My son died intestate, so we (parents) inherited his estate (under $150K). Calif law applies.
In settling the "small estate" (informally), I donated his personal property -- furniture, clothing, books, etc. The property was donated within 2 weeks and in the same calendar year of my son's death.
On which income tax return can we deduct the value of the donated property: my son's, ours or either one (our choice)?
yours. Your son died before it was donated, so his tax year ended.
alternatively, I suppose it could be deducted from the estate's income tax return (not estate tax return) assuming one was filed.
Sorry for your loss.
That's the way I thought about it, and that's the way I handled it.
But I started to have doubts because the donation occurred before the 40-day waiting period that is usually required for a "small estate" transfer of personal property (Calif Probate Code sec 13100 et seq).
So technically, I think I donated the property on behalf of the estate (as the estate personal representative), not my own property. Therefore, it was not clear that I can claim the deduction for myself.
That left the possibility that it should be claimed on my son's 2012 income tax return (the death was in Nov 2012, and the donation was in Dec 2012).
Or a 4th possibility I just thought of: no one can claim the deduction. As you say, not my son because the donation occurred after his death. Not me because perhaps it was not my property at the time of donation.
Do those additional facts alter the answer?
The 40 day requirement is to protect creditors. It doesn't change the fact that, under California law, you inherited his property immediately, subject to administration. So you really can choose either and it will be legitimate.
Right, but there is no reason that your son's estate can't take the deduction on the estate tax return, if there is one.
But again, legally it was yours immediately, so you can take the deduction for yourself, too.
No, you are fine, at least with respect to the deduction is concerned.
[....]
Great! Thanks for the confirmation, Stu and "Pico".
To be clear, the donation would be on the estate return (form 1041) and not the decedent's final 1040. From the 1041 a K-1 will be issued to the beneficiaries, and they would take the deduction on their Schedule A. However, this method is complicated because a form 1041 must be filed, and yet the estate is well below the exemption (I think that's something like $5 million), so no 1041 will even be filed. The issue is that most estate tax preparers charge at least $600 for an estate return. So just take the deduction directly on your tax return and that's it. Sorry about your loss.
It is my understanding that in order for an estate to claim a charitable deduction on the 1041, there must be 1. gross income to the estate and
A K-1 can be issued, but it's not necessary if the estate decides to take the dediction on its own.
I think you're confusing income tax with estate tax. The $5 million exemption is for estate tax. The 1041 is for reporting taxable income for income tax purposes.
That's a good point. But I doubt it should be an issue. As long as no beneficiary complains, what state law says about it shouldn't have any effect on federal tax law.
But the, you never know.
I was discussing federal law for points 1 and 2. See IRC Sec. 642, and its regs and Riggs National Bank of Washington D.C. v. United States, (173 Ct. Cl. 478 (1965) and Sid Richardson Foundation v. United States,
430 F.2d 710 (5th Cir., 1970).Going back to the OP, the charitable contribution deduction can be taken by the beneficiary who inherited the property and made the donation.
To be clear, the donation would be on the estate return (form 1041) and not the decedent's final 1040. From the 1041 a K-1 will be issued to the beneficiaries, and they would take the deduction on their Schedule A. However, this method is complicated because a form 1041 must be filed, and yet the estate is well below the exemption (I think that's something like $5 million), so no 1041 will even be filed. The issue is that most estate tax preparers charge at least $600 for an estate return. So just take the deduction directly on your tax return and that's it. Sorry about your loss.
==========The "$5M exemption" applies to form 706, not 1041. The exemption for form
1041 is only $600 for an estate.To deduct on form 706 for charity requires a will directing a charitable bequest. We don't have that here.
To deduct on the decedent's final 1040 requires that the charitable gift complete before death except for any required acknowledgement letter per Section 170(f)(8).
The deduction is properly taken on either a 1041 (if required) or directly on the distributed beneficiary's 1040. Either way, the beneficiary gets credit for the deduction.
My condolences on your loss.
Separating the wheat from the chaff of the many responses to your question, the short answer is that the value of the donated items is a deduction on Schedule A of your tax return.
How about if the personal representative claims donations on their own personal taxes beyond the estate forms? I've just written the courts a memo outlining my mother's mismanagement of my grandmother's estate arguing against a huge PR fee that equals ~50% of the remaining estate funds after the sale of my grandmother's house. She also retains some items that were not discussed for division amongst the heirs in probate proceedings.
I'm so sorry to hear about your son's passing. That's horrible for a parent.
I'd think you could deduct it either from the return for your son's estate (but not his final tax return) or from yours, whichever works best for you.
No, the PR does not make the contribution on his own behalf, but on behalf of the estate. So the PR can't take the deduction himself, even if he ends up with most of the estate as his fee.
See my replies of May 10 & 11. Under the right set of circumstances a personal rep might be allowed to take a charitable deduction. E.g., the PR would also have to be an heir and the distribution of property to him/herself did not breach the PR's fiduciary responsibility to the estate and other heirs.
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