ESTATE ADMINISTRATION: FISCAL OR CALENDAR YEAR?
As the executor of an estate, one of the major choices you’ll make is whether to choose the calendar year or the fiscal year as the estate’s taxable year. You’ll have a choice because the estate is its own separate entity. Unlike an individual, however, the estate need not use the calendar year as its taxable year.
What’s the difference?
A calendar year ends on December 31st of the year in which the decedent passed.
A fiscal year begins on the day of the decedent’s death and ends on the last day of the month prior to the first anniversary of that individual’s death. For instance, if the decedent died in May 2023, their estate’s fiscal year would begin on the date of their death (May 2023) and end on April 30th, 2024.
When is the choice made?
The executor must make the choice of taxable year on the estate’s first fiduciary income tax return.
What is the purpose of the tax year selection?
The main purposes of the tax year selection are to maximize tax deferral and to minimize the tax burden on the estate.
What’s the right choice?
Most executors choose the fiscal year because it gives them more time to handle the tasks necessary to file the estate’s fiduciary income tax return.
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