Estate tax
return. Generally,
if the decedent died during
2004, an estate tax return (Form
706) must be filed if the gross
estate is more than $1,500,000.
Consistent
treatment of estate items. Beneficiaries
must generally treat estate
items the same way on their
individual returns as they are
treated on the estate's return.
For more information, see
How
and When To Report
under Distributions to
Beneficiaries From an Estate
in Publication 559,
Survivors, Executors, and
Administrators.
Introduction
This chapter discusses the
tax responsibilities of the
person who is in charge of the
property (estate) of an
individual who has died
(decedent). It also covers the
following topics.
Filing the
decedent's final return.
Tax effects on
survivors.
This chapter does not
discuss the requirements for
filing an income tax return of
an estate (Form 1041). For
information on Form 1041, see
Income Tax Return of an
EstateForm 1041 in
Publication 559. This chapter
also does not discuss the
requirements for filing an
estate tax return (Form 706).
For information, see Form 706
and its instructions.
Useful Items - You
may want to see:
Publication
559
Survivors, Executors,
and Administrators
Form
(and Instructions)
56
Notice Concerning
Fiduciary Relationship
1310
Statement of Person
Claiming Refund Due a
Deceased Taxpayer
4810
Request for Prompt
Assessment Under
Internal Revenue Code
Section 6501(d)
Personal
Representative
A personal representative of
an estate is an executor,
administrator, or anyone who is
in charge of the decedent's
property.
Executor.
Generally, an executor (or
executrix) is named in a
decedent's will to
administer the estate
(property and debts left by
the decedent) and distribute
properties as the decedent
has directed.
Administrator.
An administrator (or
administratrix) is usually
appointed by the court if no
will exists, if no executor
was named in the will, or if
the named executor cannot or
will not serve.
Personal
representative.
In general, an executor
and an administrator perform
the same duties and have the
same responsibilities.
Because a personal
representative for a
decedent's estate can be an
executor, administrator, or
anyone in charge of the
decedent's property, the
term personal representative
will be used throughout this
chapter.
The surviving spouse may
or may not be the personal
representative, depending on
the terms of the decedent's
will or the court
appointment.
Duties
The primary duties of a
personal representative are
to collect all of the
decedent's assets, pay the
creditors, and distribute
the remaining assets to the
heirs or other
beneficiaries.
The personal
representative also must
perform the following
duties.
Notify the IRS
(as discussed below)
that he or she is
acting as the
personal
representative.
File any income
tax and estate tax
return when due.
(See
Final Return for
the Decedent, later.)
Pay any tax
determined up to the
date of discharge
from duties.
Provide the
payers of any
interest and
dividends the
name(s) and
identification
number(s) of the new
owner(s). (See
Interest and
Dividend Income
(Forms 1099), later.)
For more information on
the duties and
responsibilities of the
personal representative, see
Duties under
Personal Representative in Publication 559.
Notifying the IRS.
If you are appointed
to act in any fiduciary
capacity for another,
you must file a written
notice with the IRS
stating this. Form 56
can be used for this
purpose. The
instructions and other
requirements are given
on the back of the form.
Final Return for the
Decedent
The same filing requirements
that apply to individuals
determine if a final income tax
return must be filed for the
decedent. Filing requirements
are discussed in chapter 1.
Filing to
get a refund.
A return should be filed
to obtain a refund if tax
was withheld from salaries,
wages, pensions, or
annuities, or if estimated
tax was paid, even if a
return is not required to be
filed. See
Claiming a refund, later. Also, the
decedent may be entitled to
other credits that result in
a refund. See chapters 38
and 39 for additional
information on refundable
credits and see chapter 36
for information on the child
tax credit.
Determining
income and deductions.
The method of accounting
regularly used by the
decedent before death
generally determines what
income you must include and
what deductions you can take
on the final return.
Generally, individuals use
one of two methods of
accounting: cash or accrual.
Cash
method.
If the decedent used the
cash method of accounting,
include only the items of
income actually or
constructively received
before death and deduct only
the expenses the decedent
paid before death. For an
exception for certain
medical expenses not paid
before death, see
Decedent in
chapter 23.
Accrual
method.
If the decedent used an
accrual method of
accounting, report only
those items of income that
the decedent accrued, or
earned, before death. Deduct
those expenses the decedent
was liable for before death,
regardless of whether the
expenses were paid.
Additional information.
For more information on
the cash and accrual
methods, see
Accounting Methods in chapter 1.
