Legal settlement years after file forms 706 and 1041

Jul 16, 2010 1 Replies

My mother died in 2007. I did: Form 706 Federal estate taxes Form 1041 Federal estate income taxes Washington state estate taxes (no income taxes in Washington) for the year of her death.



Now (years later), I get a $612 check that is a prorated part of a class action settlement (I did not know about this until recently) for securities fraud related to a stock owned by my mother at the time of her death.



So, what do I need to do w.r.t. this money?



File an amended Form 706 since it could be considered part of her estate when she died?



File a 1041 for 2010 (next spring) since it is income to the estate? Is a legal settlement taxable? Does it matter that the money will be passed thru to the beneficiaries of the estate via Sch K-1?



Both?



If both, what deductions go on which form to avoid double taxtation?


IMHO you file a 1041 declaring a $612 long term capital gain on Schedule D and pass the gain through to the beneficiaries via K-1s.

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