What Form Do I File?
Form 1041 is the Fiduciary Income Tax Return, used to file
income taxes for an estate or trust. An estate needs to file a Form 1041 if the
gross income is $600 or more. A trust needs to file a Form 1041 if the gross income
is $600 or more.
Form 706 is the Estate Tax return. An estate tax return is required when the
value of the gross estate, combined with the total taxable gifts made during
the decedent's lifetime, exceeds the unified credit equivalent. For Estate Tax
Purposes in 2003, the Unified Credit is $345,800 ($555,800 for 2004) and the
Applicable Exclusion Amount is $1,000,000 ($1.5 million in 2004).
Form 709 (and 709A) are Gift Tax returns. A gift tax return is required when
total gifts given to any one donee exceeds $11,000 in any calendar year. If
the gift represents a future interest, then a gift tax return has to filed regardless
of the amount. A gift tax return should also be filed if a gift was made by
either a husband or wife, and they wish to elect the benefits of gift splitting.
Lastly, it may be advantageous to file a gift tax return for gifts of certain
assets, in order to limit the ability of the IRS to claim that the value of
the property was higher than originally claimed.