Form 1041

[mckaypartners]

On Form 1041, for real estate sold within 6 months of the date of death, my understanding is the sales price can be used as the stepped up cost basis?

So in TurboTax Business under “How much did this asset cost?” can I simply enter the sales price rather than the purchase price?

[Anonymous_]

Technically, you should get an appraisal as to the fair market value on the date of death.

If the prices in the particular area have not changed to any extent, you can try using the sales price as the basis but, if audited, you will need to justify the basis (e.g,, with documentation).

Note that the six month alternate valuation date is only applicable in certain instances. In short, it applies to rather large estates and even then, only if the alternate valuation reduces the size of the estate and the amount of estate tax due.

[mckaypartners]

Thank you for your response.  There were no appraisals done for the rental property or personal property on the date of death. But the properties were sold in 4 months from the date of death.

The Estate is valued at about $2.0M so Form 706 does not need to be filed. I know Form 706 is used to file the "alternate valuation date".  My understanding is if the properties were sold within 6 months from the date of death, that the sales price would be the stepped up cost basis, resulting in no capital gain tax.

So on Form 1041 in TurboTax Business under “How much did this asset cost?” can I simply enter the sales price rather than the purchase price, effectively making the stepped up cost basis equal to the sales price.  There are no instructions in TurboTax business regarding the stepped up cost basis. 

Thank you for any advice.

[Anonymous_]

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@mckaypartners wrote:

So on Form 1041 in TurboTax Business under “How much did this asset cost?” can I simply enter the sales price rather than the purchase price, effectively making the stepped up cost basis equal to the sales price.  

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Obviously, you would enter the sales proceeds (less selling expenses) as the sales price. 

However, you need to know the fair market value as of the date of death. If the market has remained stable, and prices have not changed, you might be able to get away with using the sales price as the basis. Note that, if audited, you will have to show that the fair market value on the date of death is the same as the sales price.