Level 3

Clients spouse passed away in May.  Client received a 1099-R to the spouse (not to estate) for loan offset distribution in Thrift Savings Plan.  Does the 1099 get filed on 1041 or 1040?  Technically there is no estate as the spouse was the beneficiary of the TSP and all other assets were co-owned thus negating any kind of estate.  Some CPA websites says to file with 1041 because the 1099 was created after death.  In this case,  since there is no estate, who pays the taxes?  If filed on 1040, spouse would have to pay the taxes on loan that she was not legally liable for to begin with.  The offset reduces the amount of the TSP account so in theory, the spouse is being penalized for the loan. 

I've researched the IRS regs and various other areas, including some CPA input, but can not come up with clear concise direction.  The IRS does not address this area specifically that I can find.  Any input from someone with direct experience or knowledge of this situation would be greatly appreciated.

Labels (1)
0 Cheers