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Member
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Last Login: 2/17/2006 5:31:10 PM
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Client passed away in early 2003. All the records picked up timely by the attorney/executor. Five months later, attorney (literally) disappeared, and most of client's records not recovered. New attorneys finally got copies of will and opened probate. After three years, probate documentation finally complete. All prior filing deadlines blown.
Estate is ballpark 1.1MM, but a 200k asset passed by title to a charity, bypassing probate. Probate trust, without any charitable deduction, is taxable in 2003 (12k tax) and 2005 (40k tax). All remaining assets are money. Attorney is comfortable in conclusion that there is not a taxable estate and comfortable not filing 706. Substitute executor is a good client.
This has been lying in the weed for 3 years, and suddenly needs immediate answers.
Questions:
1) Any argument that the 1041/541 could deduct the charitable contribution?
2) If the numbers and the attorney conclusion are most likely correct, any compelling reason for filing a very late 706? (I am interested in protecting the executor. I understand the statute problem, but agree that estate is not taxable. If no 706, I would write a CYA letter, but would rather not run up the fees without a good reason.)
Thank you in advance for your help. John
John Levy, CPA, CITP
2161 Ygnacio Valley Rd. #10
Walnut Creek, CA 94598
925/937-3444 -- (fax)935/937-8465
John@LevyCPA.com
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Power Member
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Last Login: 1/6/2010 6:00:00 PM
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| Some preliminary questions: How was title held to the asset passing to the charity? Is it includable in the "gross estate?" If not, why not.
John Jacobson
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Power Member
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Last Login: 3/12/2011 12:58:57 PM
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| John: The IRS is auditing 1041s and chedking to see if charitable contributions were deducted on 706 before allowing them on Form 1041. I don't see that you have a 1041 deduction but there would be one on Form 706. On the 1041 you don't deduct specific bequests unless they're running through income - example, you give a stock to charity and the estate collects dividends, then their is a charitable deduction for paying the dividends over to the charity. A specific bequest to a charity is deductible on Form 706 because you're accounting for assets not income. I'd file the 706 late to claim the charitable deduction. Mary Kay 
Mary Kay Foss
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| I am still gathering information, but my understanding was that the asset was titled so that the charity had a suvivorship interest in the asset. The attorney indicated that title caused the asset to pass directly to the charity.
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Thank you Mary Kay
John
John Levy CPA
john@levycpa.com
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