Who must
file the return?
The personal
representative (defined
earlier) must file the final
income tax return (Form
1040) of the decedent for
the year of death and any
returns not filed for
preceding years. A surviving
spouse, under certain
circumstances, may have to
file the returns for the
decedent. See
Joint return,
later.
Example.
Samantha Smith died
on March 21, 2004,
before filing her 2003
tax return. Her personal
representative must file
her 2003 return by April
15, 2004. Her final tax
return is due April 15,
2005.
Filing the
return.
The word DECEASED,
the decedent's name, and the
date of death should be
written across the top of
the tax return. In the name
and address space, you
should write the name and
address of the decedent and,
if a joint return, of the
surviving spouse. If a joint
return is not being filed,
the decedent's name should
be written in the name space
and the personal
representative's name and
address should be written in
the remaining space.
Example.
John Stone died in
early 2004. He was
survived by his wife
Jane. The top of their
final joint return on
Form 1040, which
includes the required
information, is
illustrated on the next
page.
Signing the
return.
If a personal
representative has been
appointed, that person must
sign the return. If it is a
joint return, the surviving
spouse must also sign it.
If no personal
representative has been
appointed, the surviving
spouse (on a joint return)
should sign the return and
write in the signature area
Filing
as surviving spouse.
See Joint return, later.
If no personal
representative has been
appointed and if there is no
surviving spouse, the person
in charge of the decedent's
property must file and sign
the return as personal
representative.
Example.
Assume in the
previous example that no
personal representative
has been appointed. The
bottom of the final
joint return, which
shows that Jane is
filing the return as the
surviving spouse, is
illustrated on the next
page.
Third party
designee.
You can check the Yes
box in the Third Party
Designee area of the return
to authorize the IRS to
discuss the return with a
friend, family member, or
any other person you choose.
This allows the IRS to call
the person you identified as
the designee to answer any
questions that may arise
during the processing of the
return. It also allows the
designee to perform certain
actions. See your income tax
package for details.
Claiming a
refund.
Generally, a person who is
filing a return for a
decedent and claiming a
refund must file Form 1310
with the return. However, if
the person claiming the
refund is a surviving spouse
filing a joint return with
the decedent, or a
court-appointed or certified
personal representative
filing an original return
for the decedent, Form 1310
is not needed. The personal
representative must attach
to the return a copy of the
court certificate showing
that he or she was appointed
the personal representative.
If the personal
representative is filing a
claim for refund on Form
1040X, Amended U.S.
Individual Income Tax
Return, or Form 843, Claim
for Refund and Request for
Abatement, and the court
certificate has already been
filed with the IRS, attach
Form 1310 and write Certificate
Previously Filed at
the bottom of the form.
Example.
Mr. Green died before
filing his tax return. You
were appointed the personal
representative for Mr.
Green's estate and you file
his Form 1040 showing a
refund due. You do not need
Form 1310 to claim the
refund if you attach a copy
of the court certificate
showing you were appointed
the personal representative.
When and
where to file.
The final income tax
return is due at the same
time the decedent's return
would have been due had
death not occurred. The
final return for a decedent
who was a calendar year
taxpayer is generally due
April 15 following the year
death occurred. However,
when the due date falls on a
Saturday, Sunday, or legal
holiday, the return is filed
timely if filed by the next
business day.
Generally, you must file
the final income tax return
of the decedent with the
Internal Revenue Service
Center for the place where
you live. A tax return for a
decedent can be
electronically filed. A
personal representative may
also obtain an income tax
filing extension on behalf
of a decedent.
Joint
return.
Generally, the personal
representative and the
surviving spouse can file a
joint return for the
decedent and the surviving
spouse. However, the
surviving spouse alone can
file the joint return if no
personal representative has
been appointed before the
due date for filing the
joint return for the year of
death. This also applies to
the return for the preceding
year if the decedent died
after the close of the
preceding tax year and
before filing the return for
that year. The income of the
decedent that was includible
on his or her return for the
year up to the date of death
(as explained under
Determining income and
deductions,
earlier) and the income of
the surviving spouse for the
entire year must be included
in the final joint return.
A joint return with the
decedent cannot be filed for
the year of death if the
surviving spouse remarried
before the end of the year
of the decedent's death. The
filing status of the
decedent in this instance is
married filing separate
return.
Personal representative may
revoke joint return
election.
