Estate Return Question

[neilbrink]

Being not real familiar yet with completing Estate returns, I have one that began at the client's death on 9-15 2007. From that date until the end of the year, the estate received a cashed out annuity, taxable income of 11,081 and 3 months of rent from an apartment netting $548. After the $600 exemption, the taxable income is $11,029. The tax on that amount is $2904. Does that sound right, and does the estate than pay that amount? Thanks. Neil

[jklcpa]

Is the estate filing a calendar year return, because estates can have a fiscal year? The estate can choose, as its year end, any month end date that is not more than 12 mos after dod. That means that this estate might have a year end as late as 8/31/08.

When the EIN was applied for, what year-end was specified?

[neilbrink]

Is the estate filing a calendar year return, because estates can have a fiscal year? The estate can choose, as its year end, any month end date that is not more than 12 mos after dod. That means that this estate might have a year end as late as 8/31/08.

When the EIN was applied for, what year-end was specified?

The Letter with the assigned EIN from the IRS indicated that the Form 1041 must be filed by 4-15-08, "based on the information from you or your representative." I assume that the attorney applied for the EIN.

Is it too late to change this to a fiscal year? It looks like the estate should be settled within the year.

[neilbrink]

It looks like we can file Form 1128 to change the tax year ending date. Anyone with any expericence with this? Thanks.

[michaelmars]

you can just file a fiscal year, selecting ayear on an ss 4 is not binding

no need for an 1128 in the first year

[neilbrink]

you can just file a fiscal year, selecting ayear on an ss 4 is not binding

no need for an 1128 in the first year

Thanks.

[OldJack]

I agree with MichaelMars but would add that I usually elect calender year to avoid all the confusion of a fiscal year. If the beneficiaries have not been determined and the estate is in probate you would have the estate pay the income tax per the 1041. Otherwise, the trustee could elect to pass the income to the beneficiaries for taxation which may be less tax.

[Linda Mathey]

If you elect a fiscal year and if the estate makes distributions to the benes during that year you can pass out income equal to the distribution to them on a k-1. They might be in a lower tax bracket than the estate.

If you elected a fiscal year you will file it on a 2007 form but the benes would pick up the income on their 2008 tax return. In addition, if you elected the fiscal year and the estate then made payments of expenses such as attorney fees, executor fees, etc. it would reduce or perhaps eliminate the taxable income.

You can elect any month end as long as the first year for the estate is 12 months or less.