Yes, you will need to file a final return on behalf of your father. you will report any income and expenses that he had during the year, just the same as he would have if he had filed his own return. On the top of the return, you should write "Deceased", followed by the date of death. You may sign the return as his personal representative.
If your father is due a refund for the year, you should also attach Form 1310 to claim the refund on his behalf.
If the money that you inherited from your father was in a tax exempt account, then as the beneficiary of this account you will have to pay income taxes on your own personal return for the amount reported to you on the 1099-R form.
If there were other assets such as a home, or cash in a regular savings account that was not tax deferred, then you owe no income taxes on those types of assets.
If your father's entire estate was valued at more than the allowed exemption amount for 2008 (which was $2 million), then an estate tax
return would also need to be filed. Estates valued at less than $2 million in 2008 are not required to file an estate tax return.
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