A court-appointed personal
representative may revoke an
election to file a joint
return that was previously
made by the surviving spouse
alone. This is done by
filing a separate return for
the decedent within one year
from the due date of the
return (including any
extensions). The joint
return made by the surviving
spouse will then be regarded
as the separate return of
that spouse by excluding the
decedent's items and
refiguring the tax
liability.
Relief
from joint liability.
In some cases, one spouse
may be relieved of joint
liability for tax, interest,
and penalties on a joint
return for items of the
other spouse that were
incorrectly reported on the
joint return. If the
decedent qualified for this
relief while alive, the
personal representative can
pursue an existing request,
or file a request, for
relief from joint liability
within two years of the
first collection activity
against the requesting
spouse. For information on
requesting this relief, see
Filing a Joint Return in chapter 2.
This section explains how
to report certain types of
income on the final return.
The rules on income
discussed in the other
chapters of this publication
also apply to a decedent's
final return. See chapters 6
through 17, if they apply.
Interest and
Dividend
Income
(Forms 1099)
A Form 1099 should be
received for the
decedent reporting
interest and dividends
earned before death.
These amounts must be
included on the
decedent's final return.
A separate Form 1099
should show the interest
and dividends earned
after the date of the
decedent's death and
paid to the estate or
other recipient that
must include those
amounts on its return.
You can request
corrected Forms 1099 if
these forms do not
properly reflect the
right recipient or
amounts.
For example, a Form
1099-INT reporting
interest payable to the
decedent may include
income that should be
reported on the final
income tax return of the
decedent, as well as
income that the estate
or other recipient
should report, either as
income earned after
death or as income in
respect of the decedent
(discussed later). For
income earned after
death, you should ask
the payer for a Form
1099 that properly
identifies the recipient
(by name and
identification number)
and the proper amount.
If that is not possible,
or if the form includes
an amount that
represents income in
respect of the decedent,
report the interest, as
shown next under
How to report.
See
U.S. savings bonds
acquired from decedent
in Publication 559 for
information on savings
bond interest that may
have to be reported on
the final return.
How
to report.If you are
preparing the
decedent's final
return and you have
received a Form
1099-INT for the
decedent that
includes amounts
belonging to the
decedent and to
another recipient
(the decedent's
estate or another
beneficiary), report
the total interest
shown on Form
1099-INT on Schedule
1 (Form 1040A) or on
Schedule B (Form
1040). Next, enter a
subtotal of the
interest shown on
Forms 1099 and the
interest reportable
from other sources
for which you did
not receive Forms
1099. Then, show any
interest (including
any interest you
receive as a
nominee) belonging
to another recipient
separately and
subtract it from the
subtotal. Identify
this adjustment as a
Nominee
Distribution
or other appropriate
designation.
Report dividend
income for which you
received a Form
1099-DIV, Dividends
and Distributions,
on the appropriate
schedule using the
same procedure.
Note.
If the
decedent
received amounts
as a nominee,
you must give
the actual owner
a Form 1099,
unless the owner
is the
decedent's
spouse. See
General
Instructions for
Forms 1099,
1098, 5498, and
W-2G,
for more
information on
filing forms
1099.
Accelerated
Death
Benefits
Accelerated death
benefits are amounts
received under a life
insurance contract
before the death of the
insured individual.
These benefits also
include amounts received
on the sale or
assignment of the
contract to a provider
of viatical settlements
(life insurance payouts
prior to death).
Generally, if the
decedent received
accelerated death
benefits either on his
or her own life or on
the life of another
person, those benefits
are not included in the
decedent's income. This
exclusion applies only
if the insured was a
terminally or
chronically ill
individual. For more
information, see
Accelerated death
benefits
under
Gifts, Insurance,
and Inheritances in Publication
559.
Business
Income
This section
discusses some of the
business income which
may have to be included
on the final return.
Partnership income.
The death of a
partner closes the
partnership's tax
year for that
partner. Generally,
it does not close
the partnership's
tax year for the
remaining partners.
The decedent's
distributive share
of partnership items
must be figured as
if the partnership's
tax year ended on
the date the partner
died. To avoid an
interim closing of
the partnership
books, the partners
can agree to
estimate the
decedent's
distributive share
by prorating the
amounts the partner
would have included
for the entire
partnership tax
year.
On the decedent's
final return,
include the
decedent's
distributive share
of partnership items
for the following
periods.
The
partnership's
tax year
that ended
within or
with the
decedent's
final tax
year (the
year ending
on the date
of death);
and
The
period, if
any, from
the end of
the
partnership's
tax year in
(1) to the
decedent's
date of
death.
