Income In Respect Of A Decedent - Income Tax Treatment

Income Tax Treatment
The character of the income you receive is the same as it would be to the decedent if they were still alive. If the income would have been a capital gain to the decedent, it will also be a capital gain to the final recipient.The income must be reported by the person or entity who acquired, from the decedent, the right to receive the income, and must be reported on their tax return.


Examples:
Terry died. A $10,000 fee for advice given was collected after his death. Suppose the fee increased Terry's estate tax liability by $4,000. Terry's estate is allowed an income tax deduction for the estate taxes attributable to the fee collected.

Mr. Rodriguez's estate is the beneficiary of his IRA. At his death, the IRA was valued at $1 million and his taxable estate was $6 million. With the IRA, estate tax is $350,000, and without the IRA, the estate tax is zero ($5 million exemption). As the IRA is distributed to the estate, the estate can reduce any income tax payable by the $350,000 (the estate taxes paid because of the IRA being included).

Sample Questions 1 - 3


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