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Form 1041 how to report IRD

cpasjr
Level 1

Decedent received  a 1099-NEC and a 1099-MISC with his social security number.  Death was in 2020, 1099's received in 2021. Both amounts were for restricted stock.  The stock went into widow's investment account. In filing the 1041, how do I record these amounts?  I did an override on the K-1 and put both amounts in ordinary business income.  My thinking is that the total would've been on his W-2 if alive.  Is this correct even though it doesn't show the payers?  If I put it in other income, it shows up on the K-1 also on line 14 H and then passes through to the widow and is subject to additional net investment tax. Thanks in advance for any help.

Sandy Rogers

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BobKamman
Level 15

How did he receive them?  Delivered to the cemetery, or placed under the urn on the widow's mantel?  In either case, forget about the pieces of paper and follow the money.  You're doing a 1041 for what -- the estate?  A now-irrevocable trust?  How did the widow manage to deposit the money to her account if it belonged to the estate or trust?  Is there some other reason you are filing a 1041?  Sounds to me like IRD that goes on the widow's 1040.  

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cpasjr
Level 1

The stock was forwarded directly from his former employer to her brokerage account. I'm doing a 1041 for the estate because the 1099's, and also some bank interest, were made out with the deceased 's social security number.   She files Qualifying widow  for 2021, so can't go on her return.  Thanks. 

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BobKamman
Level 15

If I'm going to sign her return I'm going to make sure it shows all of her income, and not pay any attention to pieces of paper.  Was the bank account in his name only?  Sounds like he had named her as beneficiary of employee benefits -- to avoid having them go to an estate.  The SSN on the 1099's is meaningless on a situation like this.  Or it means, the employer forgot to ask for hers.  

qbteachmt
Level 15

"My thinking is that the total would've been on his W-2 if alive."

Maybe the amount on the NEC, sure. One would be the Granting (-NEC) and one would be the Vesting (-Misc) events.

The granting date is available as basis, but your vesting date seems to be the same, perhaps because of a death clause. Perhaps they sold some stocks to pay backup withholding on the NEC? A -Misc might be used to show the difference between the vested basis and the sales price for generating the cash for withholding. You stated the widow got stocks, so there would be a difference in number of shares vested vs transferred.

 

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cpasjr
Level 1

So the real question is where to enter the amounts from the 1099-NEC and 1099-MISC in Lacerte 1041 detail.  Do they both go in the screen for other income?  If so, accounting income or corpus, or tax only (not in accounting income)?  It doesn't seem to matter since wherever I put it shows up in the same place on the K-1.  I just want to do it correctly. Thanks for the help. S

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qbteachmt
Level 15

You seem to have three events:

The -NEC seems to be the income that would have been late wages, not distributed as cash, because it represents taxable Value for the Stock granted/vested.

The stock is an asset with that basis (and FMV to the widow). Purchase date would be vesting, not grant, if that is different. That's assuming no one filed to elect grant date as basis date.

And the -Misc might be fractional sales and/or short term sales.

I have made a bit of assumptions. The broker might have some info.

 

 

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qbteachmt
Level 15

I offered this article just days ago, on another topic here:

https://www.investopedia.com/articles/tax/09/restricted-stock-tax.asp

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