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Re: 1041 for estate in litigation

  
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Re: 1041 for estate in litigation njtaxguy 10-25-2006
Posted by njtaxguy on October 25, 2006, 6:46 pm
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 s...@panix.com (Seth Breidbart) wrote:

>> I have a client who is the administrator of an estate that
>> is in litigation between the beneficiaries. The
>> administrator is under a court order to pay only expenses
>> and distribute nothing to the beneficiaries until the matter
>> is resolved. The income to the estate is significant and
>> results in a higher tax rate than the beneficiaries are
>> likely to pay had the income been distributed.

> Would it make sense to set up a separate trust, which gets
> the income that should be distributed to the beneficiaries
> and holds it until the court rules on who the benficiaries
> are?

Thanks for your response.
As I understand you suggestion - The administrator would
establish the trust funded with the undistributed income and
wait for the court decision.

The 'final' distribution would be from the trust per the
court's allocation.

Is this correct?

Gordon

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Posted by Stuart A. Bronstein on October 27, 2006, 10:55 pm
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> Thanks for your response.
> As I understand you suggestion - The administrator would
> establish the trust funded with the undistributed income and
> wait for the court decision.
>
> The 'final' distribution would be from the trust per the
> court's allocation.
>
> Is this correct?

That's what it sounds like to me. But I doubt it will give
you any benefit.

What might be better would for all the beneficiaries to
agree that they will individually recognize the income (the
trust can send them 1099's), and that the trust will
disburse to them sufficient funds to pay the tax until the
case is finally resolved.

Stu

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Seth Breidbart on October 28, 2006, 5:51 pm
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> What might be better would for all the beneficiaries to
> agree that they will individually recognize the income (the
> trust can send them 1099's), and that the trust will
> disburse to them sufficient funds to pay the tax until the
> case is finally resolved.

But until the case is resolved, nobody knows whether party A
gets 90% or 10% (or 0%) of the trust/income.

Seth

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Stuart A. Bronstein on October 30, 2006, 2:31 am
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sethb@panix.com (Seth Breidbart) wrote:

>> What might be better would for all the beneficiaries to
>> agree that they will individually recognize the income (the
>> trust can send them 1099's), and that the trust will
>> disburse to them sufficient funds to pay the tax until the
>> case is finally resolved.

> But until the case is resolved, nobody knows whether party A
> gets 90% or 10% (or 0%) of the trust/income.

But they all at least claim to be current beneficiaries. So
I don't see why they can't agree to share the income
pro-rata for tax purposes. The trust would issue 1099s and
the trust would disburse enough money to pay for the taxes -
likely less than if the trust paid its own taxes.

Stu

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Seth Breidbart on October 31, 2006, 1:28 am
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> sethb@panix.com (Seth Breidbart) wrote:

>> But until the case is resolved, nobody knows whether party A
>> gets 90% or 10% (or 0%) of the trust/income.

> But they all at least claim to be current beneficiaries. So
> I don't see why they can't agree to share the income
> pro-rata for tax purposes.

They certainly _can_. But I have no idea why they're
fighting; if they hate each other and want the other one(s)
to get *nothing* they certainly *won't* agree. Even if
they're just greedy, someone might feel that 90% less trust
taxes of 35% is better than 50% less his tax rate.

Seth

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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