1099-DIV and Nominees


G

Guy Scharf

I am working on a tax return for a friend who died in late
2003 and had a revocable living trust. I have obtained an
EIN for the now irrevocable trust.

The various funds and brokerages are sending 1099-DIVs with
the SSN of the deceased. My understanding is that I have to
use the nominee process to transfer the portion of the
dividends earned after the date of death to the trust.
Determining the amounts is straightforward as I have dates
for all distributions.

I am using TaxCut to prepare the return. It offers me the
option to enter the nominee distribution only for ordinary
dividends. I've also read publication 550, and it also
refers only to "ordinary dividends [received] as a nominee."

But the 1099-DIVs I have received have capital gains
distributions etc. (boxes 2a, 2b, 2c and maybe more on
others I have yet to receive). I presume these amounts
should also be transferred to the trust's return. If so,
what is the best/proper way to do that? It would seem to me
that I could just add the numbers all up and enter a
"nominee distribution" with the appropriate negative total
for the each box (and line on the tax form the box flows
to).

Am I on the right track?

Also, do I have to actually issue a 1099-DIV to document
that transfer, or can I annotate the entries on the tax
return with the EIN of the trust? If I have to issue a
1099-DIV, do I add together all the prorated amounts from
all of the fund-issued 1099-DIVs, or do I have to have a
separate 1099-DIV for each source?

Thanks.

Guy
 
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M

Michael T Wing CPA

Guy Scharf said:
The various funds and brokerages are sending 1099-DIVs with
the SSN of the deceased. My understanding is that I have to
use the nominee process to transfer the portion of the
dividends earned after the date of death to the trust.
Determining the amounts is straightforward as I have dates
for all distributions.
In a case like this, I probably wouldn't try to adjust each
individual item. Rather, I would start by entering the 1099
items on the decedent's return EXACTLY as reported. Then, I
would prepare a separate spreadsheet to show the "correct"
allocation of these items between the decedent and his
estate and/or testamentary trust. Lastly, I would enter a
single adjusting entry of the Schedule B to reflect whatever
adjustment (up or down) is necessary to arrive at the
correct income number. I might label this "Less portion of
income allocated to estate," or something like that. And, I
would attach a copy of the spreadsheet to the return. (Don't
ask me how to do this in any PARTICULAR tax software
program.)

I would do likewise on the Trust return.

There is one issue with respect to the capital gain
distributions on which I am not clear. Most mutual funds
make this distribution only once per year, typically in
December. So, if the decedent died in (say) September, are
you required to allocate ANY of it to him ??? I don't know.
Hopefully, others will comment on this.

MTW
 
A

Arthur L. Rubin

Guy said:
I am working on a tax return for a friend who died in late
2003 and had a revocable living trust. I have obtained an
EIN for the now irrevocable trust.

The various funds and brokerages are sending 1099-DIVs with
the SSN of the deceased. My understanding is that I have to
use the nominee process to transfer the portion of the
dividends earned after the date of death to the trust.
I don't know how your software handles it, but, GENERALLY,
isn't it permitted to combine the information from all
nominee 1099-DIVs into a single reported 1099-DIV?
 
D

D. Stussy

Guy said:
I am working on a tax return for a friend who died in late
2003 and had a revocable living trust. I have obtained an
EIN for the now irrevocable trust.

The various funds and brokerages are sending 1099-DIVs with
the SSN of the deceased. My understanding is that I have to
use the nominee process to transfer the portion of the
dividends earned after the date of death to the trust.
Determining the amounts is straightforward as I have dates
for all distributions.
Nominee status between a decedent and his estate is assumed.
I am using TaxCut to prepare the return. It offers me the
option to enter the nominee distribution only for ordinary
dividends. I've also read publication 550, and it also
refers only to "ordinary dividends [received] as a nominee."

But the 1099-DIVs I have received have capital gains
distributions etc. (boxes 2a, 2b, 2c and maybe more on
others I have yet to receive). I presume these amounts
should also be transferred to the trust's return. If so,
what is the best/proper way to do that? It would seem to me
that I could just add the numbers all up and enter a
"nominee distribution" with the appropriate negative total
for the each box (and line on the tax form the box flows
to).
Only report the pre-death amounts on the final 1040 and the
post-death amounts on the 1041. Since the 1040 will have
the word DECEASED in its title (either following the surname
or written across the top in red), IRP mismatches aren't
disregarded but are expected.
Am I on the right track?

Also, do I have to actually issue a 1099-DIV to document
that transfer, or can I annotate the entries on the tax
return with the EIN of the trust? If I have to issue a
1099-DIV, do I add together all the prorated amounts from
all of the fund-issued 1099-DIVs, or do I have to have a
separate 1099-DIV for each source?
No.
 
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G

Guy Scharf

In a case like this, I probably wouldn't try to adjust each
individual item. Rather, I would start by entering the 1099
items on the decedent's return EXACTLY as reported. Then, I
would prepare a separate spreadsheet to show the "correct"
allocation of these items between the decedent and his
estate and/or testamentary trust. Lastly, I would enter a
single adjusting entry of the Schedule B to reflect whatever
adjustment (up or down) is necessary to arrive at the
correct income number. I might label this "Less portion of
income allocated to estate," or something like that. And, I
would attach a copy of the spreadsheet to the return. (Don't
ask me how to do this in any PARTICULAR tax software
program.)

I would do likewise on the Trust return.
I am planning to enter the amounts on the 1099 items exactly
as reported and then enter an adjustment for the nominee
distribution. I have created a spreadsheet and was planning
on combining all of the individual 1099-DIV components on a
single "nominee distribution" line if that is permitted.
From what you say, that is permitted and so is the way I
will do it.

Attaching the spreadsheet to the returns sounds like a good
idea; I can do that since I will be filing these returns by
paper rather than electronically.

One key question that no one has yet answered is this: do I
need to do this same kind of distribution for all of the
various 1099 items in addition to box 1a Ordinary Dividends?
For example, capital gains. It makes sense to me that
those should be distributed too, but I have not seen
anything that says that.
There is one issue with respect to the capital gain
distributions on which I am not clear. Most mutual funds
make this distribution only once per year, typically in
December. So, if the decedent died in (say) September, are
you required to allocate ANY of it to him ??? I don't know.
Hopefully, others will comment on this.
I would like to know the answer to that too. It seemed
logical (always dangerous) that a dividend date before the
date of death means that the 1099 amounts should be reported
with the final return and that after the date of death
requires reporting with the trust.

Thanks,

Guy
 

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