S
corporation income.
If the decedent
was a shareholder in
an S corporation,
include on the final
return the
decedent's share of
the S corporation's
items of income,
loss, deduction, and
credit for the
following periods.
The
corporation's
tax year
that ended
within or
with the
decedent's
final tax
year (the
year ending
on the date
of death);
and
The
period, if
any, from
the end of
the
corporation's
tax year in
(1) to the
decedent's
date of
death.
Self-employment
income.
Include
self-employment
income actually or
constructively
received or accrued,
depending on the
decedent's
accounting method.
For self-employment
tax purposes only,
the decedent's
self-employment
income will include
the decedent's
distributive share
of a partnership's
income or loss
through the end of
the month in which
death occurred. For
this purpose, the
partnership income
or loss is
considered to be
earned ratably over
the partnership's
tax year. For more
information on how
to compute
self-employment
income, see
Publication 533,
Self-Employment Tax.
Coverdell
Education
Savings
Account
(ESA)
Generally, the
balance in a Coverdell
ESA must be distributed
within 30 days after the
individual for whom the
account was established
reaches age 30, or dies,
whichever is earlier.
The treatment of the
Coverdell ESA at the
death of an individual
under age 30 depends on
who acquires the
interest in the account.
If the decedent's estate
acquires the interest,
the earnings on the
account must be included
on the final income tax
return of the decedent.
If a beneficiary
acquires the interest,
see the discussion under
Income in Respect of
the Decedent,
later.
The age 30 limit does
not apply if the
individual for whom the
account was established,
or the beneficiary that
acquires the account, is
an individual with
special needs. This
includes an individual
who because of a
physical, mental, or
emotional condition
(including a learning
disability) requires
additional time to
complete his or her
education.
For more information
on Coverdell ESAs, see
Publication 970, Tax
Benefits for Education.
Archer MSA
The treatment of an
Archer MSA or a Medicare
Advantage MSA, at the
death of the account
holder, depends on who
acquires the interest in
the account. If the
decedent's estate
acquires the interest,
the fair market value of
the assets in the
account on the date of
death is included in
income on the decedent's
final return.
If a beneficiary
acquires the interest,
see the discussion under
Income in Respect of
the Decedent, later. For more
information on Archer
MSAs, see Publication
969, Health Savings
Accounts and Other
Tax-Favored Health
Plans.
Exemptions,
Deductions, and
Credits
Generally, the rules for
exemptions, deductions, and
credits allowed to an
individual also apply to the
decedent's final income tax
return. Show on the final
return deductible items the
decedent paid (or accrued,
if the decedent reported
deductions on an accrual
method) before death.
Exemptions
You can claim the
decedent's personal
exemption on the final
income tax return. If
the decedent was another
person's dependent (for
example, a parent's),
you cannot claim the
personal exemption on
the decedent's final
return.
Standard
Deduction
If you do not itemize
deductions on the final
return, the full amount
of the appropriate
standard deduction is
allowed regardless of
the date of death. For
information on the
appropriate standard
deduction, see chapter
22.
Itemized
Deductions
If the total of the
decedent's itemized
deductions is more than
the decedent's standard
deduction, the federal
income tax will
generally be less if you
claim itemized
deductions on the final
return. See chapters 23
through 30 for the types
of expenses that are
allowed as itemized
deductions.
Medical expenses.
Medical expenses
paid before death by
the decedent are
deductible, subject
to limits, on the
final income tax
return if deductions
are itemized. This
includes expenses
for the decedent as
well as for the
decedent's spouse
and dependents.
Qualified
medical expenses are
not deductible if
paid with a tax-free
distribution from an
Archer MSA.
For information on
certain medical
expenses that were
not paid before
death, see
Decedent in chapter
23.
Unrecovered
investment in
pension.
If the decedent
was receiving a
pension or annuity
(with an annuity
starting date after
1986) and died
without a surviving
annuitant, you can
take a deduction on
the decedent's final
return for the
amount of the
decedent's
investment in the
pension or annuity
contract that
remained unrecovered
at death. The
deduction is a
miscellaneous
itemized deduction
that is not subject
to the 2% limit on
adjusted gross
income. See chapter
30.
