The K-1 for the estate ends on 7/31/09 thus it is reported as income on the beneficiaries 2009 returns.
Steve - thanks for the update.
As I'm thinking about it, would the final 1041 for the estate have ended when everything was distributed? In other words, in this case, on 12/1/08? And, if so, does that mean that K-1's should have been issued in time for the beneficiaries to include on their 2008 returns?
I reckon the IRS does not know exactly when the distribution took place so maybe it's not a big deal? I just want to make sure the beneficiaries are compliant with IRS rules.
It is possible that the estate should have filed a short year return using a 12/31/08 year end. However, at times, estates are left open a short period of time following the "final" distribution in case any additional assets or liabilities come to light. As the return has been filed using the 7/31/09 fiscal year end, I would leave it as such.