First year estate tax return. The estate had income of $6000 but expenses and capital losses totaling $7000. No tax is due so do I have to file with the IRS?

[Critter]

YES ... to show the loss.  All the IRS sees is income, you have to report the expenses.

[ScruffyCurmudgeon]

While the IRS may or may not see the loss - in fact, if the loss arises from a capital asset sale, the IRS receives the Form 1099-B or 1099-S information, and may well have a cost basis reported! - It is critical to report the net loss as this is the amount that is transferred to the Schedules K-1 for beneficiaries, used by them in their own tax filings, and is what the IRS uses to reconcile the various reported filings.

[ScruffyCurmudgeon]

The Beneficiaries can benefit from the pass-through to them of the capital losses to be used on their own personal Form 1040 to report as losses against gains. 

While it may seem only an exercise, the filing of the Form 1041 accomplishes several tasks:

1. Establishment of a record of the receipt of income and recognition of expenses that affect the assets of the Estate;
2. Allow for the Beneficiaries to receive record of the passed-through losses that are usable on their own tax filings.

[rlengel]

Thanks for all the replies.