Deduction
for Losses
A decedent's net
operating loss deduction
from a prior year and
any capital losses
(including capital loss
carryovers) can be
deducted only on the
decedent's final income
tax return. A net
operating loss on the
decedent's final income
tax return can be
carried back to prior
years (see Publication
536, Net Operating
Losses (NOLs) for
Individuals, Estates,
and Trusts). You cannot
deduct any unused net
operating loss or
capital loss on the
estate's income tax
return.
Credits
Any of the tax
credits discussed in
this publication also
apply to the final
return if the decedent
was eligible for the
credits at the time of
death. These credits are
discussed in chapters 34
through 39.
Tax
withheld and
estimated payments.
There may have
been income tax
withheld from the
decedent's pay,
pensions, or
annuities before
death, and the
decedent may have
paid estimated
income tax. To get
credit for these tax
payments, you must
claim them on the
decedent's final
return. For more
information, see
Credit for
Withholding and
Estimated Tax in chapter 5.
Tax Effect on Others
This section contains
information about the effect of
an individual's death on the
income tax liability of the
survivors (including the widow
or widower and any
beneficiaries) and the estate. A
survivor should coordinate the
filing of his or her own tax
return with the personal
representative handling the
decedent's estate. The personal
representative can coordinate
filing status, exemptions,
income, and deductions so that
the decedent's final return and
the income tax returns of the
survivors and the estate are all
filed correctly.
Gifts and
inheritances.
Property received as a
gift, bequest, or
inheritance is not included
in your income. However, if
property you receive in this
manner later produces
income, such as interest,
dividends, or rent, that
income is taxable to you. If
the gift, bequest, or
inheritance you receive is
the income from property,
that income is taxable to
you.
If you inherited the right
to receive income in respect
of the decedent, see
Income in Respect of the
Decedent, later.
Joint
return by surviving spouse.
A surviving spouse can
file a joint return for the
year of death and may
qualify for special tax
rates for the following 2
years. For more information,
see Qualifying Widow(er)
With Dependent Child in chapter 2.
Decedent as
your dependent.
If the decedent qualified
as your dependent for the
part of the year before
death, you can claim the
exemption for the dependent
on your tax return,
regardless of when death
occurred during the year.
If the decedent was your
qualifying child, you may be
able to claim the child tax
credit. See chapter 36.
Income in
Respect of the
Decedent
All income that the
decedent would have received
had death not occurred and
that was not properly
includible on the final
return, discussed earlier,
is income in respect of the
decedent.
How To
Report
Income in respect of
a decedent must be
included in the income
of one of the following.
The
decedent's
estate, if the
estate receives
it.
The
beneficiary, if
the right to
income is passed
directly to the
beneficiary and
the beneficiary
receives it.
Any person
to whom the
estate properly
distributes the
right to receive
it.
If you have to
include income in
respect of the decedent
in your gross income and
an estate tax return was
filed for the decedent,
you may be able to claim
a deduction for the
estate tax paid on that
income. For more
information, see
Publication 559.
Example 1.
Frank Johnson
owned and operated
an apple orchard. He
used the cash method
of accounting. He
sold and delivered
1,000 bushels of
apples to a canning
factory for $2,000,
but did not receive
payment before his
death. The proceeds
from the sale are
income in respect of
the decedent. When
the estate was
settled, payment had
not been made and
the estate
transferred the
right to the payment
to his widow. When
Frank's widow
collects the $2,000,
she must include
that amount in her
return. It is not to
be reported on the
final return of the
decedent or on the
return of the
estate.
Example 2.
Assume the same
facts as in Example
1, except that Frank
used an accrual
method of
accounting. The
amount accrued from
the sale of the
apples would be
included on his
final return.
Neither the estate
nor the widow will
realize income in
respect of the
decedent when the
money is later paid.
Example 3.
Cathy O'Neil was
entitled to a large
salary payment at
the date of her
death. The amount
was to be paid in
five annual
installments. The
estate, after
collecting two
installments,
distributed the
right to the
remaining
installments to you,
the beneficiary. The
payments are income
in respect of the
decedent. None of
the payments were
includible in
Cathy's final
return. The estate
must include in its
income the two
installments it
received, and you
must include in your
income each of the
three installments
as you receive them.
Transferring your
right to income.
If you transfer
your right to income
in respect of a
decedent, you must
include in your
income the greater
of:
The
amount you
receive for
the right,
or
The fair
market value
of the right
at the time
of the
transfer.
Fair market
value (FMV).
FMV is the price
at which the
property would
change hands between
a buyer and a
seller, neither
having to buy or
sell, and both
having reasonable
knowledge of all
necessary facts.
