A wife lost her husband in the September 11 attack on the World Trade Center. They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities.
After the husband died, his estate received income of $4,000. Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. This net profit is exempt from income tax as explained earlier under Income received after date of death. The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more.
To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000.
To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. taxmap/pubs/p3920-006.htm#w32806e04
|Net profit from Schedule C, Profit or Loss From Business (husband) || 25,000|| 22,000|
|Interest income (joint account)|| 1,000|| 1,100|
|Deduction for 1/2 of self-employment tax (husband) || (1,766)|| (1,555)|
|Standard deduction|| (7,350)|| (7,600)|
|Personal exemptions (2)||(5,600)|| (5,800)|
|Taxable income ||$46,284||$44,145|
|Joint income tax liability||$7,257||$6,619|
|Plus: Self-employment tax (husband)|| 3,532|| 3,109|
|Total tax liability||$10,789||$9,728|
Worksheet C Illustrated. Amount Treated as Tax Payment for Decedent's Last Tax Year
Caution: The decedent is entitled to minimum relief of $10,000. Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000.
|1||Minimum relief amount. |
Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C.
|2||Enter the taxable income from line 22 (Form 1041) ||2||2,400|| || |
|3||Enter the distribution deduction from line 18 (Form 1041) .||3||0|| || |
|4||Add lines 2 and 3. ||4||2,400|| || |
|Enter exempt income received after death minus expenses allocable to exempt income. (See Income received after date of death on page 5.) ||5||1,000|| || |
|6||Add lines 4 and 5.||6||3,400|| || |
|7||Figure the tax on line 6 using Schedule G (Form 1041). ||7||710|| || |
|8||Figure the tax on line 4 using Schedule G (Form 1041). ||8||435|| || |
|9||Tax on exempt income. Subtract line 8 from line 7. ||9||275|| || |
|Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. If the decedent was not required to file tax returns for the eligible tax years, enter -0-. ||10||4,268|| || |
|11||Add lines 9 and 10.||11||$4,543|
|12||Additional payment allowed. If line 11 is $10,000 or more, enter -0- and stop here. No additional amount is allowed as a tax payment. Otherwise, subtract line 11 from line 1 and enter the result. ||12||$5,457|
|Note. The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). |
- Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. If filing Form 1040, include the amount from line 12 above on the "Other payments" line of the form. Write "Sec. 692(d)(2) Payment" and the amount to the right of the entry space. Also indicate whether a Form 1041 is being filed for the decedent's estate.
- If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Write "Sec. 692(d)(2) Payment" on the dotted line to the left of the entry space.