How to report the sale of my deceased son's personal vehicle 2023

[BWet7870]

My son passed away June 2023. He had a sole proprietorship business. He had a Jeep for business and personal use. His dad was a cosigner on his loan. His dad took possession of it and sold it back to the dealership. They paid off the existing loan and the remaining $11,756.38 was paid out to his dad. His dad used those funds towards my son's funeral expenses. How do I report it on my son's 2023 federal taxes (under sales price & expense of sale)? I did select the stop using this vehicle in 2023 within the vehicle summary.

Thank you!

[MonikaK1]

When a taxpayer dies, their assets become part of their estate. If the asset is transferred to an heir, under current rules, the basis is stepped up to the market value at the time of death. If the heir sells the asset, the gain subject to tax would be the appreciation that occurred since inheriting the asset. So, the subsequent sale wouldn't be reported on your son's return.

Please see this TurboTax tips article and this help article for more details regarding filing a return for a deceased person. In the Personal info section of TurboTax, a question appears asking if the person for whom the return is being filed has died.

Upon the death of a taxpayer, a new taxpaying entity—the taxpayer's estate—is born to make sure no taxable income falls through the cracks. Generally, income is taxed either:

• on the taxpayer's final return,
• on the return of the beneficiary who acquires the right to receive the income, or
• on the estate's or a trust's income tax return, if the estate or trust receives $600 or more of income.

The filing of the deceased taxpayer's final return usually falls to the executor or administrator of the estate, but if neither is named,  then the task needs to be taken over by a survivor of the deceased. The final return is filed on the same form that would have been used if the taxpayer were still alive, but "Deceased:" is written at the top of the return followed by the person's name and the date of death. The deadline to file a final return is the tax filing deadline of the year following the taxpayer's death.

I am very sorry for your loss.

[BWet7870]

My son had no will. There's no estate. His estate was insolvent. There's no executor. I don't know if this added information changes your answer or if you can provide me with more information. 

Thanks for answering!

[ThomasM125 · Accepted solution]

If his father inherited the truck, the cost basis would be the fair market value of the truck when he took possession of it, so it is doubtful he would have a taxable gain of the sale of the vehicle. If the deceased had title to it, it would belong to his estate that would be created by default when he died. If the sale proceeds were more than the cost of the vehicle less depreciation then the estate would report income on the gain on an estate tax return. The estate tax return would only be required if the income of the estate was more than $600 during the year.

The jeep was not sold until after the business was ended so its sale would not factor into the final return of the deceased as far as the business is concerned. You indicated that in TurboTax you said you stopped using the vehicle so that was correct.  You should also indicate that the vehicle was put to personal use on the screen that says Do any of these apply to the (name of vehicle):

If your son had taken an expense deduction for the vehicle, such as section 179 or bonus depreciation, you will need to account for that as depreciation recapture in the Less Common Business Situations section of TurboTax. You would have to look on page two of the depreciation schedule Form 4562 from a previous year to see if any section 179 depreciation has been taken. It would appear in column (i). If bonus depreciation had been taken, you would have to look on line 14 of Form 4562 in the year that your son put it into service to see what that amount of bonus depreciation was.

 

 

If you need to recapture depreciation because of bonus or section 179 depreciation, you will see instructions on how to do that on the screen that says Conversion to nonbusiness use:

 

So sorry for your loss!

[BWet7870]

Thanks for your time and information.

His dad didn't inherit the truck he was the co-signer and took possession of it. He then sold it to payoff the loan. He kept the proceeds to pay for his funeral expenses. My son had no will or an estate. He owed more in debt than he had in assets. The business was closed before the sale of the vehicle.