Helping personal representatives and attorneys plan for and file income tax
returns for estates (fiduciary returns) is a growing segment of our practice.
Lack of planning and missed deadlines can lead to significant tax
liability. A list of fiduciary income tax planning considerations appears
below.
Filing Requirement
- An income tax return is required if the estate's gross income for the year
exceeds $600.
- The statue of limitations on an IRS audit never expires if a tax return is
not filed.
Trapped Income
- All income is taxed in the estate if no distributions are made.
- Income in excess of $9,350 is taxed at the maximum rate of 35% (2003).
Distributions
- Distributions from the estate will transfer income to the beneficiaries.
- Electing a fiscal year end for the estate can defer this income.
Excess Deductions
- The beneficiaries can claim the estate's unused deductions and losses.
- A sale of the estate's property often produces a sizable capital loss.
Recent Tax Law Changes
- Distributions in the first 65 days of the year can now be applied to the
previous year.
- New rules affect the allocation of income among the estate and the beneficiaries.
