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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11147
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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What publication covers how and when to fiie a return

Customer Question

What publication covers how and when to fiie a return for an estate in an Irrevocable trust.
The trust was effective from date of death.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,.THe short answer (and best/most thorough publication) is the instructions ffor fomr 1041: http://www.irs.gov/pub/irs-pdf/i1041.pdf
Expert:  Lane replied 1 year ago.
One techniquie (planning consideration) you may want to look at is making a Section 645 election:.Trusts are required to use a calendar year end. However, a tax adviser can elect to include the income from a decedent’s qualified revocable trust on the estate income tax return. Doing that provides an array of benefits not normally available to trusts, the most significant of which may be the ability to use the estate’s fiscal year end for trust income. This election lasts two years beyond the decedent’s date of death (longer if a Form 706 is required to be filed; consult the instructions to Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate), which is normally plenty of time to deal with closing out a trust. Agina this is known as a a Sec. 645 election.
Expert:  Lane replied 1 year ago.
You do this by filing Form 8855 with the Form 1041. This election can be made even if there are no income-producing probate assets in the estate..Form 1041Form 8855
Expert:  Lane replied 1 year ago.
A couple of other issues:.The estate & trust income tax rates get toof 39.6% at $12,300 of taxable income for 2015. If residual beneficiaries are in lower brackets, (as they ALMOST always will be - A coupple married filing jointy doesn't hit the highest bracket of 39.6% until taxable income reaches $464,000)....it will save tax for the family overall to distribute income out of the estate to them in a timely fashion. ... The fiduciary has until 65 days after the end of the tax year to make distributions for that tax year. Capital gains stay at the Form 1041 level and are taxed there, except on the final return.. .lane
Expert:  Lane replied 1 year ago.
Also of note .... Capital gains are relatively rare on an estate Form 1041 because assets generally get a step-up in basis to date-of-death values.If the estate sells those assets quickly, there usually is not a lot of time for them to appreciate in value.
Expert:  Lane replied 1 year ago.
Finally,.If at ALL possible make the 1041 the first AND final return. (If everything can be settled within that first fiscal years, the fiduciary can file only one estate Form 1041 that's BOTH the first and last 1041..The fiduciary can make that happen by (1) ensuring that timely distributions are made to beneficiaries and that any remaining assets are unlikely to generate the more than $600 of taxable gross receipts, which is the trigger for the need to fie another year's return. (one technique for this is depositing any REMAINING a non–interest-bearing account)..Hope this helps.Lane.
Expert:  Lane replied 1 year ago.
Let me know if you have any questiuons at all ....If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'll be credited for the work here, Thanks!
Expert:  Lane replied 1 year ago.
Hi,
I’m just checking back in to see how things are going.
Did my answer help?
Let me know…
Thanks
Lane