My father was receiving some class action awards prior to his death in 2006. They were not considered taxable to my father when he was receiving them. His death was not related to the class action cases. Some class action awards will be coming in for several years still, according to the lawfirm handling them. In order to continue receiving these awards my mother had to have his will probated in Florida and a bank account opened in the name of my father's estate, as awards will be "Payable to the Estate of .........." Part of this process was the issuance of an EIN for the estate. The estate has no assets as everything else was jointly owned, and passed into my mother's name. The IRS sent my mother a letter telling her to file a 1041 for the estate for 2006. The estate had no income in 2006. Questions:
Are the class action awards still tax free? If yes, and the estate generates no other income, does she still have to file a 1041 for the estate. If an award does come in, and she cashes the check in the estates bank account, and then transfers it into her personal bank account, is it considered taxable income to her. Thanks.
P.S. As a side note, we have confirmed that there is no "estate tax" due.