Filing a Final 1041 for Estate

[Yjjones93]

I am preparing the final form 1041 for an estate that that closed probate in March 2021. Most assets were transferred by the end of May 2021. I am both the fiduciary & the sole beneficiary.  I like to think this is a simple estate transaction, hence why I am attempting to complete myself instead of hiring a tax professional, however the complexity of the IRS regulations is overkill & confusing!  I kept all assets. No sales. Only income is dividends.  Dividends were paid before & after the close of probate/transfer of assets. 

1)  Should I include all dividends reported which would include funds paid while the stocks were in process of being transferred to me,  or do I need to allocate the dividends that belonged to the estate through the close of probate?  Or would this be where the "Income required to be distributed currently" applies?

2) Income required to be distributed currently - I am so confused by this term, and research has not helped. Since I am completing the final 1041 for the estate, then any income received is required to be distributed, correct?

Thank you for any assistance with these questions.

[M-MTax]

You have to include ALL of the income earned by the estate on the 1041 which gets passed to you on the K-1.

Distributed currently is a term used to mean ALL income is considered distributed during the estate's tax year whether the beneficiaries got any of the income or not. Don't worry about it because you're getting everything anyway and this return is your final return.

[DianeW777]

The answers to your questions are posted here with your questions for clarification.

1)  Should I include all dividends reported which would include funds paid while the stocks were in process of being transferred to me,  or do I need to allocate the dividends that belonged to the estate through the close of probate?  Or would this be where the "Income required to be distributed currently" applies? 

• All income received by the estate will be required to be distributed to you, the beneficiary.  To make things easy, enter any dividends reported on Forms 1099-DIV in the name of the estate on the Form 1041. If they are all reported to the estate, including before and after probate (partially earned by the estate and the rest earned by you), then since you are reporting all of the dividends through the K-1, they will end up on your tax return.

2) Income required to be distributed currently - I am so confused by this term, and research has not helped. Since I am completing the final 1041 for the estate, then any income received is required to be distributed, correct?

• Yes, that is correct. All income is required to be distributed to the beneficiary.  You will use the 'Distributable Net Income' to remove the income from the estate and send it to the beneficiary via the K-1. This will eliminate any taxation on the estate. The income will be taxed on your return as beneficiary.
  • Distributable net income (DNI). The income distribution deduction allowable to estates and trusts for amounts paid, credited, or required to be distributed to beneficiaries is limited to DNI. This amount, which is figured on Schedule B, line 7, is also used to determine how much of an amount paid, credited, or required to be distributed to a beneficiary will  be includible in his or her gross income.
  • Instructions for Form 1041 2021