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Old 02-21-2019, 12:16 PM
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1041 filing and schedule k question

I am completing 2018 taxes for my mothers US resident estate as personal representative appointed by the court. She passed in March 2018 and was paid regular dividends (all qualified) over $1000 during the year. All her assets/property were held in common stock and a small bank account which generated almost no interest (no house, car or property to sell, etc). Dividends were reported only to her SSN. No stock sales were done during the year, although distributions of stock were made to each beneficiary.

Income was dividends, bank account interest, and pension payments.

I have a EIN from the IRS for the estate.

This is a simple will, no trust involved. The will states all taxes to be paid by the estate. All distributions are discretionary by the personal representative. State is Michigan.

Consequently, I assume the following is required:

File form 56 for fiduciary notice.

file IRS 1040 for income dividends received between Jan 1 and date of death
with a pointer in the 1040 to the 1041 and an adjustment for dividends paid as a negative amount

file IRS form 1041 for the estate dividends the rest of the year (adjustment above)

complete 1041 K-1 for each beneficiary showing 0 in the dividend categories and let the total dividends go to 1041 line 2b 2.

File MI-1041 forms since they are required if a federal 1041 is required.

Do not report the distribution of the stock to the beneficiaries in the K-1 or elsewhere. This was an inheritance. The stock did go up since the death before distribution, but those gains will be picked up later by the beneficiaries when they sell. Consequently, the estate didn't get income from the stock transfer and there is no tax due.

Am I missing something here?



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Old 02-22-2019, 09:10 AM
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File form 56 for fiduciary notice. ============>aslongas you are a person responsible for a decedent's estate, you are required to file Form 56 Filing Form 56 notifies federal agencies and creditors to send mail regarding the estate to the fiduciary.

file IRS 1040 for income dividends received between Jan 1 and date of death
with a pointer in the 1040 to the 1041 and an adjustment for dividends paid as a negative amount ============== You must report alldividend income on the 1041, and you report the share of dividend income for each beneficiary on Schedule K-1s.

file IRS form 1041 for the estate dividends the rest of the year (adjustment above)

complete 1041 K-1 for each beneficiary showing 0 in the dividend categories and let the total dividends go to 1041 line 2b 2. =============as said above

File MI-1041 forms since they are required if a federal 1041 is required. ==========I guess it depends state law these rules apply only to federal taxation. States have their procedures and laws, so you need to check with a local accountant ,an irs enrolled agent/a cpa to find out if your estate or trust must pay income taxes at the state level as well. Or Plz contact your home state dept of revenue for more accurate info in detail.

Do not report the distribution of the stock to the beneficiaries in the K-1 or elsewhere. This was an inheritance. The stock did go up since the death before distribution, but those gains will be picked up later by the beneficiaries when they sell. Consequently, the estate didn't get income from the stock transfer and there is no tax due. ==========agreed Generally, taxes on taxable income must be paid either by the trust or by the beneficiaries, but not both. If the trust retains income beyond year-end, then the trust must pay taxes on it. However, if the income is distributed, then the beneficiaries pay taxes on it and the trust is permitted to deduct it.



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