Income Distribution Deduction K1 - Small Estate

Forum|Forum|2 years ago
January 19, 2024
2 replies
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A new client just presented me with estate information from 2019 onward. No distributions of income (50K) have been made to the three beneficiaries. I read that the income distribution deduction on Sch B can still be claimed even if the executor has not actually made the distributions. However, would that not generate K-1s requiring that the beneficiaries to amend their 1040 returns? We will have the same situation for 2020-2023.

Thanks in advance.

Lacerte Tax

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sjrcpa

Level 15

"I read that the income distribution deduction on Sch B can still be claimed even if the executor has not actually made the distributions."

Where'd you read that?

There is an election that can be made if distributions were paid within 65 days after year end. Not your situation.

Estate gets to pay the tax, plus interest and penalty.

The more I know the more I don’t know.

P

pgwakefordAuthor

Level 2

Thanks so much for the reply. That's how I've prepared (unfortunately for them), however just wanting to check that I hadn't missed something. It was form the line 18 instructions.

Line 18—Income Distribution Deduction
If the estate or trust was required to distribute income
currently or if it paid, credited, or was required to distribute
any other amounts to beneficiaries during the tax year,
complete Schedule B to determine the estate's or trust's
income distribution deduction. However, if you are filing for a
pooled income fund, don't complete Schedule B. Instead,
attach a statement to support the computation of the income
distribution deduction. For more information, see Pooled
Income Funds, earlier.
If the estate or trust claims an income distribution
deduction, complete and attach:
• Part I (through line 24) and Part II of Schedule I (Form
1041) to refigure the deduction on a minimum tax basis, and
• Schedule K-1 (Form 1041) for each beneficiary to which a
distribution was made or required to be made.