A beneficiary should file an estate income tax return if the estate has losses in the year the estate terminates.

Section 642(h) provides that when an estate or trust terminates, it may pass through to its beneficiaries net operating loss carryovers under IRC Section 172, capital loss carryovers under IRC Section 1212, or deductions in the year of termination in excess of the estate's or trust's gross income for that year. Since many of the administration expenses involved in probate are paid at the time of the termination of the estate, this means that such deductions frequently pass through to the beneficiaries.  If you have an attorney who does not know anything about estate or trust taxation, then this issue is frequently overlooked.  However, if the estate or trust has large losses in the year of termination, then you need to understand the tax consequences.  For more information contact Linde Law Group today.

Matthew A. Linde
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