Solved: Form 1041 (Estates) Question
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Level 2

Form 1041 (Estates) Question

My father passed last year and had a large amount of money in a money market account with Capital One.  He used this interest to help supplement his monthly income. 

 

When he passed, I completed his return with TurboTax but my Probate attorney insisted that it be done by a CPA  (I'm assuming to prevent any possible legal disputes about the taxes having been done properly at a future date). 

 

The money from my father's account was transferred a few month after his passing to the Estate account.  It took about 2-3 months for Capital One to transfer the money to the Estate account and had earned over $600 in interest during that time prior to the actual transfer. 

 

When the CPA did my father's final return he applied all the interest earned from the money market account to the Form 1040 as income for the year.  This included interest earned in the account after his death.  The CPA stated no Form 1041 was needed as, after the money was transferred to a much lower interest bearing Estate account, the interest for the year was less than $30.  The probate attorney, however, is insistent that at Form 1041 should have been submitted to the IRS and is skeptical of how this was handled.  He brought up the fact that a large amount of interest was earned after my father's death due to the delay in the funds transfer to the Estate account.   It's seems as though he feels that  the interest earned in my father's account after his death in the money market account should have been claimed as Estate income even though the CPA treated it as income to my father (paid in the 1040 form) and not to the Estate.

 

Any thoughts on this?  Thanks.

1 Best answer

Accepted Solutions
Level 15

Form 1041 (Estates) Question

Frankly, your CPA and attorney need to discuss the facts and arrive at the correct conclusion.

 

Regardless, if the estate had gross income for the tax year of $600 or more, then a 1041 is required to be filed and the moment of death determines the end of the decedent's tax year and the beginning of the estate's tax year (so any delay is irrelevant).

 

See https://www.irs.gov/instructions/i1041#idm140366338116496

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1 Reply
Level 15

Form 1041 (Estates) Question

Frankly, your CPA and attorney need to discuss the facts and arrive at the correct conclusion.

 

Regardless, if the estate had gross income for the tax year of $600 or more, then a 1041 is required to be filed and the moment of death determines the end of the decedent's tax year and the beginning of the estate's tax year (so any delay is irrelevant).

 

See https://www.irs.gov/instructions/i1041#idm140366338116496

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