Instructions for Form 1041, U.S. Income Tax Return for Estates and Trusts
IRS has released the general instructions for Form 1041 for 2010 on its web site. They reflect law and administrative changes, as outlined below.
What's new for 2010. The 2010 Form 1041 instructions reflect these new items for 2010:
... Basis rules for property acquired from a decedent. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, they apply if the executor elects estate tax repeal for the estate of a decedent dying in 2010. If the election is not made, the Code Sec. 1014 basis rules apply (generally, fair market value at the date of death).
Recommendation: The executor should make whichever choice would produce the lowest combined estate and income taxes for the estate and its beneficiaries.
Observation: IRS plans to explain the basis rules for property acquired from a decedent dying in 2010 in Pub. 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. We will provide coverage of Pub. 4895, shortly after it is released by IRS.
... Sales tax deduction extended. The deduction for state and local sales taxes, which was set to expire at the end of 2009, was extended through 2011.
... Bankruptcy estate. For tax years beginning in 2010, a return must be filed for a bankruptcy estate only if its gross income is at least $9,350.
... Qualified disability trusts. For 2010, qualified disability trusts may claim an exemption of up to $3,650. The exemption is no longer phased out.
... Payment voucher. New for 2010 is Form 1041-V, Payment Voucher. The form is used to include information about the taxpayer's remittance of the balance due on Form 1041. Use of Form 1041-V is optional, but IRS encourages the taxpayer to use it if payment is made by check or money order.
... Amended return for NOL carryback. If an amended return is filed for an NOL carryback, the taxpayer should write “NOL Carryback” at the top of the page.
References: For trust income tax return filing requirements, see FTC 2d/FIN ¶S-2007; United States Tax Reporter ¶60,124.04; TaxDesk ¶651,007; TG ¶3001. For estate income tax return filing requirements, see FTC 2d/FIN ¶S-2004; United States Tax Reporter ¶60,124.04; TaxDesk ¶661,007; TG ¶3005.