[TimothyTuttle]

I am executor of my father's estate. Can I distribute the inheritance to my siblings over two years instead of one to reduce the income tax?

[ScottGem]

Why would there be income tax? Unless the estate is over $2million there is no inheritance tax. In any case the taxes are paid by the estate, not the heirs. The only way there would be tax for the heirs is if assets of the estate are held and sold a while after the date of death and there is a gain over the cost basis of the asset.

[TimothyTuttle]

I think I know where I may have been confused.

The instructions for Form 1041 states that distributions to beneficiaries are reported using Schedule K-1. A copy of Schedule K-1, along with the "Instructions for Beneficiary Filing Form 1040" must be provided to the beneficiaries.

I had assumed this meant that the distribution would be taxable as income, but in reading the instructions for the Schedule K-1, I now think that this is only for reporting the income from an income-producing estate.

If an estate consists only of the decedent's bank account and a liquidated IRA, then it isn't "income-producing." So this money won't be taxed as income. Do I have it right?

Thanks for your help.

[ScottGem]

Partially. The interest earned between the date of death and the date of distribution would be entered using that form and that income would be taxable, but that should be minimal depending on how long it took to distribute the funds.

[AtlantaTaxExpert]

A fiduciary return si filed by trusts and estates to report income that the trust or estate earns before it is distributed.