Estate form 1041- K-1 "Beneficiary's Allocation Smart Worksheet" is this based on percentages given in Will of just taxable income or as a proportion of Distributions of taxable income in same calendar year? CPA says the Allocation is proportional against distributions only in 2021 since "Cash basis".
Fourteen Beneficiary's benefitted from Capital Gain in sale of residence of the deceased in 2021. Each Beneficiary is to receive an equal percentage of the distributions from the Estate (per Will). The sale transaction and distribution of the Capital Gain was all in 2021.
Eleven of the Beneficiary's received a full distribution from the Estate in 2021. Three had received prior year distributions from the Estate (nothing to do with Capital Gain as was Cash in bank accounts), so got less in 2021, but ultimately got the same exact total distribution from the Estate as the others did once the residence property was sold.
An accountant originally did a 1041, but placed the Allocation of Capital Gains as a Proportion of the distributions in just 2021. The AMT method was used to minimize the taxes. Thus as the accountant entered the numbers those who had prior year distributions would benefit by not owing as much tax as those who only got a distribution in 2021. As well the other eleven are penalized by those prior year distributions.
This Proportional Allocation is what bugs me as each Beneficiary gained equally from the sale of the residential property in 2021 and all received those funds in 2021. Logically it should not matter if one or more Beneficiary got non taxable distribution in a prior year. The Will dictates the Allocation...Correct?
In the end the IRS still gets the correct amount of Tax paid.
I flagged that (IMO odd allocation) and requested a Equal Allocation to each Beneficiary as stated in the Will rather than Proportional to the funds distributed just that year. The accountant more or less said "No, because it is on a Cash Basis".
The full and Final distribution per Beneficiary was well over $20K. The Capital Gain was a little more than $2K per Beneficiary. All Beneficiary's received more than $10K in 2021. So no issue of the Capital Gain being more than any one Beneficiary received in 2021.
I can make the entry in TT 2020 1041 K-1's (line 4a) to be the Equal value per Beneficiary. So is the accountant being stubborn or am I missing something?
