Tax Answers

April 01, 1994

Here is an answer from members of the Maryland Association of Certified Public Accountants to a reader's tax question. The Sun will publish answers through April 15.

Q: I was personal representative for my sister, who left an estate of approximately $57,000. I was under the impression that everything was being taken care of by the attorney. I got some interest statements; state taxes were paid at the time of the closure. Do I need to file a 1040 in behalf of her estate?

A: The requirements for filing income tax returns for a decedent are as follows:

1. There should be final income tax returns (A federal Forms 1040 and Maryland 502) for the decedent for the year in which she died if she had income exceeding the individual filing requirements prior to the date of her death.

2. While the decedent's estate is open, the fiduciary (personal representative) is required to file income tax returns for the estate (Forms 1041 and 504) if the income received by the estate exceeds $600. The estate's tax year does not necessarily have to be a calendar year but it cannot exceed 12 months.

Based on your situation it sounds as if a final income tax return was filed for the year in which your sister died, but you need to determine whether a Form 1041 filing is necessary.

For example, if the $57,000 was land and no income was earned, you may not need to file a Form 1041. However, if the $57,000 is a bank account, you likely will have to file a Form 1041 because the interest earned may exceed $600. You can determine whether a 1041 is necessary by calculating the income from the date of death to the end of the month preceding the month in which your sister died. If the amount of this income exceeds $600 you must file a return. This does not mean necessarily that taxes will be owed since there are probably estate expenses which are deductible against the income.

Your attorney may have already determined whether a 1041 is necessary, so you should contact him or her directly.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary. Consult with a tax adviser for specific advice.

Readers may submit questions by phone, mail or fax. Selecte questions will be answered in The Sun and The Evening Sun.

To ask a tax question by phone, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll County 848-0338. Using a touch-tone phone, enter 6120 after the greeting.

Written queries may be sent to TAX QUESTIONS, The Baltimore Sun, Business News Department, 501 N. Calvert St., Baltimore 21278. Fax questions to the Business News Department at (410) 783-2517. Names will not be published. Questions will not be answered by phone.

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