Inherited Income

[cruiz]

As my mother's beneficiary, I received some income that was due to her after her death in mid-2016. This excerpt (below) from a TurboTax article describes my problem pretty well. The 1099 that this income belongs to was reported in her name but I want to report it on my return but can not figure out how to do it in TurboTax. Thanks for any help!

"That can create some hassles since the payer – a mutual fund, bank or broker, for example – will report income to the IRS on a 1099 form. Although you should try to get ownership of the account changed as quickly as possible after the death of the owner, the 1099 income report may well show more income assigned to the decedent than it should. In such cases, you must report the entire amount on Schedule B of the decedent's return, and then deduct the amount that is being reported by the estate or other beneficiary who actually received the income."

SOURCE: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Death-in-the-Family/INF12090.html

[MichaelDC · Accepted solution]

I'm very sorry for your loss.

You are correct. This is an issue of income in respect of a decedent and nominee interest.

As you know, income in respect of a decedent encompasses only income that the decedent had a right to receive at the time of death but that is not reported on the final return. It does not include earnings on savings or investments that accrue after death.

For example, if your mother who had money in a bank account, dies June 30. Only interest earned up to and including that date would be reported on your mother's final tax return. Earnings after that date are taxable to you, the beneficiary of the account, or to the estate.

Income in respect of a decedent encompasses only income that the decedent had a right to receive at the time of death but that is not reported on the final return. It does not include earnings on savings or investments that accrue after death. Say a taxpayer who has a substantial amount in money-market mutual funds dies June 30. Only interest earned up to and including that date would be reported on the final tax return. Earnings after that date are taxable to the beneficiary of the account, or to the estate.

In this case, we are going to report Nominee interest on the decedent's return. Nominee Interest is when some or all of the interest belongs to someone else but the entire amount was reported under your mother's Social Security number.

On your mother's return, use these steps to revisit the interest section:

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)

• This opens a box where you can type in “1099-INT” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)

• The search results will give you an option to “Jump to 1099-INT”

• Click on the blue “Jump to 1099-INT” link

This will bring you to a summary of interest forms already entered.  If you have already entered the interest in your return, click Edit beside the one with the nominee amount.  If you have not already entered the interest in your return, keep reading for steps to take after entering the information. Follow these steps:

• After you click Continue when you have finished entering the information from your Form 1099-INT, the next screen is titled “Tell us if any of these uncommon situation apply to you” 

• The second choice on this screen is “I need to adjust my taxable amount” 

• Check this box and click Continue

• Then you will see a screen titled “Report Interest adjustment”

• Enter the amount as a positive number 
• Check the box "I received all or part of this interest for someone else (I am a nominee).
• Click Continue

This will make the proper entry on your mother's Schedule B.

[cruiz]

Thank you Michael

If I understand correctly, your instructions pertain to my mom's return. How would I report my portion of her 1099 income for my own return in TurboTax?