Employee

Question

How to report sale of decedent's residence on form 1041

Forum|Forum|6 years ago
May 31, 2019
8 replies
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Received 1099-s for sale of decedent's residence. If it was not used as a personal residence, it should report as a capital gain or loss on Schedule D form 1041. Form D does not compute

TurboTax Business Windows

ScruffyCurmudgeon

Employee

@DABny @blesher1

DABny sent me an email to point out that all of my exhibits to answers were lost in the transition from one Intuit answer board to another.

I apologize for not following up or even being around this year. Since early January, 2020, my retirement ended and I have been in the midst of FEMA and state Covid-19 task forces - and frankly where I find myself now having to be between running 8 to 9 Zoom conferences where herding 40-60 cats over a 3 hour session takes time and other responsibilities of policy -- I just have no time this year to be here. If you really need a missing exhibit to any answer send me an email

I've attached a PDF which is an update last year that goes both ways on gain or loss of an asset of a Decedent and how to report it on Form 1041, in this case the sale of Decedent's personal residence (no, it then becomes an investment asset no longer personal residence)

UPDATED FOR 2018 Tax Year (2019) - ANSWER IS SPECIFIC TO EXECUTOR FILING FORM 1041 NOT 1040

Specific answer for where the sale of the decedent's residence is sold in the FINAL year of filing for either the decedent or the decedent's estate. NOTE that the sale of a decedent's personal residence is reported on FORM 1041 and not Form 1040 if the Estate sells the home. Form 1041 is not supported by TurboTax personal products but instead by TurboTax "BUSINESS" desktop product.
If the home is inherited by the beneficiaries, and the beneficiaries then sell the home, this question and its answers do not apply and instead, the beneficiaries report the sale as if it was the sale of an investment asset on their own personal Form 1040.

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Eight images - step by step

#1: Schedule D entries showing the loss on sale of house
- An inherited asset by law is deemed to be held long-term with value as of date of death

#2: Form 1041 page 1 - proforma allocation of maximum of $3,000 write-off of loss against any possible income - whether or not

#3: Schedule D Part II - Calculation that results showing Long-Term Capital Loss

#4: Schedule D Part III - Loss represented

#5: Capital Loss Carryover - will stay within Estate until distributed out to Beneficiary

#6: Amounts to Allocate to K-1, Worksheet - the loss showing in 11C is available to allocate; this does not mean you have yet allocated it - at this point it is still in the Estate

#7: K-1 for Beneficiary before you plug in to the Allocation Smart Worksheet the percentage to be allocated to this beneficiary - not that no loss is allocated at this time#8:

#8: In Beneficiary's Allocation Worksheet in the K-1 - plug in the percentage to allocate to this beneficiary - example here 100% - and magic!!! the loss is allocated on Line 11 Code C.

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.

2019-Sale-of-Decedent's-House-by-Benficiary---LOSS-or-GAIN-Scruffy.pdf

P

Phatparents

I am trying to view your examples: 2019 Sale of Decedent's House by Benficiary - LOSS or GAIN Scruffy.pdf

FYI - I am trying to figure out this 1041 thing...my mother passed away, the house was in a living trust, my siblings and I sold the house and split the funds, and now have a 1099-s in the amount of the sale. I was hoping that your forms would give me some guidance.

ScruffyCurmudgeon

Employee

The Form 1041 is complicated by the many linkages between the 1041, Schedule D, and the worksheets for distributions and the beneficiary worksheets.

When you say "(Schedule) D does not compute" may I ask specifically what entries you made and what you got as result.

Some examples are below but the to answer properly, need to know what it was you got, and from what.

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.

B

blesher1Author

Employee

Thanks for your help. I figured out how to get info on Schedule D as your examples showed. However, it is the final year of the estate and instead of limiting the loss to the $3,000, the total loss should be distributed to beneficiaries & the k-1 worksheet shows the correct amounts, but is not distributing to individual k-1s

R

RossMillikan

I have a trust that inherited a rental property which was sold this year. When I enter the rental information I check the box that says it was sold. I enter the sale information, which results in a loss. The loss is showing up in part II of the 4797 and gets characterized as an ordinary loss, not as a capital loss. If I uncheck the box that it was sold this year I can enter the sale as a capital asset along with stock sales. It then gets treated as a long term capital loss but the rental gets depreciated all year. How do I get it to stop the depreciation when the property is sold and treat the sale as a capital loss?

