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Illinois Resident with Wisconsin Real Estate Sale

Forum|Forum|4 years ago
December 12, 2021
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My wife and I file jointly in Illinois as full-time, retired residents.

My wife inherited real estate in Wisconsin and sold it six months later.

Do we need to file a Wisconsin tax return to avoid a matching notice on the 1099-S from the Wisconsin closing?

Since this is a short-term capital gain—not W-2 income—how do I fill out the Illinois and Wisconsin returns? Does the answer change if it is a capital loss and it is more than offset by other (Illinois) capital gains?

Thank you for reading this.

Best answer by nello

@nello wrote:
Wisconsin Schedule WD is mostly zeros, but for some reason it is still pulling the following lines from federal Schedule
Line 1a (WRONG)
Line 8a (WRONG)
Line 10 (CORRECT. This contains only the gain/loss on the house sale.)

How do I get WD to stop pulling lines 1a and 8a from federal Schedule D?

The root of the problem with Wisconsin Schedule WD lines 1a and 9a are that there is no way to exclude 1099-B transactions for Box A or Box D, respectively.

THIS IS A BUG.

What is the work around?

@nello wrote:
What is the work around?

Today I contacted TurboTax by Twitter and phoned several times. Eventually I was transferred to a CPA from TurboTax Live. After a marathon call of 3 hours and 19 minutes, we confirmed the two bugs above.

Work around is:

Remove all data from both IL and WI returns. (TurboTax → File → Remove Data, for each state).
Quit TurboTax (saving tax file).
Launch TurboTax.
Complete WI just as before.
Go to Forms view and change the column “Wisconsin Amount” of line 7 (Capital gain or loss) on the income allocation worksheet (“Inc Alloc Wks”) to the correct number.
Repopulate IL using EasyStep → Federal Taxes → Federal Review and click on “Continue” button.
Review both state returns to make sure that they are complete and correct.

The entire WI return, including Schedule WD, is now correct.

M

Mike9241

Do we need to file a Wisconsin tax return to avoid a matching notice on the 1099-S from the Wisconsin closing?

you file form 1 NPR (non-resident form ) because your gross income for Wi purposes will be over $2,000

Since this is a short-term capital gain—not W-2 income—how do I fill out the Illinois and Wisconsin returns? Does the answer change if it is a capital loss and it is more than offset by other (Illinois) capital gains?

you prepare your federal return and then your non-resident Wi return reporting only the sale of the Wi real estate in the WUI column (not other capital gains you derived as an Illinois resident)

then you prepare your resident IL return taking credit on schedule CR for taxes paid to Wi

M

Mike9241

the fact that the gain is long-term makes no difference for state income taxes because the rate for short-term and long-term gains are the same.

rjs

Employee

A sale of inherited property is always treated as long-term, no matter how long the decedent or the heir actually owned it. When TurboTax asks for the date acquired, enter the word "Inherited" (without the quotes) instead of a date.

N

nelloAuthor

@rjs wrote:
When TurboTax asks for the date acquired, enter the word "Inherited" (without the quotes) instead of a date.

On the page titled “Tell Us About the Purchase of Your Home” in the field titled “Date Bought or Acquired” only numbers can be entered; I can NOT enter any letters, including the word ‘inherited’.

Where do I enter “inherited” in TurboTax Deluxe 2021 for Mac? (In EasyStep, or Forms?)

rjs

Employee

@nello wrote:

Where do I enter “inherited” in TurboTax Deluxe 2021 for Mac? (In EasyStep, or Forms?)

@nello

There is no way to enter "Inherited" as the acquisition date for the sale of your main home. This seems to be a flaw in TurboTax. I will let the TurboTax people know, but I would not expect it to be fixed anytime soon. It's an unusual situation.

You can handle it in one of the following ways, depending on the details of your particular situation.

If you did not get a Form 1099-S for the sale, and you qualify to exclude all of the gain, or you have a loss on the sale, you do not have to report the sale on your tax return. Just omit it.

If you have to report the sale, enter the date of death of the person from whom you inherited the home, as long as it's more than a year before the sale date, and more than two years before the sale date if you qualify to exclude part or all of the gain.

If you do not qualify to exclude any of the gain, you could enter it as an investment sale for which you did not get a 1099-B, instead of as the sale of your home. For the description enter "Main home." You will be able to enter "Inherited" as the acquisition date. The way it appears on your tax return will be exactly the same as if you had entered it as the sale of your home.