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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7073
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Taxpayer died in 2013. No estate distributions. No form 1041

Customer Question

Taxpayer died in 2013. No estate distributions. No form 1041 filed in 2013. No income. In 2014 no distributions. Form 1041 filed. $223 in taxes paid. Now wondering if form 8855 should have been filed?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.
Why? Is there a Revocable Living Trust involved, that is now Irrevocable as of the Date of Death of the Decedent? Generally, when this happens, there has to be an allocation of the calendar year income pre & post death (on a cash received basis), with the pre death income going on the final decedent's personal return on Form 1040, and the post-death income going on the Irrevocable Trust's 1041, making sure that there are sufficient distributions of income from the Irrevocable Trust to pass the income out to the beneficiaries, followed by the 1041 K-1(s) for the beneficiaries to report on their personal returns. So, given that, what is your question? .
Customer: replied 1 year ago.
I prepared the 2014 1041. Small tax liability of around $200. No distributions made until 2015. Now attorney for one of the other siblings is asking if form 8855 was filed and why no 2013 1041 (no income or distributions). I'm confused as to whether a form 8855 was needed.
Expert:  Stephen G. replied 1 year ago.
Form 8855 is an "Election", it is never required unless you want to elect that treatment. Just as an aside, I normally never make that election because it just confuses things when you do the tax planning; it is almost always better to make distribute the income so that there is no tax on the 1041. If you accumulate income in the trust it is automatically classified as a "Complex" trust. As I'm sure you know, distributions in the first 60 days of the tax year may be reflected as distributions on the previous year's 1041. So that allows the income in the Trust to be determined before the distributions are made. That rule allows the income to be passed through to the beneficiaries.So, you've done nothing wrong. No sense to file the 8855 if the estate didn't have any income. I guess you are saying the 1041 was for the Trust, which is fine. I don't know why the attorneys always seem to want to make that election & file the 8855. It really doesn't matter unless the estate had expenses that could have been deducted on the 1041 & passed through to the beneficiaries as "Excess Deductions on Termination", which wind up as an itemized deduction for the beneficiaries? That only applies to the final year of the estate. There's a fair amount of postmortem income tax planning that can be done in many situations, but your situation sound way too small to deal with it. .