Other (Alternative Minimum Tax, Estates,
Trusts, Tax Shelters, State Tax Inquiries):
This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
How do I deduct the administration expenses of my father's estate?
Expenses of administering an estate can be deducted either from the gross
estate in figuring the federal estate tax on Form 706 (PDF), United States Estate (and Generation-Skipping Transfer) Tax
Return, or from the estate's gross income in figuring the estate's income
tax on Form 1041 (PDF), U.S. Income Tax Return
for Estates and Trusts. These expenses, however, these expenses cannot
be claimed for both estate tax and income tax purposes. The expenses incurred
in the sale of property are deductible from the gross estate only if the sale
was necessary to pay decedent debts, or to preserve or distribute the property
of the estate.
For more information, refer to Publication 559, Survivors, Executors,
and Administrators, designed to help those in charge of the property
(estate) of an individual who has died. Also, refer to Publication 950, Introduction
to Estate and Gift Taxes.
In general, administration expenses deductible in figuring the estate tax
include: fees paid to the fiduciary for administering the estate; attorney,
accountant, and return preparer fees; expenses incurred for the management,
conservation, or maintenance of property; expenses in connection with the
determination, collection, or refund of the estate's tax liability.
For additional information on this subject see Estates.
References:
- Publication 559, Survivors, Executors, and Administrators
- Publication 950, Introduction to Estate and Gift Taxes
- Form 706 (PDF), United States Estate (and
Generation-Skipping Transfer) Tax Return
- Form 1041 (PDF), U.S. Income Tax Return
for Estates and Trusts
I am considering a tax shelter investment. How can I recognize an
abusive tax shelter?
Tax shelters reduce current tax liability by offsetting income from one
source with losses from another source. The IRS allows some tax shelters,
but will not allow a shelter which is "abusive." An abusive shelter generally
offers inflated tax savings which are disproportionately greater than your
actual investment placed at risk. Generally, you invest money to generate
income. However, an abusive tax shelter generates little or no income, and
exists solely to reduce taxes unreasonably for tax avoidance or evasion. In
comparison, a legitimate tax shelter often produces income and involves a
risk of loss proportionate to the expected tax benefit. Abusive tax shelters
are often marketed in terms of how much you can write off in relation to how
much you invest. This "write off" ratio is often much greater than two-to-one
as of the close of any of the first five year ending after the date on which
the investment is offered for sale. A series of tax laws have been designed
to halt abusive tax shelters.
The IRS corrected my return and sent me an additional refund. Does
this mean I am also entitled to an additional refund on my state tax return?
Whether you are entitled to an additional state tax refund depends on the
nature of the change which was made to your federal return. For example, if
on your federal tax return, you used the wrong line on the tax tables to figure
your tax, this may not have an impact on your state tax return. However, if
the change was made to the amount of your taxable income on your federal
return, it may have an impact on your state tax return. Contact your state
tax office for additional information. It is helpful to have a copy of your
tax returns (federal and state) and a copy of the IRS notice when you call.
To access the state you need to direct your question to, please go to our Alphabetical State Index.
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