M

mglauner

@RossMillikan When you sell a Rental Property, you still get to claim current year depreciation.

Did you receive a K-1 or 1099-S to report the sale? Or are you preparing a 1041 Trust Return?

If you have not been claiming Rental Income/Expenses, you would enter the sale as a 'Sale of Business Property' on Form 4797 for an ordinary loss.

If you have, click this link for info on How to Enter Sale of Rental Property.

Click this link for more info on Rental Property in Trust.

R

RossMillikan

I am preparing a trust return. I received a 1099-S for the sale. I have been claiming the rental income, depreciation, and expenses. When I declared it sold this year it entered the sale on Part II of the 4797 because the date of death was within one year. My understanding is that it should be considered long term because it was inherited, so I backdated the acquisition to get it in Part I of the 4797. That seems to work out on the 4797, but the loss flows to the 1041 as an ordinary loss, not a capital loss. It then offsets all the ordinary income first and then offsets capital gain. I believe it should offset capital gain, then offset 3000 of ordinary income and carry over the rest.

7

789349

Where do you put the date of the sale from the rental property and have to have a form 4797 recapiture

7

789349

it was used as rental property first. Trying to find where to put the date so it will adjust the depreciation as well

7

789349

where do you put the date sold on the sale of assets

ScruffyCurmudgeon

Employee

Please see attachment which demonstrates how to report and file on the sale of a Decedent's personal residence not subsequently used by anyone including any rental.

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.

Sale-of-Decedents-House---simplified-with-forms-showing.pdf

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r85712

The last of my two parents died in May 2022. The home was in their revocable trust that now becomes irrevocably at the second death. The home was sold in August 2022. We have an EIN for the now irrevocably trust . I’m assuming we’ll receive a form 1099-S under the tax ID of the trust. I am planning to purchase the Turbo Tax Personal and Business software that should permit me to report the sale of the family home on form 1041, used for trusts and estates. There would be essentially no capital gain because the home receives a step-up in basis at death, and because the sale date was in close proximity to the date of death, there should be no capital gain or loss on the sale. I will distribute form 1041, K-1s to myself and my siblings to report their share of the transaction. Each K-1 should report zero taxable income in this case. The only other trust asset was some near worthless land that we’ll deal with later. Does my thinking and tax treatment of the home appear correct?

ScruffyCurmudgeon

Employee

The death of a family member is always so traumatic and the interaction with taxation issues only extends the process.
Given that the "house" sale occurred after the date of death and under the condition that no one subsequently used the house as a personal residence nor was the house rented* or leased*, the sale will be reported as Sale of an Investment by the Trust on its own IRS Form 1041 (prepared and submitted by the Decedent's Personal Representative [new wording for "Executor"] .
* - renting or leasing the house adds issues not covered in this reply
The Form 1041 for Estates and Trusts is NOT produced by any of the Personal Products - meaning that the Home & Business does not produce a Form 1041. If using TurboTax, the appropriate product is the "Business" Product [unfortunately named almost like H&B] and if needed, any associated state-level filing report module.
Even if there is no gain realized on the sale, it is still best, both for reconciling any possible state or Federal taxation issues and for memorializing the distribution of any assets to beneficiaries, to have the Form 1041 filed. Indeed if the sale price was the same or less than the stepped-up cost basis (inclusive of selling costs) then the loss, if any, or gain, if any, would be so reported.
It is the responsibility of the Realtor or Conveying Attorney to report and supply the Form 1099-S to the seller.
The Form 1041 will generate a companion "Schedule K-1(1041) form that does not report transfer of assets as such but reports the distribution of any income or transferable losses or credits to the beneficiaries. Again, even a zero entry is best reported instead of discarding what might be considered a no-value schedule.
The beneficiaries (YOU) the can use the Personal tax products to report any such entries (if there are any) when you prepare your own Form 1040.

@r85712

If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67 NOT INTUIT EMPLOYEE USAR 64-67 AIS/ASA MOS 9301 - O3 - Just donating my time**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.