Question regarding how to handle 1099/1040/1041's after a parent's death

[Yueh1]

I have similar situation as eagleman1 and morlanb. My mom passed in Aug ‘24, has trust (with separate EIN now), and I’m the successor trustee and personal rep of her estate. She has bank accts, a brokerage acct, rental property (townhome not sold yet), and an annuity. I understand from your earlier responses that her 1099-INTs (and assume 1099-DIV) can be reported on her final personal 1040. My questions are:

1) How about her rental property income? Does that need to be split or also ok to report on her final return? If split, how would I handle that because only a single 1099-MISC (under her SSN) was provided?

2) I made withdrawals from her annuity while she was alive for expenses. Those proceeds would go her personal return. Upon her passing, I cashed out her annuity for eventual distribution to beneficiaries. A portion of the distribution is taxable, and the 1099-R was issued against the trust’s EIN. I assume that will need to be reported under the estate’s return.

Thanks for your help!

[AmyC]

1. Income should be divided up based on when received, personal or estate. If you still have the rental, it ends up on the estate so you may as well split it correctly. The IRS knows her social and the estate connections. 

 On her final return, you can show a negative number in Line 21  The negative number on Line 21 will adjust the income of the reported payee to the correct amount.  The reported payee will issue a Form 1099-MISC to the nominee payee for nominee’s share of the distribution. 

You can enter a negative income adjustment with the following menu path:

1. Federal Taxes
2. Wages & Income
3. Less Common Income
4. Miscellaneous Income
5. Start
6. Other Reportable Income
7. Start
8. Other Taxable Income
9. Description = “Distribution to Estate YYY, EIN xx-xxxxxxx
10. Amount = -$xxx

TurboTax will transfer this to your Form 1040, Line 21, Page 1. To create the 1099 forms, see: 

• TurboTax article
• General Instructions for Certain Information Returns

2. Yes

@Yueh1 

[Yueh1]

Thanks so much! Very helpful.

I’ll give it a try and repost if any additional/clarification questions.

[Yueh1]

I would appreciate your help on 2 follow-up questions. For my mom’s estate return, I am planning to select “fiscal year” (i.e., Aug 1,2024 - Jul 31,2025) and not 2024 calendar year. 
1) Would your response differ depending on selection of the estate return reporting period?
2) Her trust will continue until I sell her townhome and distribute funds to all beneficiaries, so I expect to file one more 1041 after this initial one. For this initial 1041, for the time period of Jan 1-Jul 31,2025, I don’t expect to receive any 1099s from her bank/brokerage firm/property manager until early 2026. Would I generate 1099s using similar procedure you listed to report the interest/dividends/rental income, or another method?

Thanks for your continued guidance!

[AmyC]

1. No, the nominee to the estate needs to happen regardless of the time frame.

2. All of those firms/managers should have the EIN listed and be filing the tax forms for the estate for 2025. You should not have to do nominee again.

Best wishes and my deepest condolences.

[Yueh1]

Thanks for the responses to my follow-up questions. Re: the 2nd one, it’s still unclear to me how I would report any int/div/rental income the estate would receive Jan 1-Jul 31,2025. For the initial 1041, by selecting a fiscal year that runs Aug 1,2024-Jul 31,2025, the return is due by Nov 15,2025. At such time any 2025 1099s reported under the estate EIN would not be generated until early 2026, so how would I report the 7 months worth of int/div/rental income that’s part of the “2024 fiscal year”? I can calculate using monthly bank/brokerage/

property manager statements for Jan 1-Jul 31,2025, but not based on any 1099s. Specifically, a) is there a line on 1041 to report this income based on calculations, or b) do I request an extension, or c) do I submit the return on time and then amend when I finally get the 1099s? 
Thanks for your quick response and continued guidance!

[M-MTax]

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@Yueh1 wrote:

......by selecting a fiscal year that runs Aug 1,2024-Jul 31,2025, the return is due by Nov 15,2025. 

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File a 7004 and request an extension.

[Yueh1]

Ok, 1) I assume the extension will allow time for the estate EIN 1099s to be generated.

2) But specifically, how would I report what I split up between the 2024 fiscal year (7 months) and 2025 fiscal year (5 months) when the 1099s are generated for calendar year 2025?

Thanks for your patience and continued help.

[M-MTax]

You should have monthly statements from the financial institutions (or they should be available).

[Yueh1]

Yes, the monthly statements will help me calculate the split.

How would I account for the split in TurboTax Business software (or what line of form 1041)?

thanks for your help!

[M-MTax]

You would simply calculate the split manually and enter the resulting figure into the program.

[Yueh1]

Ok, thank you!

I have another related question…

In TurboTax Business/Form 1041, should I only check the “Decedent’s estate” box, but not “Grantor Type Trust”?

For context, my mom placed her assets, inclusive of bank/brokerage accts and house, under a revocable trust and was the grantor. Upon her passing, I understand the trust becomes irrevocable and I had obtained an EIN for the irrevocable trust. I am the successor trustee.

[M-MTax]

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@Yueh1 wrote:

.........Upon her passing, I understand the trust becomes irrevocable and I had obtained an EIN for the irrevocable trust. I am the successor trustee.

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Then check the Simple trust box or the Complex trust box. You should know which one from the trust terms.

See https://www.irs.gov/instructions/i1041#en_US_2024_publink1000286059

[Yueh1]

Thank you! I’ve determined it is a complex trust.

A related issue with the sale of equities/mutual funds…All sales occurred before my mom’s passing and there was net realized gain.
I received a combined 1099 statement (issued to the trust EIN) from her brokerage firm that listed both dividends (1099DIV) and the L-T sales (1099B) that were reported to the IRS. With my mom as nominee, I issued a 1099DIV, but there was no provision for issuing 1099B sales. How do I report the sales and realized gain on Schedule D so it’s clear they belong on her personal 1040 return and not the trust 1041 return?

[M-MTax]

You would report the sales on the 1041 with the trust as nominee for your mother if the 1099 was erroneously issued with the trust's EIN rather than your mother's SSN.

Use an "N" code on Form 8949.