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Old 02-21-2017, 11:42 AM
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Form 1041

Husband and wife owned the following jointly:
Savings and checking accounts
Personal residential property

Husband owned the following separately:
Savings Accounts
Various IRA's
Annuties
Pension from place of work that he received monthly.
Life insurance


Husband died last year, but before he died, a will was drawn up and and making his wife the executor of his will and includes her and his children as beneficiaries to his will. Before he died, he transfer some of his personal assets listed above into his wife's name.

Ques in regards to filling Form 1041:
1. Do I have to include joint properties as listed above?
2. Do I include the above assets that he owned separately, which schedule?
3. Do I include assets that he transferred into his wife's name before his death?
4. Can I take a deduction for the following:
(a) funeral Expense, Hospital bills not paid,administrative fees which schedule, any other expenses.

5. Is there any other information that I have to report on form 1041.

Do I have to prepare form 706 too?

Thank you



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Old 02-21-2017, 11:32 PM
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Husband died last year, but before he died, a will was drawn up and and making his wife the executor of his will and includes her and his children as beneficiaries to his will. Before he died, he transfer some of his personal assets listed above into his wife's name.=====> The 1041 is to report the income of the estate during the administration period. This would be required of the estate generated income in excess of $600 or had capital gains/losses.Sometimes you need to file both. Sometimes you need to file neither and sometimes it is one or the other.


Ques in regards to filling Form 1041:
1. Do I have to include joint properties as listed above?========>No unless you dispose of it. Since the joint owner was a spouse, half of the FMV of the entire joint account will be included in the decedent?s, I mean the husband?s, estate. If the deceased joint owner died testate, and his estate is subject to estate or state LEVEL inheritance taxes on the state or federal level the apportionment of the tax will be dependent on the provisions contained in the Last Will and Testament. The Form 1041 is a filing by the Estate of the husband for income received after his death and showing the distribution of assets..The estate's taxable income generally is figured the same way as an individual's income. An estate doesn't have a principal residence, since it is not a living person. If you sell it, then, You need to report on Sch D of Form 1041. The important thing to remember about the IRS' Form 1041 is that the form is a way to report income earned by the estate, rather than that income earned by the beneficiaries. Therefore, only things like estate interest or dividends, business income, or estate income from sources like property sales, should be reported on this form of 1041.


2. Do I include the above assets that he owned separately, which schedule?=======> Savings Accounts, Various IRA's, Pension from place of work that he received monthly, Life insurance is only part of an estate if the policy is not left to a designated beneficiary. It does not matter if it is included in a will or not. Annuity or survivorship payments receivable by any beneficiary under certain con tracts, agreements or plans are includible in the decedent's estate to the extent the value of the annuity or payment is attributable to amounts paid by the decedent . Since the Savings and checking accounts are in joint names as tenants in common, only his proportionate interest is included.


3. Do I include assets that he transferred into his wife's name before his death? ==>>No; For money and property to be subject to the estate tax, I mean to be included in the gross estate, the decedent must still own it at the time of death. This ordinarily includes personal belongings and just about everything the decedent owns at death. Since the decedent owns property jointly with rights of survivorship, then the IRS will include the full value of the property in the gross estate, even though the decedent never owns 100% of the property. This type of ownership allows the surviving owner to automatically become the full owner upon the death of the other owner. One way to keep the full value of the property out of the gross estate is to provide the IRS with proof that the surviving owner actually contributed money to its purchase. The estate tax law provides an exception when the decedent owns property jointly with a spouse. In this case, only half the value of the property is included in the decedent's estate, and it's not necessary to prove that the surviving spouse contributed money to the purchase. So as part of the estate planning process, you should create an inventory list of all of the property that he owns (whether he holds title separately in his own name, or with another person or persons as joint tenants, or tenants in common, or in his trust, or as an interest in a partnership, etc


4. Can I take a deduction for the following:
(a) funeral Expense, Hospital bills not paid,administrative fees which schedule, any other expenses.=======>Correct when you need to calculate net estate tax liability. From your gross estate funeral Expense, Hospital bills not paid,administrative fees which schedule, any other expenses can then be subtracted to give you the value of your net estate for estate tax purposes: so unless the husband the decedent should pay estate tax liability no need to claim those expense.

