree with Sara that if the dividends are the only income from estate there is no need for a 1041.