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.