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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Customer Question

my mother had an annuity, worth about 235,000. She died January 4th 2012, my father was the benificiary of the annuity, and he died a week after my mother, so as executor, I got the annuity benefit to the "estate" of my father since he was listed as benificiary. I have since passed out the value of the annuity to my two brothers, and two sisters, and everyone got an equal share of the money, of about $47,500. Does the estate have to handle the taxes, or are taxes due since the annuity went to the estate. or should each person handle the taxes on there own, next year as regular income?
Submitted: 4 years ago.
Category: Tax
Expert:  MequonCPA replied 4 years ago.
Hi and welcome to JustAnswer:

The estate will receive a Form 1099-R reporting the portion of the annuity that is taxable income. This income combined with other income and deductions will be reported on Form 1041, income tax for trusts and estates. Each beneficiary will then receive a Schedule K-1 reporting their taxable portion of the estate's income/deductions. These amounts will then be reported on their individual income tax returns.
Customer: replied 4 years ago.

Does the estate then issue a form of a 1099, to my 2 brothers and 2 sisters showing how much income they need to report on their forms 1040's or does the estate pay in income tax, so the distribution is tax free to the beneficiaries

Expert:  MequonCPA replied 4 years ago.
Assuming that the bulk of the income to the estate is the annuity income, the estate will issue a K-1 to each of the beneficiaries (1099 equivalent).

The estate will report the income, but will then report a deduction for the distributions to the beneficiaries. In the end it is likely that there will be no tax at the estate level. All of the income will be taxed to the beneficiaries.