What to do about taxes?

Here's the deal.

The estate consists of lots of different things. Money in the bank, houses, IRAs, etc. If I sell the house, I probably don't have a gain or loss because the house has a basis of whatever it's worth on the day the relative died. If I liquidate the IRA (as opposed to the IRA having direct beneficiaries listerd), it's ALL income (because it was tax deferred and doesn't get a step up). The money in the bank gets a teeny tiny bit of interest.

All income since date of death goes on the 1041 and if it's the final year, there will be a k-1 even if it's just to pass through a loss on the sale of the house or a usually worthless schedule A deduction for expenses. If it's the first year with lots of income *or* an IRA that's all income, the k-1 will show income if money was distributed.

Since your son's had received a distribution of $15,000, the K-1 can show anything from $0 income, $1000 income all the way up to $15,000 of income or, final year, a loss.

You won't know until you get the k-1. If it's a loss, you don't have to amend (but lose the ability to take the loss). If it's income, you MUST amend.

If it's income of more than $1700, not only do they amend, they pay kiddie tax (at your tax rates)!

I believe that they are able to file a 1040X form, which is the amended 1040 form. They should not freak out those as long as this is done before the deadline they will be alright. I would call the IRS office if you are unsure after reading the instructions of the 1040X.

Hope that helps

I am somewhat in the same boat. Listen to Tax Lady. I bet that K-1 that you will get will show a loss and it might be worth amending the returns to get a bigger refund. The K-1 will generally not correspond to the amount of money that was rec'd. I rec'd a nice sum of money but the K-1 shows a huge loss. I am trying to figure out what to do.

You DO NOT pay taxes on an inheritance. go to www.irs.gov and ask what a K-1 form is, research it, and download it. Taxes are amended with a 1040x form, if need be. {Knowledge faded in my brain so Just guessing, but is a k-1 [and thus the inheritance] related to a business?}