"Ed Zollars, CPA" <ezollar[at]mindspring.com> writes:

- quote -

You're thinking of the special estate and gift lien under
IRC sections 6324 and 6324A. That doesn't apply to this
income tax liability. IRS would have to pursue transferee
liability.against the heirs or executor under IRC 6901.

Phil Marti
Topeka, KS

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K Walker <nospam[at]nospam.com> writes:

- quote -

There will be no penalty if you file the amended return and
pay the additional tax at that time. They'll bill you for
the interest.

Phil Marti
Topeka, KS

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K Walker wrote:

- quote -

That one you have a reasonable, though not certain, chance
of avoiding. I would file the amended return and pay the
tax and interest voluntarily--doing that will generally
avoid seeing most penalties applied.

If the IRS or a state does attempt to assert penalties, I'd
suggest asking for a reasonable cause exception after laying
out the facts as you've noted them here.

I suspect the problem (kind of related to another post here
<grin> ) is that your original post didn't seem to limit the
question to getting out of penalties, but seemed to imply a
question about dealing with the entire liability. I think
if had indicated in your first post you were primarily
concerned about penalties, the responses would have been a
bit different.

That said, I still believe that your situation is a good
example of why executors need to not give in to the
"distribute it now" pressure that sometimes comes. In your
case, it appears that all parties are agreeable to forking
over the money to pay the tax due--but sometimes that
doesn't turn out to be the case, and it's really not good to
be the executor in that situation <grin> .

--
Ed Zollars, CPA
Phoenix, Arizona

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- quote -

As discussed in misc.taxes (dot crap most of the time) there
are no penalties. Just tax and interest.

Helen, EA in PA
50 miles, 3 days, 1 cause - Multiple Sclerosis Challenge Walk for the Cure
October 1 to October 3, 2004
Donate on-line at www.msandyou.org

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K Walker wrote:

- quote -

This is the textbook reason why an executor should resist
the pressure from beneficiaries to distribute amounts "right
now!!!" from the estate. The executor or whoever was acting
in that capacity has the obligation to determine that all
taxes (and other debts for that matter) are paid before
making distributions to beneficiaries.

As others have noted, the executor bears primary and
personal responsibility for this tax. There may be an "out"
if the executor can show he/she exercised reasonable care in
determining that all debts were paid, but as I recall a case
a couple of years ago on that one, a prevailing taxpayer won
only because he relied on the paid advice of an attorney
that turned out to be in error, after giving the attorney
all relevant facts and the attorney in question simply blew
it <grin> .

As I recall, the IRS does retain a lien on any such property
distributed to get its tax money, so the heirs likely aren't
out of the woods. As well, the executor, even if he/she
does have to pay the tax personally, may very well have a
state law claim against the heirs.

--
Ed Zollars, CPA
Phoenix, Arizona

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hilmarti[at]aol.com (Phil Marti) wrote:
- quote -

Because they're nice guys? Seriously, I have no problem
with the tax and interest, it's the penalties that I would
like to avoid. I really had no way of knowing that he took
this disbursement until I received the form. I guess I am
just hoping that the IRS will be a little more lenient since
I am bringing this to their attention before they find it.

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K Walker <nospam[at]nospam.comwrites:

- quote -

Why should they?

- quote -

File an amended return and pay the tax. If the estate was split 50/50, that
seems to be a fair way of splitting the balance due. (Whoever was executor is
legally responsible for the entire amount.)

Phil Marti
Topeka, KS

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"K Walker" <nospam[at]nospam.com> wrote:

- quote -

Prob not and will demand payment ASAP.

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K Walker <nospam[at]nospam.com> wrote:

- quote -

First, you have to file an amendment on form 1040-X to
report the additional $20K of income received before death
(any idea what happened to it?). Even at maximum tax rates,
this should be no more than $7,000 of additional tax.

If the estate has been incorrectly distributed (i.e. without
IRS release), the additional tax will have to be paid by the
beneficiaries or you (the executor). As long as that is
possible, I doubt that the IRS would be willing to "deal" a
settlement for less.

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- quote -

Was the distribution made prior to your father's passing???
If so, file an amended return to include the income on his
final return. You don't say what the payment represents.
If it were an IRA, with basis, there may be no tax.

If the distribution was made after his passing, the
beneficiaries include the income on their personal tax
returns.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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I filed my late father's final tax return in April of last
year (he died in 2002). A few months ago, I was sent a
package of mail that had gone to his old address and in
there was a 1099-R for about $20K. > From what I've
estimated, this will have about a $10,000 impact on the
return, as we originally received a refund.

My question is this. Will the IRS work with us on this to
negotiate a settlement as the money from the estate has
already been disbursed to the two heirs? Any
recommendations on what to do at this point?

Thanks in advance.

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