Estate tax return for deceased

[darladz]

We have a tax id for my mom's estate.  She passed Jan 2016.  We have only one 1099-R from an annuity with "taxable income" in box 2a. Her entire estate is significantly less than the $100K.  Do we need to file an estate tax return?

[darladz]

If we do need to file an estate tax return, how do we do this in turbo tax?

[dmertz · Accepted solution]

If the amount in box 1 of the Form 1099-R combined with any other income received by the estate in the same estate tax year is more than $600, the estate must file an estate income tax return, Form 1041.  TurboTax Business (not Home & Business) supports the preparation of Form 1041.

Even though her gross estate is under $100k, if she has a surviving spouse it may be worth filing an estate tax return (Form 706) to provide the surviving spouse with Deceased Spousal Unused Exclusion.  TurboTax does not have a product to prepare Form 706.

[darladz]

We found information regarding estate tax return that leads us to believe we do no have to file an estate tax return -- your thoughts?
"Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004...., $5,450,000 in 2016"

[dmertz]

Right, an estate tax return is not required, but if it's desirable to provide DSUE to a surviving spouse, filing Form 706 is necessary.

[darladz]

There is no surviving spouse.  We received a 1099-R for an annuity, distributed to the estate.
1. We purchased TurboTax Business yet there is no spot to enter income from a 1099-R?
2. Also, it looks as though the estate will need to complete K-1 Schedules to account for the disbursement to the beneficiaries - is this correct?
3. We keep going back to the IRS information we found that relays that only estates exceeding a $5,450,00 are required to file a return. Seems like conflicting information.
Can you provide any clarity to this?

[dmertz]

1.See tagteam's answer on how to enter a Form 1099-R into TurboTax Business:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/4549116">https://ttlc.intuit.com/replies/4549116</a>

2.  Yes, you'll need to complete Schedules K-1 (Form 1041) for the beneficiaries.

3.  You are confusing an estate tax return (Form 706) with an estate income tax return (Form 1041).

[darladz]

1. The TT Answer helped.  For example, 1099-R Box 1 = $45k, Box 2a = $25k and Box 6 = $27K.  The answer referred to states to take what is in Box 2a and report it, therefore, we do nothing with $ amount in Box 1 and Box 6.  Is this correct?
2. OK
3. Now I get it - so 1041 is required.
Thank you much.

[dmertz]

Isn't the $27K in box 5, not box 6?  I don't know that it's possible to distribute NUA from an annuity.  A distribution of NUA implies an in-kind distribution of employer securities from a qualified retirement plan.  Also, the numbers don't seem to add up.  Box 1 should equal the sum of the other two boxes, it seems to me.

Yes, the $25k from box 2a is the Distributable Net Income and will be passed through on Schedules K-1 to the beneficiaries in proportion to each beneficiary's share of the estate.  However, presumably the entire amount of the distribution is being distributed to the beneficiaries, not just the DNI (first tier distributions), so the box 1 amount less the box 2a amount will appear on Schedule B (Form 1041) line 10 (second tier distributions).

[darladz]

The 1099-R amounts were approximated but box 6 + box 2a does = box 1.
At this point, I am not sure.  My brother continue to get conflicting information.
It amazes me how complicated this estate return is for what really is a simple one 1099-R estate. I am a finance person and my brother an IT programmer.  We asked our tax people at work, a CPA, TurboTax, reviewed the IRS tax guidelines and Googled other resources - and still do not feel comfortable with moving forward ourselves.  So, we are taking this to a tax expert with estate experience to complete. 😕
He purchased TurboTax Business just for this purpose.  Will they refund his money?

[dmertz]

He would need to contact customer support:  

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/3300041">https://ttlc.intuit.com/replies/3300041</a>

He should not use the term "refund" in his query, doing so will automatically send him to information about tax refunds.  He should use the term "billing" instead.

I'm still puzzled about how NUA can be reported from an annuity.  Perhaps this was not an annuity but an employer-provided defined contribution plan.  As I said, an amount in box 6 implies an in-kind distribution to the estate of employer stock.  The cost basis for the stock would be the taxable amount of this stock included in the box 2a amount and the cost basis would pass to the beneficiaries along with the stock.

[darladz]

Thank you much for the information. 🙂