Hello. I don't seem to be able to find anything in US tax guidebooks that speaks to when income accruing to TOD investments is included in the deceased owner's 1040/1041 vs in the survivors' 1040s.
When there is a year-plus gap between date of death and the date on which the accounts are re-titled, where is the accumulating income to be reported? During that gap, 1099s were all mailed to the deceased. Does that mean that the income all belongs on the deceased's 1040 for year of death and then the deceased's 1041/estate return for the year following the year of death? What about K-1s and nominee 1099? Any relevance at any time?
TOD investments
Moderator: Mark T Serbinski CA CPA
If, due to delays in transferring of ownership, a 1099 is issued in the name of the decedent, then ALL the income from the 1099 is reported on the decendents return, and then any income that was received by the estate or inheritor is (a) deducted from that return, and (b) reported on the 1041 or the other persons 1040 for that year (whether or not a nominee 1099 is prepared -- although that would be the correct manner).
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Thanks for that info. That makes sense.
What is confusing is the sequence. Is the following understanding correct? --
If the death occurs in 2010, and no change in title is made in 2010, leading to issue of 1099s in decedent's name in 2010 -- is it correct that all the income is reported in the decedent's return?
Then if the title is changed in 2011 and subsequent 1099s are issued in the successors' names (presumably as of date of change in title, but perhaps as of some other date?), would it be correct to report income paid up to the date of change in title in a 2011 1041, deduct that amount (and the 2010 amounts too?) in the 2011 1041, and include all 2011 amounts in the successors' 2011 1040s (or both 2010 and 2011 amounts in their 1040s?
If so, is the vehicle for the reporting by successors their 1099s, or nominee 1099s, or K-1s?
Is there an IRS publication on this issue?
What is confusing is the sequence. Is the following understanding correct? --
If the death occurs in 2010, and no change in title is made in 2010, leading to issue of 1099s in decedent's name in 2010 -- is it correct that all the income is reported in the decedent's return?
Then if the title is changed in 2011 and subsequent 1099s are issued in the successors' names (presumably as of date of change in title, but perhaps as of some other date?), would it be correct to report income paid up to the date of change in title in a 2011 1041, deduct that amount (and the 2010 amounts too?) in the 2011 1041, and include all 2011 amounts in the successors' 2011 1040s (or both 2010 and 2011 amounts in their 1040s?
If so, is the vehicle for the reporting by successors their 1099s, or nominee 1099s, or K-1s?
Is there an IRS publication on this issue?
Hello again. I think I may have figured out how this works:
Pub. 559 says re estate information returns:
"Even though you may not have to file an income tax return for the estate, [which is the case given the small amount of income concerning these TOD items] you may have to file Form 1099-DIV, Form 1099-INT, or Form 1099-MISC if you receive the income as a nominee or middleman for another person. For more information on filing information returns, see the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G.
"You will not have to file information returns for the estate if the estate is the owner of record [even if this is out of date and therefore not 'true' ownership] and you file an income tax return for the estate on Form 1041 giving the name, address, and identifying number of each actual owner and furnish a completed Schedule K-1 (Form 1041) to each actual owner. "
So that suggests that even with gross income of less than $600, the 1041 should be filed in order to indicate the beneficiaries and to get K-1s to them.
And, even if they have not actually received the income accrued to the TOD items, I take it that they are then treated as the tax owners because under local law they did have beneficial title at the time of death -- and so have to report the income for the tax year in which the original (misdirected) 1099s were issued -- correct?
Pub. 559 says re estate information returns:
"Even though you may not have to file an income tax return for the estate, [which is the case given the small amount of income concerning these TOD items] you may have to file Form 1099-DIV, Form 1099-INT, or Form 1099-MISC if you receive the income as a nominee or middleman for another person. For more information on filing information returns, see the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and W-2G.
"You will not have to file information returns for the estate if the estate is the owner of record [even if this is out of date and therefore not 'true' ownership] and you file an income tax return for the estate on Form 1041 giving the name, address, and identifying number of each actual owner and furnish a completed Schedule K-1 (Form 1041) to each actual owner. "
So that suggests that even with gross income of less than $600, the 1041 should be filed in order to indicate the beneficiaries and to get K-1s to them.
And, even if they have not actually received the income accrued to the TOD items, I take it that they are then treated as the tax owners because under local law they did have beneficial title at the time of death -- and so have to report the income for the tax year in which the original (misdirected) 1099s were issued -- correct?