Hmmm ... that is a somewhat unusual situation. It sounds as if the Executor (or the tax preparer) has decided to "push" the income to the beneficiaries, before distribution. There are some tax reasons for this -- the tax rates at the estate level are horrendous -- but I would inquire if that was intended, or if the tax preparer hadn't a clue what they were doing. Either is possible.
It isn't strictly legal (arguments might be made, but it would depend on the type of income and when it was received and distributed), and if the beneficiaries complained to the IRS, the estate return would get audited.
Another possibility is that your K-1 shows some estate deductions, as well as the income? That might create an offset to the income. Estate deductions generally pass through to the beneficiaries in the year the estate closes.
Sorry, someone who knows what they're looking at would have to review the estate tax return to be certain what's going on!
This answer was edited by Reader 14 days ago.
Reason: alternate
