2 thoughts on this:
-I like to do things correct, and amending the incorrect tax form will fix the error. While putting the income back later does compensate for the error it does not actually fix it because the legal expenses should have been deducted the year they occurred and deducting in a different year can have a different effect on taxes.
I also was thinking that the IOLTA balance would have to be refunded as income to the estate bank account so would be counted as estate income in the next fiscal tax year. But is that how it would work? Or are the remaining IOLTA funds already in the estate so they are not income - they are just sitting there as if they were in an estate bank account needing to be distributed. I know I can distribute after the end of the tax year via the 65 day rule.
I don't know - you guys are the experts. Would it satisfy the IRS to just include the income in the final return? it feels more like a band aid. I don't want to have questions down the road - BUT - it would be easier as long as the IOLTA funds are not treated as income. I do not want any income after 5/31/22.
