S-corp partner died last year. How to allocate.

[Max W]

Clinets were a married couple and he died in middle of last year.  How should ownership percentage be allocated?

[Abby Normal]

You should probably just use the built in proration by dates of ownership for the deceased shareholder, but the question is, does his ownership pass to the estate or to the widow?

You could also allocate by running a P&L through the date of death and just put those amounts on the K1 for the deceased, but it might not be worth the effort.

I recently had some older clients request their K1s be titled as 'Tenants by the Entireties' with their spouses (MD law), so they get one K1 with both names on them. They had the same last name so I added "& Spouse Name" to the first name field and "TBE" after the last name.

[Max W]

3 hours ago, Abby Normal said:

You should probably just use the built in proration by dates of ownership for the deceased shareholder, but the question is, does his ownership pass to the estate or to the widow?

You could also allocate by running a P&L through the date of death and just put those amounts on the K1 for the deceased, but it might not be worth the effort.

I recently had some older clients request their K1s be titled as 'Tenants by the Entireties' with their spouses (MD law), so they get one K1 with both names on them. They had the same last name so I added "& Spouse Name" to the first name field and "TBE" after the last name.

To complicate it even more, this is in California, a comm. prop. state, where most things are supposed to be 50/50.

Then they were running two different business under the S-corp.  He was an Indian guru, astrologer an his master guru is in India and paid an enormous price for his consultations.    She started a cosmetology business last year and made about 1/4 of what he made in his half of the year.

 

[Abby Normal]

Community property?! I'm tagging out, because I have zero community property experience (thankfully).

 

[Max W]

3 hours ago, Abby Normal said:

Community property?! I'm tagging out, because I have zero community property experience (thankfully).

 

Lucky you.  It's a pain for MFS, but for stepped up basis it can be a real advantage, if it is recorded correctly.