Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
K-1 / Estate Flexibility?
Old 05-01-2019, 11:43 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,751
K-1 / Estate Flexibility?

Somewhat related to this thread:

Think of your heirs!

I have a question about flexibility in assigning gains from an Estate to multiple heirs in an estate. I'll run this by my tax guy, but thought I'd get my bearings here first.

My MIL/FIL's estates have small cap gains associated with them (gains after the step-up in basis since date of death). The heirs are their 3 kids and the grand kids.

I understand that the 'normal' and 'fair' process is to assign the gains to the K-1s in the same proportion as the distributions. But I'm pretty sure that the IRS doesn't really care how it is assigned, as long as all the gains are accounted for and paid by someone.

So to keep things simple, I'd like to propose that the gains be split evenly across the 3 kids. This avoids sending K-1s to all the grand-kids, and them having to wait for the K-1s and also have their taxes slightly more complex. The 3 kids would need to do K-1's anyhow, so as long as they don't mind accepting a slightly higher tax burden (1/3rd of the total, rather than 1/4th of the total), which I think they will accept, then this seems worth the simplification.

Does anyone know if this is a problem? I assume as long as the IRS sees 3 K-1s that account for the gains, all is good?

-ERD50
__________________

ERD50 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-01-2019, 11:57 AM   #2
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,733
That sounds reasonable to me.

Another possibility is for the estate to keep the gains and file its own tax return, paying the income taxes due from the gains or the corpus. Although this may result in a higher tax bill, zero K-1s is probably even simpler than 3 K-1s.
__________________

__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 05-01-2019, 11:58 AM   #3
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 2,581
Quote:
Originally Posted by ERD50 View Post
Somewhat related to this thread:

Think of your heirs!

I have a question about flexibility in assigning gains from an Estate to multiple heirs in an estate. I'll run this by my tax guy, but thought I'd get my bearings here first.

My MIL/FIL's estates have small cap gains associated with them (gains after the step-up in basis since date of death). The heirs are their 3 kids and the grand kids.

I understand that the 'normal' and 'fair' process is to assign the gains to the K-1s in the same proportion as the distributions. But I'm pretty sure that the IRS doesn't really care how it is assigned, as long as all the gains are accounted for and paid by someone.

So to keep things simple, I'd like to propose that the gains be split evenly across the 3 kids. This avoids sending K-1s to all the grand-kids, and them having to wait for the K-1s and also have their taxes slightly more complex. The 3 kids would need to do K-1's anyhow, so as long as they don't mind accepting a slightly higher tax burden (1/3rd of the total, rather than 1/4th of the total), which I think they will accept, then this seems worth the simplification.

Does anyone know if this is a problem? I assume as long as the IRS sees 3 K-1s that account for the gains, all is good?

-ERD50
Is the the total income for the estate in excess of the 1041 filing requirement (which if memory serves is $600)?

If not, then I don't think any K-1s need to be issued.

-gauss
gauss is offline   Reply With Quote
Old 05-01-2019, 12:47 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 21,751
Thanks for the replies.

Yes, the total gains of the estate will somewhat exceed $600, so they will need to file.

My FIL's trust will be dissolved this year, and IIRC, in the final year all income is distributed to heirs, so it will all need to go onto K-1(s). I think that is done so a large estate won't get in an endless loop of having to retain some funds to pay taxes in April, and then having income in that year, stretching taxes out into that year - it would take several years to get rid of any excess required to make sure taxes could be paid.

Maybe we will retain the earnings in my MIL's estate, that probably won't be able to be completely settled this year. Gains are low enough, I'll look but probably no big amount of difference.

-ERD50
ERD50 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Exploring ways to give an allowance (via debit or cash card) with flexibility for me spncity Other topics 9 04-03-2013 06:59 PM
did your doc suggest getting more flexibility exercises? retiringat50 Health and Early Retirement 8 08-08-2008 02:26 PM
Flexibility of renting utrecht FIRE and Money 33 07-13-2007 09:29 AM

» Quick Links

 
All times are GMT -6. The time now is 04:30 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×