Mom passed during the year do I need to file a 1041 with Schedule E showing 0 taxable income? What are consequences of not filing

[muscajj]

My mom passed in 2017 so I am looking at whether I need to file a 1041.  The only gross income she had was rent, but the schedule E nets to 0; then with attorney fees she has negative taxable income.   Do I need to file a return?  Seems like a waste of time and paper.  What are the consequences of not filing a "0" tax return?

[tagteam · Accepted solution]

" There will be no monthly 5% accumulated interested, since taxes due are 0, so the only left is a penalty.....?"

You are essentially correct that there will be no immediate monetary penalty since there is no tax due, but that is only applicable to "at this point in time". 

Recall that if no return is filed, the statute of limitations (typically three years in most instances) never runs and, as a result, the IRS can initiate an audit at any time. Thus, imagine a scenario in which years have passed and you have lost documentation for attorneys fees and expenses for the rental and the only thing left is the gross rental income - the IRS is going to come after the estate for taxes, interest, and penalties based on that gross rental income.

[tagteam]

" Do I need to file a return?"

I am sorry for your loss. 

Regardless of taxable income, a 1041 should be filed if there was (post mortem) gross income of $600 or more.

See  https://ttlc.intuit.com/questions/1901403

[muscajj]

What is the penalty for not filing a 0-tax due 1041?   There will be no monthly 5% accumulated interested, since taxes due are 0, so the only left is a penalty which I can't find - do you know what the penalty is?   That may be cheaper than the cost of filing.