Giving your
right to income as a
gift.
If you give your
right to receive
income in respect of
a decedent as a
gift, you must
include in your
income the fair
market value of the
right at the time
you make the gift.
Type of income.
The character or
type of income that
you receive in
respect of a
decedent is the same
as it would be to
the decedent if he
or she were alive.
If the income would
have been a capital
gain to the
decedent, it will be
a capital gain to
you.
Inherited IRAs.
If a beneficiary
receives a lump-sum
distribution from a
traditional IRA he
or she inherited,
all or some of it
may be taxable. The
distribution is
taxable in the year
received as income
in respect of a
decedent up to the
decedent's taxable
balance. This is the
decedent's balance
at the time of
death, including
unrealized
appreciation and
income accrued to
date of death, minus
any basis
(nondeductible
contributions).
Amounts distributed
that are more than
the decedent's
entire IRA balance
(including taxable
and nontaxable
amounts) at the time
of death are the
income of the
beneficiary.
If the beneficiary
of a traditional IRA
is the decedent's
surviving spouse who
properly rolls over
the distribution
into another
traditional IRA, the
distribution is not
currently taxed. A
surviving spouse can
also roll over tax
free the taxable
part of the
distribution into a
qualified plan,
section 403(b)
annuity, or section
457 plan.
Example.
At the time
of his death,
Greg owned a
traditional IRA.
All of the
contributions by
Greg to the IRA
had been
deductible
contributions.
Greg's nephew,
Mark, was the
sole beneficiary
of the IRA. The
entire balance
of the IRA,
including income
accruing before
and after Greg's
death, was
distributed to
Mark in a lump
sum. Mark must
include the
total amount
received in his
income. The
portion of the
lump-sum
distribution
that equals the
amount of the
balance in the
IRA at Greg's
death, including
the income
earned before
death, is income
in respect of
the decedent.
For more
information on
inherited IRAs, see
Publication 590,
Individual
Retirement
Arrangements (IRAs).
Roth IRAs.
Qualified
distributions from a
Roth IRA are not
subject to tax. A
distribution made to
a beneficiary or to
the Roth IRA owner's
estate on or after
the date of death is
a qualified
distribution if it
is made after the
5-year tax period
beginning with the
first tax year in
which a contribution
was made to any Roth
IRA of the owner.
Part of any
distribution to a
beneficiary that is
not a qualified
distribution may be
includible in the
beneficiary's
income. Generally,
the part includible
is the earnings in
the Roth IRA.
Earnings
attributable to the
period ending with
the decedent's date
of death are income
in respect of the
decedent. Additional
earnings are the
income of the
beneficiary.
For more
information on Roth
IRAs, see
Publication 590.
Coverdell education
savings account
(ESA).
If the decedent's
spouse or other
family member is the
designated
beneficiary of the
decedent's account,
the Coverdell ESA
becomes that
person's Coverdell
ESA. It is subject
to the rules
discussed in
Publication 970.
Any other
beneficiary
(including a spouse
or family member who
is not the
designated
beneficiary) must
include in income
the earnings portion
of the distribution.
Any balance
remaining at the
close of the 30-day
period is deemed to
be distributed at
that time. The
amount included in
income is reduced by
any qualified
education expenses
of the decedent that
are paid by the
beneficiary within 1
year after the
decedent's date of
death.
Archer MSA.
If the decedent's
spouse is the
designated
beneficiary of the
account, the account
becomes that
spouse's Archer MSA.
It is subject to the
rules discussed in
Publication 969.
Any other
beneficiary
(including a spouse
that is not the
designated
beneficiary) must
include in income
the fair market
value of the assets
in the account on
the decedent's date
of death. This
amount must be
reported for the
beneficiary's tax
year that includes
the decedent's date
of death. The amount
included in income
is reduced by any
qualified medical
expenses for the
decedent that are
paid by the
beneficiary within 1
year after the
decedent's date of
death.
Other income.
For examples of
other income
situations
concerning
decedents, see
Specific Types
of Income in Respect
of a Decedent in
Publication 559.
Deductions
in Respect of
the Decedent
Items such as business
expenses, income-producing
expenses, interest, and
taxes, for which the
decedent was liable but that
are not properly allowable
as deductions on the
decedent's final income tax
return will be allowed as a
deduction to one of the
following when paid.
The estate; or
The person who
acquired an interest
in the decedent's
property (subject to
such obligations)
because of the
decedent's death, if
the estate was not
liable for the
obligation.
