Updated July 22, 2015
Estate Income Tax / Estate Tax / Estate Tax Return Chicago Illinois
Form 1041 or The U.S. Income Tax Return for Estates and Trusts is the form used in this instance. An estate can adopt any tax year ending within twelve months after the death of the decedent. It may also adopt any permissible accounting method. Alternative minimum tax also applies and is determined in the same manner as it is for individuals.
Tax is imposed on the taxable income of estates, rather than on items which are treated as fiduciary principal. State law defines what is the principal and the income of an estate for federal income tax purposes. Most states have adopted the Revised Uniform Principal and Income Act. Some have done so with certain modifications. The act and other state laws provide that the trust instrument designations of fiduciary principal and instruments control the designation of income. They also provide other default designations.
Principal, generally, is property held eventually to be delivered to the remainderman. Change in form of principal is not taxable income. Income, is the return on, or the use of that principal. It is held for, and or distrubuted to, the income beneficiary. Principal may also be referred to as corpus or res.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.