Accountants' Handbook Special Industries and Special Topics 10th Edition_17

Tham khảo tài liệu accountants’ handbook special industries and special topics 10th edition_17, tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả
Nội dung trích xuất từ tài liệu:
Accountants’ Handbook Special Industries and Special Topics 10th Edition_1741 18 ESTATES AND TRUSTS • EGTRRA has modified the income tax rules relating to the step-up in basis discussed above be-ginning in 2010. To make up for the loss of revenue from the estate tax repeal, a new “carryoverbasis” regime will become effective. Under this regime, property acquired from a decedent will havea basis equal to the lesser of the decedent’s basis or the fair market value of the property on the dateof the decedent’s death. A total $4.3 million of property may, however, still qualify to use the currentstep-up in basis rules. Up to $3 million of property passing to a surviving spouse, plus up to an ag-gregate of $1,300,000 of property passing to any beneficiaries will qualify for a step-up in basis.These new rules sunset after 2010, resulting in the modified carryover basis rules ending and the cur-rent step-up in basis rules being reinstated in 2011. So just in case, we should all start keeping betterrecords in order to accurately reflect our tax basis in the assets we hold currently. Estates must now make quarterly estimated tax payments in the same manner as individuals, ex-cept that an estate is exempt from making such payments during its first two taxable years. Accord-ingly, the penalties for underpayment of income tax are applicable to fiduciaries. Some states also tax the income of estates, and the representative must see to it that such statestatutes are complied with.41.2 ACCOUNTING FOR ESTATES(a) GOVERNING CONCEPTS. The general concepts governing the accounting for decedent’s es-tates are for the most part similar to those applicable to trusts, but there are some differences. The un-derlying equation expressing the accounting relationship is assets accountability. However, therepresentative is concerned not with the long-term management of property for beneficiaries, but ratherwith the payment of debts and the orderly realization and distribution of the estate properties. The col-lection and the distribution of income are incidental to the main function of the estate’s fiduciary. Whenever an estate accounting is prepared, a reconciliation of the gross estate as finally deter-mined for estate tax purposes should be made with the schedule of principal received at the date bythe representative. Every difference should be explainable.(i) Accounting Period. The accounting period of the estate is determined by the dates set by thefiduciary or by the court for intermediate and final accountings; nevertheless, the books must beclosed at least once a year for income tax purposes.(ii) Principal and Income. Unless otherwise provided for, the rules outlined below for thetrustee should generally be followed by the representative in the allocation of receipts and dis-bursements to principal and income. Such distinctions, although not called for under the will, arefrequently mandated by requirements of estate, inheritance, and income tax laws and regulations.(iii) Treatment of Liabilities. The representative picks up only the inventory of assets of thedecedent at the inception of the estate. Claims against the estate, after presentation and review, arepaid by the representative and are recorded as “debts paid.” The payment of such debts reduces inproportion the accountability of the representative.(b) RECORD-KEEPING SYSTEM. No special type of bookkeeping system is prescribed by law,but a complete record of all transactions must be kept with sufficient detail to meet the requirementsof the courts and of the estate, inheritance, and income tax returns. Much of the information may bein memorandum form outside of the formal accounting system. The federal estate tax law requires information regarding assets beyond those ordinarily under thecontrol of the representative (e.g., real estate). Such information must be assembled in appropriateform by the representative, who has responsibility for the estate tax return.(i) Journals. A single multicolumn journal is usually sufficient. It should incorporate cash re-ceipts, cash disbursements, and asset inventory adjustments. Further, it is important to note and keeptrack of the distinction between principal and income. 41.3 TRUSTS AND TRUSTEES—LEGAL BACKGROUND 41 19 •(ii) Operation of a Going Business. If the decedent was the individual proprietor of a goingbusiness and if the court or the will instructs the administrator or executor to continue the oper-ation of the business, the bookkeeping procedure becomes somewhat complicated. The books ofthe business may be continued as distinct from the general estate books, or the transactions ofthe business may be combined with other estate transactions in one set of rec ...