How does nominee/decedent (i.e. me the Executor) pass capital loss to Estate, then Estate to beneficiaries?

Forum|Forum|2 years ago
January 30, 2024
12 replies
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Note: The loss is in a revocable/living trust account, whose final taxes will be completed with the decedent's return (for income prior to death) and with the new trust (with new TIN) and estate under a 645 election (after completing form 8855) for after-death income. I'm not sure that makes a difference, but thought I'd include just in case it does...

What little I could find showed the decedent can not pass on the loss... that the loss would stay with the decedent's tax return even though the sale/loss was after the decedent passed.

This doesn't seem correct, so I'm probably wrong. If I'm wrong, what form does the decedent (me the executor) use to pass on the loss? I understand I need to transfer 1099-DIV and 1099-INT income but do not understand how I would pass on the loss. What would I do?

What is correct? ANY advice is appreciated.

Note: These are funds from the sale of a defunct (Puerto Rico Power) bond that could not be transferred and had to be sold to close decedent's account when assets were transferred to beneficiaries.

Thanks in advance!!

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Anonymous_

Level 15

The simple answer is that any excess capital losses essentially die with the decedent; they cannot be transferred to the estate.

If the loss was incurred as a result of a sale that was effected after the decedent passed, then the loss would be recognized either by the estate or the trust (whichever entity owned the asset).

EDIT: Since you made a 645 election, the loss would be recognized by the estate since the trust is treated as a part thereof (again, assuming the sale was after the decedent passed).

davidssonAuthor

Level 4

Thank you for your response!!!

The sale/loss was after death, in a living trust account that shared Mom's social security number.

The brokerage transferred almost all assets to a new trust account with a new TIN (for post-death income) but was unable to transfer this defunct bond, which had to be sold in the original trust (with her SS#) to allow that account to be closed.

Because it was sold in an account with her SS# (after death) does it...

1. Get transferred by some nominee form to the new-trust (1099-B?)? If so, which form?

2. Die with the decedent?

3. Count as a loss against her estate (even though it was sold after her passing)?

4. Something else?

Thanks again!!