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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I have a question about k-1s for a 1041 estate return. Estate

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I have a question about k-1's for a 1041 estate return.
Estate has Rental Properties and Dividend Income.

2010 - 1st year return - Estate had profits and since none of the profits were distributed or required to be distributed the tax was paid on the 1041 return and no K-1's were issued to heirs.
2011 - $ 12K loss and NOL carryback election revoked and elected to carry forward - no funds distributed to heirs - no k-1's were issued to heirs (were they required??? or should the NOL just be passed on a K-1 on the final return??)
2012 - All rental property assets distributed to heirs on December 28th, but not distributions of any funds. After December 28th the only remaining assets of the estate were stocks and the personal residence of the decedent.
2013 - Final Estate return and the K-1's issued to the heirs for the first time because now there is finally a distribution of funds to the heirs - (right or wrong??)
I guess the main question here is when do the heirs get the K-1's and does it make a difference that there were never any distribution of profits?

Lev :

Hi and welcome to our site!
If none of the profits were distributed and was not required to be distributed - the form K1 is not required.
NOL will stay with the estate and unused deductions will be passed to beneficiaries on the final tax return (final K1) when the estate is closed.
If anything were distributed previously should not affect the distribution on the final tax return.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29954
Experience: Taxes, Immigration, Labor Relations
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Hi and welcome to JustAnswer:

Different expert here.

In general, I agree with the other expert, but I have a question:

Was there any income in 2012 that exceeded the NOL carryover? If so, the response may be different.

Customer: replied 4 years ago.

Another loss in 2012 -

The answer is what I expected, but since this estate is being fought out in court, I wanted to be certain that I was correct.




Customer: replied 4 years ago.

So, if the property is distrusted in 2012,, can I show the property distribution on the 2013 k-1.? If I wait for the final return to file any K"1's I don't know the proper way to show the property distrustions of the corpus from a prior year.

The form K1 is used to report taxable income, deductions and some other important information which are used (or may be used) by beneficiaries of their individual tax returns.
The fact of distributions of the corpus doesn't affect the tax liability - and as such is not reported on K1.
In case none of income is distributed - generally K1 is not required.
If K1 is not issued - the administrator may provide a letter to beneficiaries with explanation of facts. In particular - information provided may include basis of distributed property, etc.
Customer: replied 4 years ago.

Perfect - I did see that the K-1 on the 1041 has no place for property distributions, but I knew the beneficiaries needed something to show basis of the rental property.

Your understanding is correct.

Only items that affect income tax return of beneficiaries are reported on K1.

The distribution of the corpus is not required to be reported.

You may however report the distribution of the corpus on line 14 as Other information.

If the only item to report is the corpus distribution - you still MAY issue K1, but it is not required.

Some additional comments are passed by MequonCPA:

Any distribution of assets by the trust is assumed to be income first. The fact that the trustee chose to distribute real estate rather than cash doesn't change the sequence.