Discussion:1041 questions
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Discussion Forum Index --> Basic Tax Questions --> 1041 questions
Discussion Forum Index --> Tax Questions --> 1041 questions
| 22 April 2009 | |
| I 'trust' you all have had a successful tax season..sorry I couldn't resist but that isn't my trust question.
Can a beneficiary (trust) take the estate deduction before the final 1041 is filed or must it be taken on the final return? And, of course, the classic question straight from the IRS example: Can an IRA owned by the deceased and passed by will to a trust generate an estate deduction for the trust even if the IRA is being paid out over 5 years into the trust? I have read and re-read the instructions, and everything I can get my hands or eyes on, but I can't seem to bring myself to a conclusion on these issues. I appreciate any insight I can get. | |
| 22 April 2009 | |
| the will is disregarded if the decedent has a named beneficiary for his IRA
the IRA passes by contract, not by will | |
| 22 April 2009 | |
| but to answer your question, if there is any Estate transfer (706) tax due to items of IRD, the deduction is allowed ratably as the items of IRD are recognized by the recipient of the items of IRD. If the trust is the recipient, and doesn't pass the income out to a beneficiary, then the trust would get the estate tax deduction. If the trust distributes the IRD or a portion of it out to a beneficiary, then it should also 'distribute' or notify the recipient, of the applicable estate tax deduction attributable to the IRD. | |
| 22 April 2009 | |
| I 'trust' this is the 'estate' deduction you are referring to, but your original question was quite unclear. | |
| 23 April 2009 | |
| Thanks Kevinh5, I am dealing with a covey of hostile relaties who are mad a hatters that the entire estate went to a trust of which none of them are beneficiaries. I almost want to give the whole thing back to the attorney.
Let me see if I understand your answer: The estate transfer tax can be passed through the initial 1041 ratably as the income is passed out; there is no rule that it can only pass on the final 1041? What I dont understand is, if the IRA is not passing through the 1041, but was taxed in the 706, can I make the "with and without" calculation and include the estate deduction on the 1041 even though none of the IRA is shown on the 1041? Or is that a "side" calculation that the trust would make and I not show the deduction on the 1041 at all? | |
| 23 April 2009 | |
| not completely
only the portion attributable to items of IRD, which is the 'with and without' calculation, but all items of IRD have to be included in the 'with and without' to determine the total deduction which is divvied up amonst the items of IRD | |
| 23 April 2009 | |
| and the IRA (and other IRD items) would be taxed at both the 706 level and the recipient (1041 or 1040) level, thus the whole 'estate tax deduction' thing to ameliorate the penalty of double taxation | |
| 23 April 2009 | |
| The IRD calculation is net. The category of deductions in respect exists...♫ | |
