Personal Finance (Not Investing) • Help with Form 1041 Reporting of Real Property Sale by Estate

Assuming no one lived in the house after the date of the owner's death, I agree there should be a capital loss allowed as a pass-through to the beneficiaries. Without any unusual local circumstances, a sale that close to date of death should not require an appraisal. Even if the attorney/accountant incorrectly assumed no deductible loss on the sale, what is their explanation for omitting the sale from the tax return in the presence of Form 1099-S?

The capital loss may be used against the ordinary income such that the loss passing to the beneficiaries is less than $19K.

And why no deduction on the tax return for attorney or accountant fees?

Thank you, MarkNYC.

The estate was opened in Nov. 2022. The estate paid an attorney fee of $2k in 2022 for the probate court filings. A 2022 Form 1041 was not filed because 2022 income for the estate was ~$50. It sounds like those attorney fees are allowed be added into the calculation of the loss distributed to the beneficiaries in 2023 as part of the K-1 final distribution. Thanks for this catch.

Why not elect a fiscal year for the estate 1041, from Nov 2022 through Oct 31, 2023, thereby allowing the inclusion of the $2K legal fees paid in late 2022 on the 1041 FYE Oct 31, 2023?

(Did the $2K include the cost of preparing the 1041?)

I don’t know as I did not see the attorney’s engagement letter.

It seems like the best course of action (based on the details I provided below) may be to file a fiscal year Form 1041 for 10/31/22 - 9/30/23 if the estate account was fully distributed by 9/30/23. Would this be your suggestion?

Details:
My terminology in the prior post was wrong. The executor was appointed in Nov. 2022 but the estate’s non-calendar fiscal tax year would run from 10/31/22 (day after decedent’s death) to 9/30/23. I believe (but need to verify) that the estate account was fully distributed and closed in either Sept. or Oct. 2023. If the estate account was fully distributed by 9/30/23, the Form 1041 could be filed for the fiscal year. Such Form 1041’s (reporting a loss) filing deadline would have been 1/15/24 and past due. I will verify that an extension (Form 7004) was not filed (but pretty sure it was not). The late penalty is 5% of tax due for each month filed late but if the return reports a loss it doesn’t sound like there is a penalty to pay.

Statistics: Posted by HomeStretch — Mon Mar 04, 2024 3:51 pm — Replies 4 — Views 199

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