the question is whether IRC Code Section 663(b) applies. that gives an estate only 65 days after the end of its tax year to make a distribution that carries out income. so the question becomes should the estate have reported all the income and paid the tax and then distributed the remaining cash or could it because its the year of termination ignore 663(b) and make an income distribution late so the estate pays no tax on the income. the beneficiaries get taxed
(1)General rule
If within the first 65 days of any taxable year of an estate or a trust, an amount is properly paid or credited, such amount shall be considered paid or credited on the last day of the preceding taxable year.
(2)Limitation
Paragraph (1) shall apply with respect to any taxable year of an estate or a trust only if the executor of such estate or the fiduciary of such trust (as the case may be) elects, in such manner and at such time as the Secretary prescribes by regulations, to have paragraph (1) apply for such taxable year
the election would have been made by checking the box on the tax form other information - question 6
there is a $280 penalty imposed for each k-1 filed late. and a late payment penalty if any taxes that were due were paid late.
