My mom died last August, and I inherited a promissory note for a business she sold in 2011. The note went into probate, and I created an estate account with an EIN to collect the payments until her estate closed.
The 1099-INT from the loan servicing agency has her SS# and shows the principal and interest paid for the whole year. As I understand it, I need to report on her return only the principal and interest received up to her date of death. So, I would divide the totals by 365, then multiply by the number of days up to her DoD. Then I enter those interest and principal amounts on her return. The remainders for the rest of the year go on her estate return. Is that correct?
That would be the way the interest would be reported, however the loan servicing agency should have been given the EIN of the estate to report the interest earned after death on a 1099-INT with the estate EIN.
If they are willing, it would be worth getting two corrected 1099-INT to allocate the interest income properly.
I did give the loan servicing agency the EIN, but it took them two months to direct the payments into the estate account. For those two months, I moved the payments into the account manually, so the principal and interest they have for the EIN number wouldn't match with the amounts she received up to her date of death.
I'm planning to report the principal and interest for those two months on the estate tax return. The numbers will be two months off from the EIN numbers, but will jive with her date of death.