5. Is there any other information that I have to report on form 1041.========.asmentioned above

Do I have to prepare form 706 too?=========>It depends; The federal government imposes an estate tax on large estates and the irs uses Form 706 for calculating estate taxes due. However, smaller estates usually aren't required to file Form 706 unless the surviving spouse wants to preserve the unused portion of the decedent's estate tax exemption. An estate must file Form 706 if the gross estate plus the adjusted taxable gifts the decedent made during life exceed the basic exclusion amount of the unified credit. As of 2016, this is $5.45 million, which means that most people won't be required to file form 706. If a return is required, it's the responsibility of the executor of the estate.A decedent's gross estate includes everything he owned at the time he died. Assets are valued at the fair market value at the time of death, not the amount paid to purchase the assets. For example, if the decedent bought a house for $400k and it's now worth $600k, $600k is added to the size of the estate. The adjusted taxable gifts refer to any gifts made during the decedent's lifetime that were subject to the gift tax, including gifts that were taxable but no tax was paid because of the unified credit. For example, if a decedent gave away $74k when the annual exemption was $14k and chose not to pay gift tax, $60k of that would come off the available amount of the deceased's unified credit.



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Old 02-22-2017, 11:06 AM
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Form 1041

Thank you so much for the explanation, two more questions:

1. I assumed that the executor will have to apply for an EIN number, am I correct?

1. I also assumed that once an EIN is received that the Executor will have to open up a checking account and all funds from the estate goes into that account for later distribution, am I correct?

2. Do I have to continue filing 1041 every year until everyone is paid from the estate?

Thank you.



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Old 02-22-2017, 11:44 AM
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Quote:
Originally Posted by minim84 View Post
Thank you so much for the explanation, two more questions:

1. I assumed that the executor will have to apply for an EIN number, am I correct?

1. I also assumed that once an EIN is received that the Executor will have to open up a checking account and all funds from the estate goes into that account for later distribution, am I correct?

2. Do I have to continue filing 1041 every year until everyone is paid from the estate?

Thank you.
1. I assumed that the executor will have to apply for an EIN number, am I correct?======>>Correct; The estate needs a federal ID number, an EIN. The decedent's SSN# may not be used because the estate is a separate entity for tax purposes. The EIN, the same sort of ID used by businesses is required for estates. You can apply for an EIN for an estate by mail or phone, free of charge, but the IRS prefers that you do it online.

1. I also assumed that once an EIN is received that the Executor will have to open up a checking account and all funds from the estate goes into that account for later distribution, am I correct?======>>Correct; To collect the deceased person's cash assets and to have a way to pay the bills, you'll need a bank account for estate funds; during a typical probate, which lasts less than a year, a basic checking account will work. You can deposit any estate income into it and use the funds to pay debts and expenses. Especially if a significant amount of money is involved, try to find an account that pays at least a small amount of interest.
If you think the estate may be open longer,a checking acct also works however, it might be a better idea to set up a single account that can handle both investments and cash. Everything shows up on one statement, which greatly simplifies your record keeping.


2. Do I have to continue filing 1041 every year until everyone is paid from the estate======>yes;since an estate is a separate legal entity for federal income tax purposes. As the executor of the estate, you may need to file an income tax return for the estate, as well as a final personal income tax return for the deceased person.you must file a federal income tax return of Form 1041 aslongas the estate has: gross income for the tax year of $600 or more. You are responsible for filing a Form 1041 for the estate. The return is filed under the name and ein of the estate. On it, you?ll report estate income, gains, and losses, and will claim deductions for the estate. You don?t have to include a copy of the will when you file the return.



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Old 10-09-2017, 09:39 PM
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Join Date: Oct 2017
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Question about the 1041

Hello! I have a small business- a sole proprietorship- I sell art on Etsy and have some workshops or one time courses. I got a letter from IRS that I filled the wrong form and had to fill a 1041 -U.S. Income Tax Return for Estates and Trusts- I looked at the form and have no idea how to fill it! I opened this business in October 2016 and I gained 235 dollars and paid 12.83 dollars sales and tax in 2016, I have 6000 dollars in my business saving account and 200 dollars in my business checking account, nothing else. Can someone please tell me where do I have to write this on the form?



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Old 11-15-2017, 10:50 AM
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Old 11-17-2017, 08:56 AM
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