The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  State Tax Liability-Form 1041 K-1 Date:  12/10/2012  11:00 AM
Author:  reitsbyziggy Number:  117089 of 132797

From my previous post...

My mother passed away in February of 2012. She had a substantial amount of deferred interest from US savings bonds and therefore a decision was made to distribute the Form 1041 income to the heirs thru K-1 Forms. The Estate will have a Fiscal year end of January 31, 2013. I understand that each of the heirs will be required to roll this income into our calendar year 2013 tax return.

US savings bonds are generally exempt from state income tax. Unfortunately the Form 1041 K-1 line 1 is labeled as “Interest Income” with no description of its nature. I also notice the Form 1041 does not use a schedule B to roll up the “Interest Income” on line 1 and therefore it also has no description of its nature. I'm looking for some kind of documentation to prove that this interest income is in fact deferred US Savings bond interest that is not subject to state income tax.

Would it behoove us to instruct the tax preparer of the Form 1041 to insert the term “See attached schedule” along the dotted line area of line 1 and prepare a supporting schedule itemizing the type of interest income this is or do they typically just file these in an e-file format where this doesn't get to the IRS. The heirs could then also request a copy of the Form 1041 along with their Form 1041 K-1 to have some supporting documentation.
Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us