Prorate Decedents Capital Gain Distributions
Q: This question came up in another thread, but hasn't received much attention. Here goes:
When prorating income between a decedent and his estate, do you allocate ANY portion of an annual mutual fund capital gain distribution if the decedent died BEFORE such distribution was declared and/or received?
For example, say that the taxpayer dies in September. His mutual fund pays an annual capital gain distribution in December (the typical pattern for most mutual funds). Must any of that distribution be allocated to the decedent for income tax purposes?
A: -If the DOD was before the declaration of the capital gain then it is an estate asset (or beneficiary's) and not prorated on the final 1040. If the DOD was after the declaration but before the receipt then it is IRD (income in respect of decedent) It belongs to the estate/beneficiary and is not included on the final 1040. -Since the taxpayer died before the CG distribution was declared, I would opine that this income neither goes on the decedent's final tax return nor is IRD. It is income to the estate and should be included on the 1041. The estate "owned" the fund at the time the CGD was declared. .