Question

Sell of house in name of estate

Forum|Forum|4 years ago
February 19, 2022
1 reply
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House sold in name and tax id of estate. House sold for a loss. 1099-S issued to estate with tax id of estate. Estate has no income. Estate distributes cash from house sale to bene's.

1. Does the estate have to file taxes even though no income and sold for loss?
a. If estate does have to file taxes, how does it report it?
b. If estate does not have to file taxes, isn't the IRS expecting something documentation due to 1099-S issued to estate.
c. If estate does have to file, please confirm if K-1's are necessary. I do not think they are because estate had no income and did not distribute income. Estate also is not passing on any type of tax obligation, etc to the bene's.
3. Do the bene's report the receipt of cash from the house sale from the estate? I do not think so because inherited cash is not reported at the federal level and the states in which the bene's live do not require it.
Is this correct?

A

Anonymous_

Employee

The IRS is going to be expecting a return as a result of the estate being issued a 1099-S.

Unless a beneficiary (or other family member) lived in the house , or it was otherwise held for personal use, the beneficiaries can deduct the loss from their final K-1s (it would be a capital loss).

N

Nicmonkeye

Thank you.

It was not rented nor was it used for investment purposes. One beneficiary did live in house until time sold.

The estate is the reporting entity. It has it's own tax id. It's the estate's tax id that received the 1099-s. I thought estates only filed if it generates $600 or more of income. There was zero income. I guess the only reason the estate would need to file in this instance is because a 1099-s was issued?

Likewise, are K1's necessary? I do not think the loss can be claimed by the beneficiaries since the estate itself is the reporting entity and incurred the loss (likewise, the estate would have been responsible for paying taxes if there were a gain, etc).

With respect to the beneficiaries, the act of inheriting cash is not reportable or taxed at the federal level and is only reportable or taxed in 6 states. Is this correct? ( What the beneficiary does with the inherited cash after the fact can potentially trigger a taxable or reportable event.)

A

Anonymous_

Employee

@Nicmonkeye wrote:

I guess the only reason the estate would need to file in this instance is because a 1099-s was issued?

Yes, since a 1099-S was issued, presumably in the name of the estate and with the estate's EIN, the IRS will be expecting a return (you will simply need to report the sale in order to establish the basis and show there was no gain).

@Nicmonkeye wrote:
Likewise, are K1's necessary? I do not think the loss can be claimed by the beneficiaries

Since the house was held for personal use (never rented nor held for investment purposes), there is no need for K-1s. The net loss will not be deductible by the beneficiaries.