When must an Estate Tax Return be filed?
The IRS code section states that "an Estate tax returns must be filed for any estate that still retains income-earning assets as of the end of the year." Most estates distribute the decedent's assets shortly after death but some estates retain an ownership of those assets for some time afterward until such time the assets are liquidated and distributed to it beneficiaries.
The remaining undistributed assets within the Estate would generate either investment income, rental income or capital gains. It is this income, if it exceeds the certain limits that would create a reportable transaction.
What tax form is used to file the Estate Tax Return?
The income that an estate earns is reported on "Form 1041 U.S. Income Tax Return for Estates and Trusts." The fiduciary must file Form 1041 for a domestic trust that would be taxable under section 641 provided it meets any of the following:
- The Trust has taxable income for the tax year.
- The Trust has gross income of $600 or more.
- The Trust has a "beneficiary who is a nonresident alien."
