Have Tax Questions? Ask a Tax Expert for Answers ASAP
Welcome to the site. I will be helping you today.
There should definitely have been a K-1.
When estates and their attorneys don't file tax returns that they would be paid for, the tax man in me wonders why.
Depending on the way assets were brought in to the estate, it's very possible that the asset sold at no gain or loss (new value at date of death, assumed to sell for that if liquidated right away in most cases. Expenses of sale are often lumped in to the sale so no gain or loss is passed through, but the expenses of administration, including attorneys fees, etc. coould be passed through to the beneficiaries.
Without a K-1, you don't know what to report. It's not likely there is taxable gain, but there seems to be the possibility that the inheritance tax and other costs of administration might generate deductions.
An example: farm goes in to estate for $250,000 at death. $19,000 paid in real estate commission, inheritance tax, etc. $21,000 paid in legal, executor commissions, etc. Each beneficiary gets a check for $10,000 and no K-1. Is it $10,000 tax free or $11,000 and $1,000 in pass through expenses to deduct? How much did executor and attorney get? Yours is a valid question.
I believe I can confirm your tax man's opinion. Good luck with what you decide to do after this, and thanks for using Just Answer/Pearl.
What I really need to know - Is Iowa inheritance tax and administration costs of this estate deductible on my Colorado tax return? If they aren't, I guess there is no point on insisting on a K1 form even though every posfessional I spoke with says that one should be filed.
Thank you - answer was plain and simple - just what I needed to know