Highlights of CCH Seminar: Preparing Form 1041

AccountingWEB staff writer Anne Rosivach attended the recent CCH audio seminar: Preparing Form 1041: U.S. Income Tax Return for Estates and Trusts. This is her report.

Tax professionals need to be aware that in the coming years the Internal Revenue Service plans to audit more of the estimated four million trusts which are the centerpiece of estate planning and file Form 1041, says Steve Siegel, J.D., LL.M., estates and trusts practitioner. Siegel conducts "Preparing Form 1041: U.S. Income Tax Return for Estates and Trusts," a two-hour CCH audio seminar that offers practitioners who are gearing up for the coming tax season a concise, line-by-line review of Form 1041 and analysis of what must be done to accurately complete the form.

Throughout the course Siegel refers to fiduciary responsibility and suggests steps fiduciaries can take to optimize the position of beneficiaries and their own position as they prepare the form.

Materials provided for course participants include a concise desk reference and sample forms, schedules, and K-1's prepared for the various types of estates and trusts, which illustrate practical fiduciary tax problems.

Some of the more complex issues practitioners should pay particular attention to as they prepare the form which Siegel discusses in detail are:

Reportable income

Issues relating to income of the trust include:

  • Business income -- If the fiduciary is responsible for operating a business, the fiduciary is viewed as a new taxpayer-owner
  • Taxation of capital gains -- tax consequences for beneficiaries.
  • Specific rules for capital losses in year of termination
  • Consequences of retaining ordinary income
  • Fiduciary passive activity losses – depreciation
  • Partnership income – technical difficulties

Deductions

Siegel reviews specific rules and exceptions, actions that can maximize deductions, as well as areas where deductions are limited. Among these are:

  • Claiming deductions for expenses related to the decedent's estate tax return that may also be claimed on Form 706)
  • Moving income to the final 1040
  • Allocating expenses to nontaxable income
  • Charitable deduction -- Siegel emphasizes that there must be some document or evidence that the decedent intended the charitable contribution for which a deduction is taken. He discusses the timing of charitable contributions – election to file in year 1 or year 2
  • Fiduciary as a separate taxable entity with pass through characteristics for the income distribution deduction
  • Distributable net income (DNI) concept and exceptions
  • "65-day" rule
  • Deduction for income in respect of a decedent and certain generation skipping taxes

Final year considerations

Siegel also refers to rules relating to deductions that apply only to the final year for the estate and reminds participants that Form 7004 will extend the date for filing only for five months in 2009, until September 15th. Other special situations that apply to the final year are reviewed including use of excess deductions and claiming fees as deductions.

Other matters

Before analyzing the sample 1041's, 1041 schedules and K-1s, Siegel touches on calculation of tax owed, payment and penalties, use of the AMT credit, and fees charged by the fiduciary.

About the presenter
Steven G. Siegel is president of The Siegel Group, a Morristown, New Jersey - based national consulting firm specializing in tax consulting, estate planning and advising family business owners and entrepreneurs. Mr. Siegel holds a BS from Georgetown University, a JD from Harvard Law School and an LLM in Taxation from New York University.

About CCH Audio Seminars
You can train your staff with the power of CCH audio seminars. CCH audio seminar events are live and interactive with opportunities to ask the presenter(s) your questions. The audio is delivered directly to you over the telephone to provide clear, reliable sound quality. Some events also include a web component. Invite as many people as you wish to attend at your location. For large groups, use a speakerphone to deliver the audio and a projection system to deliver the Web component.

You can view the list of upcoming CCH Audio Seminars.

You may like these other stories...

School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
Many senior US tax professionals believe that a streamlined audit process will be the top benefit resulting from the IRS Transfer Pricing Audit Roadmap, a new toolkit organized around a notional 24-month audit timeline,...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.