Estate 1041 Sale of Home Questions

Forum|Forum|3 years ago
March 9, 2023
2 replies
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I have printed my Turbo-tax Business Return for Estate 1041 and have a few things I would like to like to confirm before filing.

1. I entered sale of Estate house that was lived in by 1 of the 2 beneficiaries (children of deceased) for 6 years (rent free). After adding to cost-basis for upgrades to the home and deductions incurred in 2022 for utilities, taxes, homeowners insurance, mortgage interest, and maintenance & repairs, plus township certifications to make the home salable the Form 1041line 4 Capital Gains is positive. If the Estate pays the taxes due to IRS does that mean that K-1's are not required for the beneficiaries?

2. There was CASH available in the Estate that was not earned in 2022. This was distributed to the beneficiaries with their 50% portion of the proceeds from sale on the Estate house. Given this CASH was available in the original Estate value (CASH) from 2016 how is this handled when it comes to issuing K-1's?

As it stands now my printed1041 documents (using the above $$$,$$$. from #1and #2) are printing a K-1 with no values. Is this correct? If yes, should I suppress the print of the K-1's and not send to the IRS or the beneficiaries?

If I'm missing anything else here related, please let me know. Thank you in advance for the help.

TurboTax Business Windows

Best answer by Anonymous_

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Anonymous_Answer

Employee

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RaiseMyHand_01Author

Okay so for #2, CASH that was part of the original Estate at time of death is never reported on Form 1041, right? Thus not taxable to the beneficiaries, (2children).

For #1, I followed the instructions for Home Sale worksheet and Form 8949 for Long Term Capital Gains (the Estate home remained in the decedents name from DOD in 2016 until sold in 2022). I received a 1099-S from the closing attorney and followed the instructions in Turbo Tax. To clarify no taxes were paid to the IRS at the time of closing. My question is if the Estate 1041 calculates taxes are due based on the home sale and the Estate pays the IRS the taxes when submitting the 1041then are K-1's required for the additional money distributed to the beneficiaries?

Anonymous_

Employee

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BasBleu_bobcat

Distribution of assets which the estate owned at the time of the decedents death is not income and no income tax will be due (either from the estate or the heirs). Instead it is used to value the estate for inheritance tax purposes. The proceeds from the sale of the house will be inheritance, not income for the heirs income tax purposes.

I would not expect to generate a k-1 unless you have a 1099-INT or DIV from the estate.