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Trouble with Estate Tax

My Mother-in-Law died in July of '09. Her estate was not disbursed until March of '10. I'm certain we have a loss from date of death to date of receipt of proceeds. The brokerage firm that was holding the bulk of the estate is waiting for the Executor to give them permission to give us the numbers.

The real problem is that for some of amazing reason my childbride of 33 years is under the delusion that because I passed the CPA exam I know something about taxation. The only tax returns I've prepared since the day I met her were hers for the first two years I knew her and that was part of the con job I was running on her to think I was a good deal!

So please tell me what is the Tax Law on estates regarding Date of Death and Date of Disbursement. And please give me enough information that I can placate this unbelievably beautiful and young looking woman who still suffers from the delusion that I am a good deal.

Dick

Reply to
Dick Adams
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You're in luck. You can perpetuate the con and still tell the truth: It depends.

In this case there are no clear answers without input from the executor. "[Special term of endearment], it's impossible to say until we hear from the executor." If she presses you can add that there are two types of tax potentially in play, estate and income. On the estate tax front you really have so little information you'd just being SWAG'ing even if you knew the law. On the income tax front, without knowing what the executor did you don't know what the income tax implications are. You can finish up with an explanation that if estate tax isn't an issue and investments once held by MIL wind up in wife's name, her basis is their value as of the date of death and any sale will be long-term regardless of how long it was in wife's name. (If there were any retirement accounts involved you should have known about them long ago since they pass outside the probate proceedings.)

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

To keep it simple: Estate Tax: For 2009, no return was required if the estate was valued at $3.5M or less.

Income Tax for Decedent: A Form 1040 would have been required based on income received up until the date of death. Filing requirements would have been the same as if she had lived the whole year.

Income Tax for Estate: A Form 1041 is required if the estate had gross income of at least $600 or any income if she had named a nonresident alien as a beneficiary. The person responsible could have used the remainder of 2009 as a calendar filing year or could have elected to use a fiscal year that started from the day of death. As you say she died in July '09 and the estate was disbursed in March '10, a fiscal year return would not have been due until the Fall of 2010. It would have been both the initial and final return.

Reply to
Alan

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