You should not have to visit a lawyer and slough your way
through the surrogates court just to be able to file a 1041.
Has the widow applied for a Tax ID # for the estate? Just
use that, file an estate return, and no one will be the
wiser.

Unless someone needs to pass the estate through probate, and
open up estate brokerage and checking accounts, re-title
property, etc., why bother? Many families just agree
informally on naming an executor from the heirs, without
petitioning the courts. To any practicing attorneys out
there: what am I missing?

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Linda Dorfmont wrote:

- quote -

If there is only a single beneficiary, I believe that you
may be able to find this situation among those described in
IRC sections 671-679 and then can avail her of the ELECTION
under TR 1.671-4. As long as the 1040 discloses that it is
a consolidated return in lieu of a separate 1041, there
shouldn't be a problem.

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Linda Dorfmont wrote:

- quote -

I don't know about case law. But, I would probably ask them
to issue a "30 day letter" (or whatever they call it these
days) so that the matter can be taken to IRS appeals.

Also, it might be worth pointing out to the feds that if you
went to the trouble of filing a 1041, etc., it is likely
that you would be able to dredge up estate administration
expenses that would partially offset the income. By
foregoing that "opportunity," the IRS actually comes out
ahead.

MTW

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A client lost her husband in 2002 (October). He had a loan
outstanding on his 401k at the time of his death. After
several months of non-payment "he" received a 1099R for the
distribution. His wife received the balance of the account
under her name and SSN. Both documents were issued for 2003.
Hers is no problem. We put it on her tax return for 2003.
The problem is getting the IRS to accept the loan
forgiveness distribution under the late husband's SSN. They
have rejected the amended return claiming this income, and
have requested that the widow file another amendment as MFJ.
The legal eagles at the Practitioner hotline say she has to
go through all the expenses and rigamarole of setting up an
Estate, filing an Estate Income Tax return and passing the
income through to her own return. This would result in the
exact same amendment we filed. The employer refuses to issue
the document in the widow's name even though the
distribution code is 4 (death). The widow, with several
children, can't afford the attorney fees, preparation fees,
etc. to deal with this. Her English is limited as well.

I have always heard that IRS will accept income reported for
a decedent on the beneficiaries' returns just as long as
somebody reports and pays tax on it. It seems that they will
not accept her paying tax on the income just coming directly
from his SSN and want an amended return without the income
at all. Let them go dig him up and make him file ;-)

Is there any case law on avoiding the 1041 and going
directly to the 1040 as nominee income to the widow?

Linda Dorfmont E.A., CFP, CSA

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