I am preparing form 1041 for my mother's estate. We sold her home and the proceeds were distributed to the beneficiares. However, we are reporting a net loss on the sale of the home after stepping up the basis and paying closing costs. The only other income reported on form 1041 is income and dividends from financial assets. I have read that capital gains are normally taxed at the estate level and not shown on beneficiaries' form K-1. During the Turbo Tax interview, when asked if there were any distributions made to beneficiaries, I listed the proceeds from the sale of the home. Should I not have done that, since there was a loss on the sale? As a result, Turbo Tax is showing that there is income of about $1000 to be distributed amongst 5 beneficiaries. This seems silly. Is it okay to say there was actually no income distributed to the beneficiaries, or would that not be correct?
