Decedent Interest Income Received on Refund

[Whitegj]

I am the executor of father's estate.

He died in March 2020. He had a living trust that converted to an irrevocable trust at his passing.  The Irrevocable Trust TIN was created shortly after his passing

Problem 1

His 2020 tax return was filed on time using a 1040 and is SSN.

The 2020 tax return generated a $23 interest on a refund.  The refund was received in 2023.  The refund and the the $23 interest on the refund was issued to his SSN, deposited into the Trust and distributed. 

The IRS has issued a 2023 1099 INT to my Father's SSN

How do I file the interest - use a 1040 and the SSN to align the 1099 and the return?  Or do I file a 1041 and use the TIN?

Problem 2

During 2023 I also received a refund on the 2021 estate 1041 return.  Refund was due to a computational error. The IRS 1099 for the interest on this refund was issued to the Estate TIN.

I believe I handle this by filing a 2023 1041 for the Estate and including the interest issued to the TIN.

To be clear, all proceeds for both refunds were deposited into the irrevocable trust and distributed accordingly.  I am one of seven beneficiaries of the trust   I will complete the 2023 estate trust 1041 manually and send by certified mail.  If it is recommended that I file the SSN interest income on a 1040 using my father's name and SSN, I will do so using TTax and file by mail

[AmyC]

For problem 1: I would file a 1099-int from your dad's SSN to the Trust TIN as nominee. This shows the SSN is not receiving and using the interest earned but the Trust TIN is.

For problem 2: You could file another 1041 but if you have already filed your final return, then I would do a nominee from the estate to the trust TIN. 

If you are going to do one nominee, may as well do two and keep things simple. To better understand and prepare the 1099-int form, see Topic no. 403, Interest received | Internal Revenue Service

[Whitegj]

thank you for the response.

Now for the "dumb questions".  In previous filings I engaged a tax attorney who handled my fathers and the estates tax filings.  His rates, while generally reasonable, will be significantly more than the total interest received.  I was hoping to do this my self and avoid the unnecessary cost.  I thought we had closed the estate in 2023 as there is no more trust income and only distributions through the trust.

1.  It I understood you solution correctly, the solution offered is to use form 1096 to reassign the 2020 Interest issued to my father's SSN to the estate TIN.  The amount involved is $205.  Second step is to file the $205 using  1041.  I do not understand how to complete the 1096 much less then "tie" the transfer to the 1041

2. For the 1099 issued to the Trust (amount of $30), file a second 1041 for the amount of interest income and offset that amount with the legal/accounting expense associated with preparing the 2022 Trust return

Given the small amounts involved and the fact that no tax be owed on the amounts, can I simply do the following:

For the 1099 (amount $205) issued to the SSN, use a 1040 and mark final

For the 1099 (amount $30)  complete the 1041 and mark final

[tagteam]

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@Whitegj wrote:

For the 1099 (amount $205) issued to the SSN, use a 1040 and mark final

For the 1099 (amount $30)  complete the 1041 and mark final

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Your figures are ridiculously small. 

For example, with respect to the trust, the minimum exemption is $100 so you could prepare that 1041 manually without even needing to issue K-1s; the taxable income would be $0 (if you even wanted to bother filing that at all).

With respect to the interest paid and issued to your father's SSN, you could treat that as IRD (income in respect of a decedent) since the funds were issued with his SSN. Then, after distribution, inform the recipients to include their share on their 1040s as IRD.