Distribution to estate - any tax consequences?

In my opinion: Estate probably needs to file a return. Yes, Other Income line 21. Payment from a lawsuit is almost always taxable.

It's taxable to the extent it compensates for lost income. But to the extent it is to compensate for something that is lost, including lost health or personal injury, it is not taxed.

OP's question really can't be answered without knowing what the lawsuit was about, what the surrounding facts were, and exactly what the settlement document or judgment says.

I think it would be preferable to file another trust return using the existing EIN. Even though a final return was already filed, I think the IRS would have no problem accepting the new one.

You might even be able to get away with nominee 1099 forms for interest, divs, and capital gains, although maybe not for a 1099-MISC.

-Mark Bole

I agree.

I disagree with the answers that suggested that the estate needs to file a return. It looks as if the estate has already been administered and distributed. Each beneficiary would report the amount as income (if required) on their individual returns. If there were estate tax and the lawsuit were listed among assets (as a receivable), then there may also be an estate tax deduction for the itemizing beneficiaries.

The payment was issued to the trust, not the estate. If the amount had been large enough to require a 1099-MISC, then the trust EIN would be reported on that form.

I suggested that having the trust issue K-1's, or else creating nominee

1099's if possible, would be necessary to keep things straight. Are you saying, wait and see if the IRS sends a letter and then explain it?

-Mark Bole

If the trust was a grantor trust before death, the estate, then the beneficiaries are still successors. Remember that such trusts are NOT recognized for tax purposes.

Even for a non-grantor trust, it currently does NOT exist. It was previously dissolved. The individuals, as successors to the trust, still report the amounts directly.