My wife is the ultimate beneficiary of her mother's estate (Estate 1).
Her mother's estate just received a K-1 from another estate (Estate 2) with short term and long term capital losses in line 11.
My question is can the capital losses from Estate 2 flow through Estate 1 to my wife?
They can, but the real question is "will they?"
The K-1 issued TO the estate needs to be incorporated into the estate return. Then mom's estate will include that in its calculations and if there is sufficient income, and the fiduciary so elects, then a K-1 will be issued to your wife. This K-1 will include everything from Mom's estate including the K-1 received by mom's estate.
Multi-layer pass through taxation can get interesting. Pass through taxation is also the most convoluted and complex version of taxation that exists. I would NOT suggest that anyone other than a PRO familiar with pass through tax experience undertake the preparation of these returns. There are way too many things that can go wrong.
answered 11 Mar '11, 15:34