If an estate's investments make income - interest, dividends, gains - and the estate pays the income tax and no distributions to beneficiaries are made the same year, are K1s generated for the beneficiaries.
My first accountant generated K1s for both beneficiaries with "No Reportable Income" on the top and no income entered. Just the beneficiary name and ss#.
My new accountant says we need to generate K1s where all the estate income is split between the beneficiaries evenly even though they did not receive the money yet.
Who is correct? If the first one is wrong we have some fixing to do!
You'll need to sign in or create an account to connect with an expert.
You do not report income on a k-1 until it is distributed. The 1041 has a place to mark if the money was undistributed. Money can sit in the estate for years while assets are sold. You do have a fiduciary duty to wrap things up as quickly as possible and get the money distributed.
The lawyer will want the final paperwork signed and will be dangling that distribution check to get things wrapped up.
I had it all set up to not include any income on K1s due to no distributions. Then my cpa told me otherwise. I guess I will go back to him and figure out what to do.
And - I do understand my fiduciary responsibility and I would love to have this all done. The lawyer is in no hurry and all agree that this estate is very complicated. I'm doing the best I can.
Thank you
You will want to distribute out the income from the estate at least annually so it is not taxed at the compressed trust and estate tax rates. Work with the lawyer but making partial distributions will carry out the estate income and it will be taxed at the individual beneficiaries rates, which are much lower than the trust tax rates.
All I asked was a simple question. I did not ask how to handle distributing an estate. You are telling me obvious things I already know. Please stop.
The answer depends on applicable state law and the terms of the will, if any. If the income was required to be distributed concurrently, even if it was not distributed it must be included on Schedule B line 9 and reported on Schedule K-1 as if it had been distributed. If the income was not required to be distributed concurrently and was retained by the estate, making the income taxable to the estate, the income would not be reported on Schedules K-1.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
embedded_guy
Level 3
lesmir302
Returning Member
powerstix2
Level 1
StaceyVA
New Member
lnk-fr
Level 2
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.