Total Pension distribution Code 4

[LINDAAHILL]

Can this distribution be transferred to an heir without paying the 40% estate tax?

[IRonMaN]

Who was the check made out to?

[LINDAAHILL]

The 1099 was issued to the estate and direct deposited in the Estate bank account.

[LINDAAHILL]

The estate

[IRonMaN]

Did the estate hold on to the money or did it distribute the money to the beneficiaries?  If it did distribute the money, a K-1 would get generated from the 1041 and the income would flow to the beneficiary.

[LINDAAHILL]

It has not been distributed.  But income tax was withheld.  Is it necessary to pay Estate tax at 40%  on amount of K1?  

THANK YOU SO MUCH FOR THE HELP

[IRonMaN]

If it wasn't distributed it would be taxed at the fiduciary income tax rates.

[LINDAAHILL]

Since the beneficiary would be inheriting the money, I assume no tax would be paid.  Is that correct?

[IRonMaN · Accepted solution]

If the estate pays the tax for 2019 and the estate eventually gets closed and distributed in 2020, there wouldn't be any additional tax owed by the beneficiary ------------------- assuming there aren't any additional tax generating issues out there.

[LINDAAHILL]

Thank you.

[IRonMaN]

You betcha!

[sjrcpa]

If it didn't get distributed it's not on the K-1.

40% seems high, but entirely possible (income tax + NIIT). Are you talking 1041 or 706?

[LINDAAHILL]

Form 1041