Interest income received by estate several years after final estate return filed

[ron6612]

I just received a NJ check for unclaimed property several years after filing initial and final estate return for my mother.

The check includes both untaxable basis of stock that was unclaimed plus $5,000 of interest income. There is $1,500 for attorney probate fee to do the administrative proces.

 The state paying out the funds has my mother’s social security number, not the estate EIN number and my social security number as executor of estate. The check was made out to me as personal representative of my mother’s estate. 

My question relates to how to report the $5,000 of interest income and $1,500 expense. Should I do an amended final estate tax return showing the additional income and expense, do a new estate tax return or an amended final 1040 for my mother?  

On the original estate tax return there was only income from an annuity that was paid out and distributed as K1’s to beneficiaries after expenses. There was no taxable estate income. 

The distributable income on original estate return was $120,000. This additional net income is $3,500. 

The $3,500 will be given to grandchildren along with the return of capital. 

My effective tax rate is 32%. I will not be receiving any of the interest proceeds. 

If could only show the net $3,500 on estate tax return the tax rate is 10%. 

Not sure to what tax reporting number state will use but will find out soon. 

Need advice please!

[PatriciaV]

Since your name is on the check for the interest income, you can distribute the income according to the original estate documents then use the nominee procedures on your tax return. 

In TurboTax you do this by entering the 1099-INT, then checking on the next screen that you need to adjust the amount. You'll then be able to enter the adjustment amount and check the reason for the adjustment. If none of the interest income belongs to you, you can make an adjustment for the full amount.

Nominee Returns

When you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the recipients. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area (provided on the Form 1096).

• On each new Form 1099, list yourself as the payer and the beneficiary as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms.