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State tax refund of a decedent on Form 1041 and Tax benefit rule

When a significant tax refund was received by a decedent, is the refund that needs to be reported on the estate tax return, Form 1041 limited by the tax benefit rule?

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6 Replies 6
sjrcpa
Level 15

Yes


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BobKamman
Level 14

I am not convinced that any of it has to be reported.  Refunds of amounts deducted on a 1040 -- usually these are state income tax refunds, but they can be refunds of other taxes, or other expenses like medical -- are not income.  They are adjustments to amounts previously deducted.  Just because there is a line on the 1040 for reporting them, doesn't make them income.  They are an asset of the estate, and maybe the estate is liable to amend the 1040 to reduce the deduction to the amount actually owed.  

Does anyone know of an IRS or court ruling that addresses this question?

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sjrcpa
Level 15

Isn't it IRD?


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BobKamman
Level 14

@sjrcpa Isn't it IRD?

That's what I'm asking.  It's not income in respect of a living person.  It's just an adjustment to an item deducted in an earlier year.  

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sjrcpa
Level 15

I remembered a similar conversation. I think you can read this even if you are not a member.

https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=18574&p=161609&hilit=ird+state+tax+refund#p161...


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dkh
Level 11

@Blake1040AAAAAAA     is your sign-in a nod to The Fonz?   🤔

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