The $348.89 accounting entanglement called debt is impossibly complex assuming it could be untangled at all.

1992.05.19   (Edward White to Anthony O'Connell, c/o E.A. Prichard, copy to Jean Nader)
"In your letter of May 6 to Jean you asked that I communicate with you with regard to the Harold O'Connell Trust.
I am trying to prepare the estate tax, and as usual in these cases, there are problems trying to understand the flow of debts and income.
I do have a few questions which are put forward simply so that the figures on the Trust's tax returns and accounting will agree with the estate's.
1. The K-1 filed by the Trust for 1991 showed income to your mother of $41,446.00. The Seventh Accounting appears to show a disbursement to her of $40,000.00 plus first half realty taxes paid by the trust for her and thus a disbursal to her of $1794.89. If these two disbursals are added the sum is $41,794.89. This leaves $348.89 which I cannot figure out. It could well be a disbursal of principal and not taxable. 1
2. The K-1 filed by the Trust showed a payment of $816.00 in interest to the estate. You sent a check in the amount of $1475.97 to the estate. What was the remaining $659.97? Do I have this confused with the tax debt/credit situation which ran from the Third Accounting?
3. On the Seventh Accounting "Income per 7th Account" is shown as $5181.71, but I cannot figure that one out either.
I am of the opinion that the estate owes the trust for the second half real estate taxes from September 15, 1991 through December 31, 1991 in the amount of $1052.35. This is shown on your accounting a disbursed to the heirs. Should this be paid back to the heirs or to the Trust?
I believe that the income received from the savings accounts from September 15 to the date the various banks made their next payment to the Trust (9/30 and 9/21) should be split on a per diem basis, since the Trust terminated on her death. This will be a small amount of course.
Are there any other debts which your Mother owed the Trust?
I realize that Jo Ann Barnes prepared this and if you authorize it I can ask her to help me out.
Please understand that I have no problem with the Accounting, I m just trying to match things up. In the long run, since the beneficiaries are the same, the matter is academic. Please send the bill for the appraisal whenever you receive it. Jean is filing the Fairfax form for re-assessment in her capacity as a co-owner in order to give us a better basis to get this assessment changed and to meet the county's deadline. It will state that the appraisal you have ordered will follow. I think this will be to all of your benefit in the long run.
Sincerely, Edward J. White"

1 The K-1 reports $41,446.00 to the IRS but the Court account reports something different from $41,446.00 but Edward White is confused about what it is. Why did Joanne Barnes report (40,000.00 + 1794.89) to the Court and 41,446.00 to the IRS to create the accounting entanglement (40,000.00 + 1794.89) - 41,446.00 = 348.89, when the amounts should be the same?


Additional layers of accounting entanglements are added to this by having the Trust pay the beneficiares real estate taxes. The Trust is not supposed to pay for individuals personal financial obligations.

1993.02.12 (CPA firm of Joanne Barnes and Forest Balderson to Anthony O’Connell)
"Re: Trust u/w of H. A. O'Connell
Dear Mr. O’Connell:
Joanne Barnes has asked me to respond to your letter of January 21, 1993 concerning the differences in the "Total distributions" from the court accounting and the fiduciary return. I will also try to answer the other questions in your letter.
The amount on Page 2, Line 12 of Form 1041 in the amount of $146,795 is the figure on a work paper which I previously gave to you (copy attached). Listed below, again in another format, is how that $146,795 was arrived at:

  Mrs. Jean O'Connell          
    Check #230   $   40,000.00  
    Check #251 (R. E. taxes)          
       ($3,330 x 53.9006%)       1,794.89  
  Sheila O'Connell          
    Check #268       20,000.00  
    Check #276       15,000.00  
  Jean Nader          
    Check #267       20,000.00  
    Check #277       15,000.00  
  Anthony O'Connell          
    Check #269       20,000.00  
    Check #278       15,000.00  
    Total amount of checks   $   146,794.89  

The $146,794.89 or $146,795 was the total amount of cash distributed to the beneficiaries or heirs of this trust during the calendar year 1991.
The $1,794.89 of real estate taxes which you as Trustee paid on behalf of the three heirs (Shelia O'Connell, Jean Nader and Anthony O'Connell) was an obligation owed directly by the three heirs as your mother's interest in this real estate passed directly to each of you at her death. When you received the K-1's for 1991, attached was a schedule for each of you to report 1/3rd of these real estate taxes on your individual income tax returns. 2
The final point in your letter is in regards how to treat the $1,475.97 of cash which was paid to your mother's estate in 1992. This is just a cash transfer to cure a cash deficiency as of the date of death and NOTHING else. On page 4 of the Seventh Account, your mother owed the Trust at the end of the Sixth Account $3,705.74 but you had underdistributed $5,181.71 of cash through her date of death. The $1,475.97 just completes what was due her. The transfer to her estate has no tax effect for either 1991 or 1992.
I hope that the foregoing has answered your various questions. I am also returning to you, the letter which you sent with your letter of January 21, 1993. I have made a copy of it for our files.
Very truly yours,
Keller Bruner & Company, P.C.
Forest N. Balderson”

2 I believe this means that the accountants did the Trust accounting in a way that had the Trust pay the real estate taxes for the beneficiares of the Estate, but as individuals. This entangles, I believe, tax returns and accountings for the Trust, the Estate, the IRS, the State, and the Court. To disentangle this would, I believe, require amending the Trust's fiduciary tax returns to the IRS and the State and the Trust's court account to the Court, the Estate's fiduciary tax returns (assuming it was not put on the Estate Tax Return IRS Form 760) to the IRS and the State and the Estate's court account to the Court, and the individual tax returns of the three beneficiaries of the Estate to the IRS and the State.

This $348.89 accounting entanglement called debt was created in Jean O'Connell indididual tax return, so it should not show in the estates's Bk467p191 court account.

But the $241.81 at Bk467p193, item 27, and described in note 6 3 at Bk467p194, entangles Jean O'Connell's 1991 individual tax returns with her estate. What note 6 describes is unusual and unusual is a flag. History suggests that this accounting entanglement of $241.81 was created to cover the accounting trail of the Lynch payment of $125,188 to Jean O'Connell on April 21, 1991

3 6.  When the 1991 income tax was prepared by Edward J. White, Co- Executor, a large capital gain was omitted necessitating the filing of an amended return. $526.55 was assessed in interest by the IRS. The figure [$241.81] is the amount of interest earned by the estate while the amount due the IRS was in the estate bank account. The balance of the interest assessment was paid by Edward J. White.

If we tried to expose the accounting trail of the Lynch payment of $125,188 to Jean O'Connell on April 21, 1991, and find out where the money went, would we be stymied by the $348.89 and $241.81 accounting entanglements?