What must estates and trusts obtain like any other type of entity?
An EIN
This is required for filing income tax returns for trusts and estates, often referred to as “fiduciary” tax returns.
When do estates and trusts generally terminate?
When all of their assets and income have been distributed, and all of their liabilities have been paid.
The IRS may intervene and terminate a trust or estate if its existence is unnecessarily prolonged.
How do individual, estate and trusts taxpayers calculate and track Net Operating Loss (NOL) carryovers and carrybacks?
Taxpayers use Form 172 to figure the amount of NOL available to carry forward (and in certain cases, carry back).
How is the Net Investment Income Tax (NIIT) calculated for estates and trusts?
Estates and trusts pay a 3.8% NIIT on the lesser of:
- Their undistributed net investment income
- The excess of adjusted gross income (AGI) over the threshold for the highest trust tax bracket ($15,200 in 2025).
The NIIT is a 3.8% tax on the lesser of undistributed net investment income or the excess of adjusted gross income over the threshold amount at which the highest tax bracket begins.
What is the exemption amount for estate tax purposes in 2025?
$13,990,000
If a taxpayer’s assets at the time of death are less than this amount, an estate tax return (Form 706) does not have to be filed, assuming no taxable gifts were made during the decedent’s lifetime.
What is the purpose of Form 8971?
To report the value of the property on an estate tax return.
Executors must complete Form 8971 and provide Schedule A to the beneficiary.
What is probate?
The court-supervised process of administering an estate.
True or False:
Executors and administrators are appointed regardless of whether the decedent had a will.
True
Executors are appointed when the decedent has a will, and administrators are appointed when the decedent dies without a will.
What forms may need to be filed after a person dies?
- Form 1040: Decedent’s final income tax return
- Form 1041: Fiduciary income tax return for the estate
- Form 706: Estate tax return, if required
What is IRS Form 56 used for?
To notify the IRS of a fiduciary relationship for an estate or trust.
What form is used to claim a refund on behalf of a deceased taxpayer?
Form 1310
This form is used if the refund is being claimed by someone other than a surviving spouse.
How should executor fees be reported if the executor is not in the business of being an executor?
As “other income” on Schedule 1 of their 1040.
What is the filing deadline for a taxpayer’s final income tax return?
April 15 of the year following the taxpayer’s death.
Who is responsible for filing the final tax return of a deceased individual?
The executor or personal representative.
What is Income in Respect of a Decedent?
(IRD)
Taxable income earned but not received by the decedent by the time of death.
IRD is reported on the tax return of the person or entity that actually receives the income, such as an estate or a beneficiary.
True or False:
Income in Respect of a Decendent (IRD) retains its tax nature when received by a beneficiary.
True
The income retains the same character it would have had if the deceased taxpayer were alive, such as ordinary income or capital gains.
How is the ongoing income of a domestic decedent’s estate reported?
In Form 1041, U.S. Income Tax Return for Estates and Trusts, which reports income earned during estate administration and determines whether it is taxed to the estate or passed through to beneficiaries.
What is the due date for filing Form 1041?
The fifteenth day of the fourth month following the end of the entity’s tax year.
A 5½ month extension may be requested if Form 7004 is filed by the original due date.
What is the maximum estate tax rate in 2025?
40%
What is the Deceased Spousal Unused Exclusion?
(DSUE)
The unused portion of the decedent’s predeceased spouse’s basic exclusion amount.
A portability election must be made by filing Form 706 to claim the DSUE on behalf of the surviving spouse’s estate.
When is the estate tax return (Form 706) due?
It must be filed within 9 months after the decedent’s date of death, with a 6-month extension available by filing Form 4768.
What is the assessment period for estate tax?
Three years for a timely filed estate tax return.
The assessment period is four years for transfers from an estate.
What is the applicable credit amount for estates in 2025?
$5,541,800, which offsets the estate and gift tax. It corresponds to a basic exclusion amount of $13,990,000 in 2025.
What is the purpose of Form 706?
To report and pay estate taxes, and, when applicable, to elect portability of the deceased spouse’s unused exclusion (DSUE) to the surviving spouse.
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Essential Tax Law Figures for Businesses34
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Unit 1: Business Entities and Requirements72
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Unit 2: Accounting Periods and Methods65
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Unit 3: Business Income46
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Unit 4: Business Expenses64
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Unit 5: Employee Compensation and Fringe Benefits78
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Unit 6: Other Business Deductions and Credits72
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Unit 7: Basis of Business Assets31
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Unit 8: Depreciation and Amortization58
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Unit 9: Disposition of Business Assets58
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Unit 10: Partnerships in General43
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Unit 11: Partnership Distributions and Liquidations26
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Unit 12: C Corporations in General46
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Unit 13: Corporate Transactions29
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Unit 14: Corporate Distributions and Liquidations30
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Unit 15: S Corporations48
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Unit 16: Farming Business35
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Unit 17: Tax-Exempt Organizations39
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Unit 18: Retirement Plans for Businesses93
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Unit 19: Trusts and Estates47
