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Preparing Tax Form 1041

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I am trying to prepare Form 1041. I have 22K of income, $10,000 of deductions (mostly lawyer). The Estate paid about $40K in state inheritance tax. I did not have to file Form 706. Is the state inheritance tax paid deductible on Form 1041?

Submitted: 8 years ago.Category: Tax
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11/19/2009
Tax Professional: MequonCPA, Certified Public Accountant (CPA) replied 8 years ago
MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,342
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Inheritance tax is not deductible on Form 1041. See page 21 of Form 1041 instructions (link below) - toward the bottom of column one.

http://www.irs.gov/pub/irs-pdf/i1041.pdf

MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,342
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Customer reply replied 8 years ago

I accept that they are not deductible as "taxes" on line 11 of Form 1041, but am wondering if they are deductible as an "administration expense", in that property cannot be released to beneficiaries without this tax being paid and tax waivers issued; this tax would have been deductible on Form 706 if it had needed to be filed. (re: Form 1041 instructions, pg 17, "Administration Expenses", col 2 &3)

Tax Professional: MequonCPA, Certified Public Accountant (CPA) replied 8 years ago

They are not considered to be administrative expenses. Those amounts are legal fees, filing fees, administrator fees, etc.

A tax is a tax and cannot be reclassified into another category. On the 706 it is also deductible as inheritance tax not as administrative expenses.

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