1041 EXPENCE

[TAXMAN]

Filing a form 1041, the estate determined when filing for extension it owed a large state income tax (20K).The estate payed this amount with the extension. Question is can the estate deduct this on current form 1041 or must wait until they file the next  form 1041? I believe they will have to wait. The estate(form 1041) filed a fed ext and payed 300k. Most of this tax is due to the fact very low distributions were made. What do you think?

[Lion EA]

The estate is most likely on the cash basis for tax purposes, so a 2020 state tax payment will be a 2020 deduction when the 1041 is filed in 2021. Or, a payment during the estate's tax year. (There could be exceptions, such as for an accrual based business being run by the estate, but you didn't mention anything like that in your OP.) Someone who prepares more 1041s will jump on here.

[Medlin Software, Dennis]

Fortunately, it sounds as if the estate has enough funds on hand to make the estimated payment, which might lead to a conclusion the estimated payment is not too much of a hardship...

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Trying to close two probates right now.  One depends on the other (one is an heir of the other).  The real property involved is in escrow, but the buyer is said to have covid.  The perform date has passed, with no one getting response from the buyer (only the buyer's brother), so I have had to send a 3 day perform notice to see if that will shake things loose.  I am actually fine if the buyer needs more time, and have a substantial non refundable deposit, but business is business and I need to hear something soon or I have to move on to the backup buyer before (if I have not already) lost the backup.  Both estates have no cash on hand, so I have had to fund out of pocket.  With the mess of selling the real property, I will be petitioning for extraordinary payment for selling the property, which my attorney says is not an issue, but in all their years, I am the first client to do so.

[DANRVAN]

If this is the first return filed for the estate, then you have the option to choose the accrual method.

The accrual method option and ability to chose a short first year are two important planning tools for an estate to match deductions with income.

6 hours ago, TAXMAN said:

Most of this tax is due to the fact very low distributions were made.

Are they past the window for the 65 day deemed distribution rule?

[TAXMAN]

Long past that. I looked for that also. However it play to their favor if they close out in 2021. Excess deductions still deductible above the line still alive?