ESTATE AND TAXES

From: BOB FORD <BOB_FORD@compuserve.com>
Subject: ESTATE AND TAXES
Date: Thu, 22 Mar 2001 19:42:33 -0500

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What a surprise to get this list.  I thought the list was dead.
At one time it was a very active list and had a lot of good people to
give some excellent help to others. =

 =

>>Date: Wed, 02 Aug 2000 11:08:14 -0400
>From: Paul Slonaker <pes@burl.averstar.com>
>Subject: Tax Liability for Deceased Mother-In-Law
> =

>My mother-in-law died earlier this year, leaving my
>wife and her two sisters as beneficieries and co-executors.
>(My father-in-law had died in 1995.)  She died in Florida,
>which was her primary residence (she spent about half of the
>year in New York).  My questions have to do with her tax
>liability.
> =

>For many years, starting well before my father-in-law's
>death in 1995, my in-laws did not even file a Federal tax
>return, having been advised by an accountant that their
>income was low enough.  My MIL continued this practice
>after my FIL died.  As far as I know, she did not file
>returns for either New York or Florida as well.  But when
>I looked through her financial papers and found 1099 forms
>for 1999 and 1998, it seemed to me that her income was
>indeed high enough that she would have had to file - and would
>have owed taxes.  To be precise, for 1999 she had interest
>and dividend income of about $10,400; after subtracting the
>standard deduction ($4300) and exemption ($2750), she would
>have owed about $500 at 15%.  Her situation in 1998 was similar.
> =

>My questions:
> =

>1. Is my analysis correct?  This seems very straightforward,
>but I may be overlooking something.
>

I am not an attorney or tax pro but to determine if any tax was owed, you=

need a lot more =

information.  Such as was any of the interest from tax exempt bonds (stat=
e
and municipal)?
You also need to know if any estimated tax was paid.  Were there some
losses on stocks and/or
mutual funds?  =

>>
>2. What's the liability of the beneficiaries/executors?  It
>seems to me that the estate is liable for any back taxes and
>penalties.  If the estate doesn't pay them, are the
>beneficiaries/executors individually or jointly liable?

>

There may be both state and federal back taxes due.  However state laws
differ so you should
consult a tax person and probably an attorney in the state of residence. =

In general the estate is
liable for all debts of the person that died.  The executor may be
personally liable if estate debts
are not paid and there are assets to pay them.  Where it really gets
interesting is when there are
more debts than assets. When that happens you MUST get legal advice.

>> =

>3. How far back are we liable?  It seems to me that we could
>be liable for taxes owed by my MIL since my FIL's death, but
>(I hope) not before that.  My BIL, who was the executor for my
>FIL's estate, claims that the lawyer who handled the estate did
>not file a Federal income tax return.  (It's also possible that
>their/her tax situation changed sufficiently at his death that
>she owed taxes afterward but they would not have owed taxes
>before.)
> =

State and Federal tax laws differ on the length of time a person is liabl=
e
for taxes
that have not been paid.  I THINK federal rules are the IRS can go back 6=

years if
no tax return has been filed. =

>>
>4. Roughly speaking, how likely is it that this would ever
>come back to haunt us?  My SIL's are all for ignoring this
>in hopes that we'll never be called on it.  I think that that's
>irresponsible, but I think that they would only be convinced
>of this if they thought there could be major repercussions
>later.
> =

>Thanks for your attention.
> - -- Paul Slonaker
>> =

No one can answer the question, "Will I get caught not paying taxes that
are due?".
If you want to sleep at night, I strongly urge you to get professional ta=
x
and legal help.

BOB FORD
BOB_FORD@COMPUSERVE.COM

 =

- -

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