I am really confused with what deductions are allowed to be taken on a Form 1041 Estate Tax Return, where they go on the 1041 and how they should be reported on the K-1 form for the beneficiaries? The Estate is in Wisconsin (2 beneficiaries in Illinois and 1 in Wisconsin).
There is no income only expenses for the 1041.
The expenses are:
Expenses Prior to Sale:
Utilities
Snow removal
Final cost of healthcare
Bank Fees
Remaining funeral cost
Repairs & Postage reimbursed to
beneficiary
Attorney Fees
After Close:
Final Attorney Fee
Closing costs:
Wisconsin Transfer Tax to Register of
Deeds
Final Water Bill to Beloit Water Utility
Home Warranty to Universal Home l
Protection
Real Estate Commission-Listing Agent
Real Estate Commission-Selling Agent
Title-Gap Endorsement to Land Title &
Closing Service LLC
Title-Owner Title Insurance to Land
Title & Closing Service LLC
Title-Special Assessment Letter to
Land Title & Closing Service LLC
County Taxes
Title-Adjustment for Owner's Premuim
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@CDA wrote:There is no income only expenses for the 1041.
If there is no income (or gain) to be reported, then you do not need to prepare a 1041 unless there is a loss on the sale of the property that needs to be passed through to the beneficiaries.
First, note that certain expenses such as medical and funeral costs are not deductible on Form 1041.
Further, note that the expenses allowable as deductions on Form 1041 with respect to the sale of the property will be dependent upon how the property was being used after the death of the owner but deductions for the management, conservation, or maintenance of estate property are generally allowed.
Since there may be state issues (e.g., WI estate with beneficiaries in another state), and your experience with the various issues may be limited, you should most likely consult with a local tax professional.
See https://taxexperts.naea.org/listing/service/estates-gifts-trusts
Funeral costs would not be deductible on a 1041 (but would be deductible on a 706, which almost certainly does not need to be filed).
Medical expenses, and the like, would be deductible on the decedent's final return, not on the 1041.
See https://www.irs.gov/instructions/i1041#en_US_2022_publink100011505
Attorney and fiduciary fees (and miscellaneous expenses such as postage) would be deductible if paid in connection with the administration of the estate.
Other expenses that relate to the property itself, may be added to the basis of the property, deducted from the sales price (as selling expenses), or not deductible at all, depending on their nature.
You will have to report the sale on your 1041 in that event.
Ensure that you use the correct basis and deduct the appropriate expenses.
@CDA wrote:There is no income only expenses for the 1041.
If there is no income (or gain) to be reported, then you do not need to prepare a 1041 unless there is a loss on the sale of the property that needs to be passed through to the beneficiaries.
First, note that certain expenses such as medical and funeral costs are not deductible on Form 1041.
Further, note that the expenses allowable as deductions on Form 1041 with respect to the sale of the property will be dependent upon how the property was being used after the death of the owner but deductions for the management, conservation, or maintenance of estate property are generally allowed.
Since there may be state issues (e.g., WI estate with beneficiaries in another state), and your experience with the various issues may be limited, you should most likely consult with a local tax professional.
See https://taxexperts.naea.org/listing/service/estates-gifts-trusts
Thanks for the quick response. I thought because the home of the deceased was sold and/or 2 of the beneficiaries were from out-of-state that I had to file a 1041 even though there was no income. Home sale did not result in a gain or lose. Home was vacant from time of death to time of sale.
I will look at the information in link you included and also check out Wisconsin.
If unable to figure out for sure about deductions, I’ll contact one of the tax experts.
Thanks again.
@CDA wrote:
Home sale did not result in a gain or lose. Home was vacant from time of death to time of sale.
If the estate receives a 1099-S, which it most likely will, then a return will be required (if nothing else other than to report the basis - the fair market value on the date of death).
Funeral costs would not be deductible on a 1041 (but would be deductible on a 706, which almost certainly does not need to be filed).
Medical expenses, and the like, would be deductible on the decedent's final return, not on the 1041.
See https://www.irs.gov/instructions/i1041#en_US_2022_publink100011505
Attorney and fiduciary fees (and miscellaneous expenses such as postage) would be deductible if paid in connection with the administration of the estate.
Other expenses that relate to the property itself, may be added to the basis of the property, deducted from the sales price (as selling expenses), or not deductible at all, depending on their nature.
The estate receive a 1099-S.
You will have to report the sale on your 1041 in that event.
Ensure that you use the correct basis and deduct the appropriate expenses.
Thanks again. I will have to review my list and see what I can use.
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