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Financial Planning / Tax Strategies
|Subject: Re: Income in Respect of a Decedent||Date: 10/13/2013 5:06 PM|
|Author: Wradical||Number: 119299 of 124931|
Please note that the deduction is actually for "estate tax on income in respect of a decedent." That is the proportionate amount of the estate tax that applied to items that were:
1. Included in the decedent's taxable estate; AND
2. Taxable income, either to the estate or to the heirs after his/her death.
Note that there actually has to be an estate tax liability for this deduction to be available. And for that, the taxable estate (and total lifetime gifts) has to be over $5 million.
Income on an annuity is one such double-taxed item. Others would include:
. IRAs and other Retirement plan benefits
. Accrued dividends after the record date
. Accrued interest on bonds, including savings bonds
. Unpaid wages and benefits to which the deceased was entitled, including stock options.
Then these are offset by "deductions in respect of the decedent", which are the accrued amount of deductible expenses. Examples include accrued property taxes and business expenses.
Medical expenses are deductible on the final 1040, even if paid after death, so they wouldn't count.
So - if there was no estate tax liability, this would not apply to you. If there was, you need to be talking to whoever did the estate tax return. And if all you received was the $20,000 annuity, and there actually was an estate tax, your share of the deduction would be quite small.
So if you were looking for a simple definition, this is as close as I can come.
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