Withhold the estate's K-1's to the beneficiaries
(Not the "late" K-1 from the Trust to the Estate prepared by Joanne Barnes)
The estate's IRS Form 1041 (Fiduciary Income Tax Return) covering the period from 1991.09.15 ending 1992.08.31 is due to the IRS on 1992.12.15. It contains the K1s showing the taxable income to the beneficiaries during this period. The beneficiaries can make tax deductions against their 1992 income during the calender year 1992. After 1992.12.31 the beneficiaries cannot make tax deductions against their 1992 income. I believe the other beneficiaries received their K-1's about the same time I did, on January 22, 1993. The K-1's show that approximately 45% of the $148,484 of the capital gains taxes on the $545,820 was passed through the estate to the beneficiaries.
to Edward White)
"Thank you for your letter. You mention that distributions from my mother's estate to the beneficiaries are tax free (except from after death income), and that the Lynch Note will not produce any capital gains. Perhaps I am misinterpreting your letter or perhaps I'm just plain wrong. I hope I am wrong.
The Lynch Note to the estate, a result of the installment sale of my mother's residence on 4/21/88, carries with it a taxable capital gain. The IRS requires that this capital gains tax be paid by the estate or the beneficiaries if the taxable capital gain is passed
through the estate to the beneficiaries before the end of the tax year.
The gross profit percentage on the sale was seventy-nine percent (79%). The payoff of the Lynch note to the estate on 4/21/92 was $545,820.42 of which $45,067.74 was income and $500,752.68 was capital. Of that $500,752.68 in capital, 79% or $395,594.62 is taxable capital gain.
In order for the beneficiaries to minimize penalties and interest on their quarterly estimated tax payments to the IRS, would you please tell us what share of the capital gains tax liability or any tax liability, has been distributed from the estate to the
I make much better tax plans if I know what my projected taxable and non-taxable income is going to be. Six weeks remain in the tax year. Would you please send the beneficiaries, with all deliberate haste, your close out schedule for my mother's estate? Please be as specific in dollars and dates as you possible can.
Yours truly, Anthony
to Edward White)
"Thank you for your letter of December 11, 1992. I personally do not think pursuing the minority interest point is a good idea. I vote "no". All three beneficiaries own and operate their own business. For us, there are now two weeks left to make tax deductible disbursements. It would be quite helpful to me in my tax strategy to know my approximate taxable income. Would you please tell the beneficiaries your best estimate of our 1992 individual taxable income from the estate? Please use $300,000.00 as the evaluation of Accotink. Again, I ask that you please send the beneficiaries, with all deliberate haste, your close out schedule for my mother's estate. Please be as specific in dollars and dates as you possible can. I thank you in advance.
1993.01.22 (Received 1993.01.22) (Jean Nader to Anthony O Connell)
I received your letter yesterday - You are a witty writer!
I ll await the publication that you ordered- At this time I m not making a commintment to do this - Love Jean -
I waited until now to mail copies so that they would not be rushed and/or lost in Christmas mailings."
to Edward White)
"Last week [1993.01.22] I received a copy of the estate's 1041 and K-1's for the estate's tax year ending August 31, 1992.
As I understand it, the 1992 taxable income of $72,466.00 assigned to each beneficiary is based only on the first distribution of $75,000.00, and at some point, you will determine what portion of the second distribution of $33,000.00 on 9/15/92 will be taxed to us in 1993. If I am wrong, please correct me. For 1993 estimated tax purposes, should we expect this same 97% taxable amount?
In your letter of November 17, 1992, you state that the capital gains tax will be paid by the estate on its fiduciary return. The K-1 shows you assigned a $57,301.00 taxable capital gain to each beneficiary. Why this shift of the tax burden from the estate to the beneficiaries?
I understand my sister had fifteen minutes to sign this return and get it in the mail to beat the deadline. If this is true, it puts her in the position of having to choose between signing something she does not have time to go over, or incurring penalties and interest by the IRS."
to Jean Nader)
"That was a wonderful telephone conversation we just had. I think it was far and away the best yet dealing with important financial and emotional issues. I'd like to put in writing what I hope I said on the phone.
My complaint to the Virginia State Bar does not involve you. It concerns possible Charges of Misconduct of an attorney licensed by the Virginia State Bar. You are not a member of the Virginia State Bar. It is not a civil court issue. It is my complaint, I made it, and I defined it. Please do not let anyone else define my complaint to you.
I hope you do not let yourself and our inheritance be unwittingly drawn into this. If you are asked to sign something, I hope that you would consider some option like:
"My brother tells me I am not involved in his complaint to the Virginia State Bar. Unless I hear differently from the Virginia State Bar, I do not consider myself involved in his complaint in any way" and " Based on the available information I have now, and unless I hear differently from the Virginia State Bar, I would not agree to any request for funds from the estate concerning this complaint"
The two CPA's I talked to this morning concur that the K-1's sent several days ago showing our individual 1992 tax liability of $72,446.00 from the estate is based only on the first distribution of $75,000.00. At some point you and Mr. White will determine what portion of the second distribution of 9/15/92 for $33,000.00 will be taxed to us in 1993.
Thank you for your wonderful hospitality this weekend.