Level 3

Treatment of unusual payments as part of a will

Forum|Forum|4 years ago
September 24, 2021
3 replies
16 views

I understand that most items associated with administering a will are not typically deductible, but this situation is a bit unique (at least for my usual work) and wanted an outside opinion. My clients father passed away a few years back and left a commercial property to his estate. His father and his fathers girlfriend lived on the property until he passed, and she continues to live in a home on the property while my client runs his business off the commercial land. The will states the property will be passed to my client 100% as long as he pays (from his money, not inherited funds) $2,000 monthly until the day she passes and then he will receive the property in full. He also fully upkeeps the property, pays the taxes etc. Should he not make these payments, she will receive the commercial property immediately and my client will get nothing, including being forced to move his business and she will immediately kick him out due to the usual discord after estates are handled.

The question would be since he is paying her from his own funds, is there any recourse to deduct this or 1099 for this money as it was not being paid from funds that were in the estate. Rather, my clients funds so he can keep his businesses operating on the land in question. He obviously wants to give her a 1099, which she was originally ok with doing until she found out she would owe a small amount of tax by doing so.

This topic has been closed for replies.

qbteachmt

Level 15

"He obviously wants to give her a 1099, which she was originally ok with doing until she found out she would owe a small amount of tax by doing so."

Wahhh; cry me a river.

The provision of using "only his own money" seems odd. We all have only our money, no matter what the original source of it was. Once you inherit money, it is added to your money and it is yours.

"My clients father passed away a few years back"

"from funds that were in the estate"

Were? Are? It's not clear if you are describing an Estate or a Trust. How long is the Estate staying open and unsettled?

"she will receive the commercial property immediately and my client will get nothing, including being forced to move his business and she will immediately kick him out due to the usual discord after estates are handled."

These people have never heard of Leased Property, then? A commercial property that is not occupied becomes pretty expensive to maintain.

Of course he can take a business expense on his taxes for costs incurred for the location of his business. Of course any rent payment to someone for business occupancy is a business expense and of course it would be reportable. It isn't clear if he should be paying that person and reporting it as such, or paying the Estate?

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lmlassociatesinc1Author

Level 3

I was trying to say no money was dispersed form the estate as this property was all that was there. He only has to pay her cause of his fathers stipulation.

The estate will remain unsettled until the girlfriend passes, at which point my client will receive the property assuming he maintains the 2k monthly payment to her. It remains open

In theory he should be paying the estate i suppose then the estate would send to her and he would then 1099 the estate? Same difference to him

qbteachmt

Level 15

Do you have a Life Estate, or just a verbal expectation for making some income for the girlfriend? Because legal issues should rule; not, "My girlfriend is your problem, now."

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BobKamman

Level 15

Who is/was personal representative/executor of the estate?

Or was there an estate? Were all these provisions in a trust document, instead?

Was there a deed from the estate to the son? Does it have these restrictions in it?

What happened to the rest of the assets in the estate? Were they distributed to the son? Or are they still being held in an estate account, from which the $2K is being paid? Are 1041's still being filed for the estate?

Why does he think he needs her permission to give her a 1099? Why does he think he can't deduct the rent, if he doesn't? (Last time I checked it's a $50 penalty, although maybe that has gone up recently.)

L

lmlassociatesinc1Author

Level 3

The fathers Girlfriend is the executor

A life estate was left with the provision that she be allowed to continue living on the property and my client be allowed to continue running his business while paying all operating costs of the land, plus $2,000 monthly to her. Short version she lives there for free at my clients expense. Upon her death he receives the property from the life estate.

Restrictions on the property is is cant be sold, or mortgaged until he or she passes.

There were no other assets other then a tiny bank account and some small collectibles which went to the girlfriend.

No 1041's have been filed as she is the executor and doesn't believe them necessary.

He doesnt need permission, just more looking at if he is correct to issue it, as their relationship is toxic at best and we just want to be sure she has no recourse to say a 1099 is not applicable.

qbteachmt

Level 15

"The fathers Girlfriend is the executor"

That doesn't mean she profits personally. Perhaps these payments are supposed to be paid into the Estate.

"Upon her death he receives the property from the life estate."

Yes, that would be typical.

"No 1041's have been filed as she is the executor and doesn't believe them necessary."

She doesn't get to control what is required.

"He doesnt need permission, just more looking at if he is correct to issue it, as their relationship is toxic at best and we just want to be sure she has no recourse to say a 1099 is not applicable."

She doesn't get to control what is required.

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T

Terry53029

Intuit Community Champion

Sounds like your client should seek the advice of an attorney. I would think the $2000 a month sounds like rent, and a 1099 would be appropriate. If not rent, it would be a gift, and would require a 709. I would certainly have my client seek legal advice, as I'm not sure a will can force a person to spend his own money to receive an inherence

qbteachmt

Level 15

I agree with Terry. I would seek an attorney, just to figure out how to abandon this girlfriend and still have the right to the property later, to make it clear that the legal issues outweigh any petty issue she thinks rules this roost. But, hey, that's just my response to stupid...

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