Simple Inheritance tax related questions ... I think

  • Thread starter harlanhucklebee
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H

harlanhucklebee

My mother was killed in a car crash in early 2004.

The Estate got a settlement for the car insurance company of the other
driver (other driver's fault). Was 100K.

The estate also sold her home (which she bought in july 2002 and we
sold around April of 2004). The Capital Gains on the house was only
about 35K.

To overestimate, say the total amount in the estate to distribute
180,000 and going to her 3 biological kids.

The Estate didn't produce any income (interest, etc.).

Basically, the money was distributed in equal shares (around 60K).

The estate has a tax id and the irs mentions a 1041 to be filled out.

Any idea what needs to be filled out in that form?

No income was produced by the estate. I believe the capital gains is
excluded because it is under a certain amount (250K ... a little less
because it is prorated because she didn't have the house for 2 years
.... anyway know way near that amount).

So, what would I have actually to report in the 1041 form?

Also, do the heirs get taxed on the cash disbursements (60K each) from
the estate? We are the biological kids.

I am trying to figure out the IRS publications to determine any tax
liability ... but not finding any. Don't want to find out later that
the IRS is going to be asking for money after the estate is closed ...
because the heirs will be unpleasantly surprised and may not have the
$$$ to pay the taxes.

I have been doing my taxes for years and the information just seems to
get more cryptic (maybe it's me).

Thanks in advance,

Harlan
 
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S

Stuart Bronstein

My mother was killed in a car crash in early 2004.

The Estate got a settlement for the car insurance company of
the other driver (other driver's fault). Was 100K.

The estate also sold her home (which she bought in july 2002
and we sold around April of 2004). The Capital Gains on the
house was only about 35K.

To overestimate, say the total amount in the estate to distribute
180,000 and going to her 3 biological kids.
I'm sorry to hear about your mother.

But as far as this is concerned, it's complicated enough and
there is enough involved that you really should have gone to
a local professional. You haven't even come close to giving
us information that would be necessary to give you helpful
information.

First of all, what was the $100k settlement for? Was it all
for personal injuries? Was some of it for lost wages? Was
part of it for damage to your mother's car?

Next, what was the value of the home when your mother died?
If it sold for the same amount, there was no taxable capital
gain. If not, the capital gain is calculated as the
difference between the sale price and the value on the date
of death.

Stu
 
M

mytax

Form 1041 is not a do it yourself form. You should seek the
advice of a tax professional in your area.

Missy Doyle
 
A

Arthur L. Rubin

My mother was killed in a car crash in early 2004.

The Estate got a settlement for the car insurance company of the other
driver (other driver's fault). Was 100K.

The estate also sold her home (which she bought in july 2002 and we
sold around April of 2004). The Capital Gains on the house was only
about 35K.

To overestimate, say the total amount in the estate to distribute
180,000 and going to her 3 biological kids.

The Estate didn't produce any income (interest, etc.).

Basically, the money was distributed in equal shares (around 60K).

The estate has a tax id and the irs mentions a 1041 to be filled out.

Any idea what needs to be filled out in that form?
Try reading IRS publication 559. It may not be helpful, but
it couldn't hurt. I think I'd hire a professional to ensure
the estate is properly closed, including the necessary
taxes, and I've actually prepared a simple estate's 1041
once.

Without researching it, I'd say that the settlement is
non-taxable; you (either the estate, or the heirs -- I'd
have to research it as to which, if the money is
distributed) would have to pay long term capital gains tax
on the gain on the sale -- defined as the sales price less
the value at the time of death.

The 250K exclusion died with her, but you have the basis
step-up.
 
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M

Mike L

My mother was killed in a car crash in early 2004.
The Estate got a settlement for the car insurance company of the other
driver (other driver's fault). Was 100K.

The estate also sold her home (which she bought in july 2002 and we
sold around April of 2004). The Capital Gains on the house was only
about 35K.

To overestimate, say the total amount in the estate to distribute
180,000 and going to her 3 biological kids.

The Estate didn't produce any income (interest, etc.).

Basically, the money was distributed in equal shares (around 60K).

The estate has a tax id and the irs mentions a 1041 to be filled out.

Any idea what needs to be filled out in that form?

No income was produced by the estate. I believe the capital gains is
excluded because it is under a certain amount (250K ... a little less
because it is prorated because she didn't have the house for 2 years
... anyway know way near that amount).

So, what would I have actually to report in the 1041 form?

Also, do the heirs get taxed on the cash disbursements (60K each) from
the estate? We are the biological kids.

I am trying to figure out the IRS publications to determine any tax
liability ... but not finding any. Don't want to find out later that
the IRS is going to be asking for money after the estate is closed ...
because the heirs will be unpleasantly surprised and may not have the
$$$ to pay the taxes.

I have been doing my taxes for years and the information just seems to
get more cryptic (maybe it's me).
Your mother's residence is stepped up in value at the date
of her death to current market value. We had a similar
situation upon my Father-in-Law's death and were consoled to
take a capital loss after deducting selling expenses. We
also were able to report all final tax liabilities on his
1040 and had no need to request an EIN (which then would
have required a 1041 filing).
 

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