Determining whether to file a joint return in the year of death.

• Author: Young, Patrick L.

This case study has been adapted from PPC's Guide to Tax Planning for High Income Individuals, 21st edition (March 2020), by Anthony J. DeChellis and Patrick L. Young. Published by Thomson Reuters, Carrollton, Texas, 2020 (800-431-9025; tax.thomsonreuters.com).

A decedent's tax year ends on his or her date of death, although the due date of the final return (Form 1040, U.S. Individual Income Tax Return) remains the same, typically April 15 of the following year. In general, normal tax accounting rules apply regarding the recognition of income and deductions, including the doctrine of constructive receipt. The tax year of the estate's income tax return, Form 1041, U. S. Income Tax Return for Estates and Trusts, begins with the date of death and must terminate at a month end no more than 12 months after the date of death.

Tax planning opportunities must be considered both when death is imminent and after death. Several elections can affect the income or deductions reported in a decedent's final return.

A final individual income tax return (Form 1040) must be filed for the year of a decedent's death. If a surviving spouse does not remarry during the year, the spouse may file a joint return with the decedent for the year of death but is not required to do so (Sec. 6013(a)(3)). The joint return will include income and deductions for the decedent prior to the date of death and the surviving spouse's income and deductions for the entire year (Regs. Sec. 1.6013-1(d)(1)). If the surviving spouse remarries before the close of the tax year that includes the date of death, a separate return must be prepared for the decedent (Regs. Sec. 1.6013-1(d)(2)).

The personal representative generally decides whether to file a joint return. However, the surviving spouse may initiate the joint return if a personal representative has not been appointed by the due date (including any extensions) for filing the spouse's return and no return has previously been filed for the decedent for that year (Sec. 6013(a)(3); Regs. Secs. 1.6013-1(d)(3) and (4)). If these criteria are met, a surviving spouse may file a joint return with his or her deceased spouse, even though the IRS has prepared a "substitute for return" under Sec. 6020(b) and issued a notice of deficiency (CCA 201044011).

If a personal representative is later appointed, that person may disaffirm the joint return by filing a separate return for the decedent within one year of the due date (including extensions)...