When completing a final return on Form 1040, what period should be consider for including income and expenses?

Forum|Forum|7 years ago
June 1, 2019
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My father passed away in April 2016. Do I only include activity on the final 1040 return through that date or do I include through the end of the calendar year 2016? Must I complete a form 1041? How does it work with Form 1040? Can 1041 be completed on Turbo Tax?

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ScruffyCurmudgeon

Employee

If income was received in your father's name (or in the name of his Estate) after his death, and if the income exceeded $600, please post a follow-up question because then a Form 1041 must be filed, and furthermore you need to be careful to not report such income (or for that matter expenses) that were received after date of death in his Form 1040.

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.

T

TomYoung

Employee

"My father passed away in April 2016. Do I only include activity on the final 1040 return through that date or do I include through the end of the calendar year 2016?"

Basically you only include the actual activity up to the date of death. Pub 559:

"Income To Include

The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. The method of accounting regularly used by the decedent before death also determines the income includible on the final return."

and

"Cash Method

If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return.

Constructive receipt of income. Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Include the interest income on the final return. Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. If the corporation customarily mailed its dividend checks, the dividend was includible when received. If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Do not include the dividend in the final return."

"Must I complete a form 1041? How does it work with Form 1040? "

The Form 1041 is the "income tax" return of the estate itself until the estate is closed out. Per Pub 559:

"Income Tax Return of an Estate— Form 1041

An estate is a taxable entity separate from the decedent and comes into being with the death of the individual. It exists until the final distribution of its assets to the heirs and other beneficiaries. The income earned by the assets during this period must be reported by the estate under the conditions described in this publication. The tax generally is figured in the same manner and on the same basis as for individuals, with certain differences in the computation of deductions and credits, as explained later"

and

"Filing Requirements

Every domestic estate with gross income of $600 or more during a tax year must file a Form 1041. If one or more of the beneficiaries of the domestic estate are nonresident aliens, the personal representative must file Form 1041, even if the gross income of the estate is less than $600."

"Can 1041 be completed on Turbo Tax? "

It can, but only by purchase of the TurboTax Business, (NOT "Home & Business"), product.

It generally behooves you to finalize the estate as promptly as possible to minimize the income tax reporting issues. For simple estates this generally involves notifying payers of income to the deceased - Social Security, retirement plans, etc. - and changing the title to inheritable assets into the name or names of the beneficiaries.

Tom Young