By Jacob I. Sherman, CPA
Reviewed by Marco Svagna, CPA, David Berdon & Co., LLP
This recent publication delves into an important practice area that is rarely explored in print. Jacob Sherman, a seasoned estates and trust practitioner, has produced a good resource for the practitioner who is just getting involved in trust and estate practice.
Sherman takes the time to explain some basic estate and trust concepts that most books assume the practitioner already understands. For example, he highlights the importance of understanding that only probate assets are included in an accounting and that only the income from such assets is typically reported on the fiduciary income tax return. The novice also learns which values should be utilized for the fiduciary's beginning inventory. The book explains and illustrates, on an elementary level, what fiduciary accounting income is and the distinction between income and principal. The author, however, does not examine specific income and principal statutes of various states or specific problems that a practitioner may encounter in computing accounting income, such as the treatment of income from partnerships. Important tax concepts such as income in respect of the decedent and IRC section 754 adjustments are discussed.
A considerable portion of the book is devoted to manual record keeping for estates. Sherman explains how workpapers are set to allow the practitioner to prepare estate tax and fiduciary income tax returns and perform estate accountings without duplicating work. The author is able to generate the Form 706, the Form 1041, and the probate account by the use of only one set of cash receipts and disbursements. He explains how the same set of receipts and disbursements are adjusted on three different worksheets to arrive at the final numbers. Some practitioners may feel that this is not useful with the advent of computer software; however, reviewing the specially designed workpapers gives the practitioner a better understanding of how to prepare an accounting, which could easily be transferred to an electronic spreadsheet. This section may also be useful for estates that are too small to set up on a computerized system.
The last chapter of the book deals with preparing an annual trust report for a substantial trust that has six different portfolios of securities managed by six separate investment counselors. In addition, the trust has various investments in real estate partnerships. The author answers questions on how the trust reports should be prepared and what type of work papers should be prepared for the report. Sherman also defines and discusses principal and income.
The author also includes a very helpful postmortem questionnaire and checklist. In addition to the use of checklists, he goes into substantial detail in the use of time scheduling as it applies to preparing and filing the Form 706, as well as income tax returns. He claims that it proved unusually profitable at the firm where he served as managing partner for many years.
Experienced estate and trust practitioners may find this manual too basic, but it can be a very useful tool for accountants that are just getting off the launching pad. *
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