Discussion:1041 Question

I was shown a 1099-R by a trustee/executor/beneficiary that had a revocable trust as recipient. Box 1 was about $120K, Box 2A $70k, Box 4 $7k, Box 5 $50K and Box 7 was a 4 (death). The payer was an insurance company. I was shown a letter where a lawyer detailed his charges, distributions to beneficiaries and asked if the trustee wanted a 1041 prepared. The question to me was if 1041 was needed since the money was distributed. I told him for sure! I also told him to be careful in spending his share of the estate since some of the benefits could be taxable to him. I was thinking of an inherited IRA.

Later the person told me that the lawyer had said none of the benefits were taxable. I know the life insurance proceeds are not taxable, but I keep wonder how you get Box 2A taxable amount onto a 1041 and then a K-1 as nontaxable? I used the little yellow box, my tax guide and even the 1041 instructions … but still missing the answer.

If you see a motor home broken down on I-75 or I-65, please stop … it might be me!

Snowbird 14:52, 16 April 2009 (CDT)

the tax pro doing the 1041 would include the taxable amount in DNI and then take the IDD to net zero tax at the 1041 level, passing out the tax withheld on the K-1s.

I'm not sure what your question was - this doesn't seem to be a client of yours. I think you only wanted confirmation that your thought process was correct. It is.