form 1041 -

[Jerry C]

An individual (beneficiary) came to me after she already filed a 1041 for her father's estate. The only income in the estate was a Traditional IRA that was distributed to the estate worth $343,000. The person filed the 1041 and paid (or the estate paid) $127,105 in taxes ($125,006+penalty and interest $2099). The way she filed, she didn't create a K-1 to herself for her personal tax return.

So it appears the return was completed in error. My question: The income was $343,000. Was she also suppose to deduct the $343,000 on line 18 and then the estate would have paid $0 taxes and the full burden would have been on the beneficiary, hence the  K-1 for the full $343,000? or what should the estate have paid (37% of what amount), and then the deduction would have been the difference?

[IRonMaN]

If the income was distributed to the beneficiaries, the tax would be zero.

[sjrcpa]

Timing counts.

What was the period covered by the 1041?

How much was distributed to the beneficiary?

On what date was the distribution made?

[Jerry C]

The 1099R was distributed or made to the Estate

The daughter, is the beneficiary, and in the end would have received the $$$

[IRonMaN]

Would have or did receive the dollars in the same year?  Timing is everything with an estate.

[Jerry C]

OK. PERIOD COVERED BY 1041 1/1/21-12/31/21 Somewhat of many issues. Father passed on 6/16. Father was moving money from account "A" to another account "B", then passed. Account "A"cut and mailed the $343,000 on 6/17/21 ( 1 day after the passing). Account "B" upon receiving the check, couldn't cash it because the person had died and the check was returned to Account "A". After many things that had happened, Account "B" rec'd check on 9/8/21 and Account "A" sent  a letter stating the 1099R was prepared. The check dated 9/8/21 expired before depositing and had to be re-issued.(which I believe the date was 3/21/22) and a estate bank account opened and the $343,000 was deposited into the estate account on 4/5/22. At that point, the beneficiary moved $100,000 on 5/31/22 to open a cd to gain interest. and the remaining $243,000 stayed in the estate account. In the meantime, the IRS withdrew $127,105 for the taxes owed on the 1041 that was filed timely. i know there is a lot of info.  so based on all of this I still have some questions, but I will await your response. Thank you

[BobKamman]

Was the daughter named a beneficiary on either account A or B, or was the estate the beneficiary?    I would say the distribution was made 9/8/21, you can't just defer taxes to the following year by not cashing the check.  I am always amazed when people are so blasé about six-figure amounts.  Apparently the 1041 preparer agreed that the distribution was received in 2021, because it was reported on a 2021 return.  If the estate received the distribution in 2021, and it's still sitting in an estate account, not the beneficiary's account, then they just paid a lot of tax they should have taken steps to save.  How much, depends on how much other income the beneficiary had in 2021.  If $343,000 is just a paltry amount for her, maybe it doesn't make that much difference.  

[Jerry C]

check actually cut and then had to be re-issued . both in 2021 (made out to the estate)

Check was finally deposited in 2022

[Jerry C]

ok, then at this point, do I just prepare a K-1 to the Beneficiary for the $343,000

Unfortunately because of the untimely death and how this went down, I am guessing both the estate and the beneficiary has to pay taxes on the full amount 

[IRonMaN]

Just the estate

[BobKamman]

At this point you have at least six months to learn the basics of estate income tax, and Form 1041 preparation.