1041 For Estate

[cferg]

I am trying to finish up the 1041 for my mom's estate. I think I am doing it correctly but want to double check what TurboTax and I came up with. Mostly that I didn't mess up somewhere.. 

The only asset was her home. It had a step-up value of $287,800.00 and sold for $316,500.00. After subtracting closing costs (not including $441.43 in property tax paid as part of the sale) there was a gain of $5,529.00 which was entered on the 1041. After subtracting the property taxes paid and the probate attorney fees, there was an adjusted total income of $896.00. After the $600.00 exemption there was taxable income of $296.00 and a tax of $30. I do have some questions. First, does the money in the estate account(the net proceeds from the home sale, and from a state tax refund) go anywhere on the 1041? Is the amount of the money, from the bank account, each beneficiary gets put on the K-1? Next, does the entire $5,529.00 that was capital gain get divided among the heirs and entered on the K-1's even though it was reduced by the subtraction of the property taxes and the probate lawyer fees? Or is it the $30 tax showing on Line 28 that gets divided. 

Unfortunately, TurboTax Business doesn't support the state tax forms for estates in Oregon. So doing that is going to be an adventure. 

[tagteam]

The principal (corpus) in the estate account is not entered anywhere on the 1041 nor the K-1s.

Only income, gain, deductions, and credits are reported on the K-1s, not distributions of corpus.

[tagteam]

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@cferg wrote:

After the $600.00 exemption there was taxable income of $296.00 and a tax of $30.

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If you are distributing income (gain) to the beneficiaries, then there is no exemption for the estate. The exemption is only available if the estate is paying any tax due.

Again, if the estate is paying any and all tax due (and not distributing income/gain to the beneficiaries), then it is likely you do not need to issue K-1s.

[cferg]

Wow! That is great. I have always been under the impression that K-1's were required for any distribution from the estate, and especially for the proceeds of the sale of the decedent's residence. That should make all of my siblings happy (and me too.) Thank you very much.

[cferg]

Thank you. I was under the impression that the estate was not allowed to pay the Capital Gains tax and that any distributions from the estate account had to be reported on a K-1, especially when it is the proceeds of the sale of property/real estate. That will make life much easier and my siblings much happier. 

[tagteam]

Typically, an estate or trust will pass through any income or gain to the beneficiary(ies) due to the compressed tax rates for both entities, in which case K-1s will be issued.

However, if the entity pays any tax due, there is usually no need to issue K-1s.

[cferg]

I do have one other question. If you use a fiscal year, which encompasses part of two separate years, for the estate return and you distribute money during the second year in the fiscal period, when do you sent out 1099's. Our fiscal year is from 8/19 of 2021 to 8/19 of 2022. I paid the lawyer last week when we got permission to close out probate. Do I give him a 1099, now, for 2021 or wait until the end of the calendar year and give him one for 2022. I really appreciate all of the help I have been given. The estate isn't a very big one but some of the wording in the instructions has been a little confusing.  Now if only one of you could help me with the Oregon estate forms. LOL  

[cferg]

We don't seem to have a lot of gain, so it is probably just as easy to pay it out of the estate, so no one has to deal with it.