RE: "Recall, however, that you would be indicating that the distributions were made in the current tax year (2021), the year in which the property was sold, which is actually not the case."
The 2020 1041 was filed earlier this year (just Interest Income - a few hundred dollars). The Estate owed no taxes for 2020.
This discussion is about the 1041 as a short year 1041 as a Final return for 2021
By .."indicating that distributions were made in the current tax year (2021)..."
Do you mean to say "...indicating prior early distributions were made in the current tax year (2021)..."
If so it makes no sense and not at all what would be reported.
The prior year early distributions to the three were from the Corpus of cash assets. These cash distributions were already reported in prior tax years on each of the 1041s and the Estate paid all income tax on Interest Income those prior year 1041s.
The distributions in 2021 included the remaining Corpus cash assets and the funds derived from the sale of the residence in 2021. Did I mention the cash on hand at start of 2021 was more than the sale price of the residence itself? Income produced in 2021 was only distributed in 2021.
As such distributions in 2021 were primarily the remaining Corpus of cash assets and secondarily the smaller amount of the proceeds from the sale of the residence, less expenses.
