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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 307
Experience:  Tax Accountant at Praxair, Inc.
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My Mother passed away in May of 2015. Her trust received

Customer Question

My Mother passed away in May of 2015. Her trust received 206,000 from an annuity with 111,000 taxable and another 83,000 with 14,000 taxable. The money has been distributed evenly among 5 siblings. How do we file with the IRS? Should the tax rate be at capital gain rates or income rates?
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Submitted: 9 months ago.
Category: Tax
Expert:  Jonathan Tierney replied 9 months ago.

Hi, my name is ***** ***** I can help. Your mother's trust and/or estate would need to file a Form 1041 to report its income. However, if the income was distributed to her beneficiaries' the trust and/or estate can take a deduction for amounts it distributes and issues a K-1 to its beneficiaries who then report it on their personal income tax returns.

Was you mother's trust a revocable one? If yes, the trustee can elect to treat her revocable trust and estate as a single entity. This would be beneficial as the trust would then be able to elect a fiscal year ending May 31, so any K-1's issued would go on the beneficiaries' 2016 tax returns which would be filed in 2017.

Income from an annuity is taxable as ordinary income.

Do you need help preparing the Form 1041?

I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions.

Thanks, Jonathan

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