Must Estate Distribution Be Reported on 1041 Income Tax Return?
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Question:
I am starting a 1041 for my Mom’s estate and had a question about distributions. My sister acquired my Mom’s share of the house they both owned and lived in together. Is my Mom’s interest in that real estate reportable as a distribution to my sister? If so, how would that amount be calculated?
Response:
No, you don’t report distributions on the 1041. The 1041 is an income tax return so it only reports income earned by the estate, whether dividends, interest, rent, capital gains or business income. If the income is then distributed to a beneficiary, then it passes through to the beneficiary, who receives a K-1 from the estate. However, if the house was not sold resulting in capital gain, but instead simply distributed to your sister as part of her inheritance, it is not reported on the 1041.
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