Inherited collectibles: how to establish cost basis?

Forum|Forum|4 years ago
February 8, 2022
1 reply
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My mother died last September, and I am the executor of the estate. She left a revocable living trust, listing collectibles (art/books/antiques) and house. The collection of collectibles is huge--thousands of items. I got the collection professionally appraised by category, but not individual items. All assets are well under 11 million, so not subject to federal estate tax as I understand.

I understand the cost basis of the house and collection will be stepped-up to date of death.

Late 2021 I sold a small portion of the collection, with money going to the estate bank account, which will be distributed to beneficiaries. In 2022 I hope to sell the remainder/bulk of the collection, again with all proceeds going to the estate account, to be distributed to beneficiaries.

I believe I need to file a 1041 form, for estate income, but don't know how to determine cost basis for collection items. Do I need to get every single item appraised? Is it too late to do that now?

Not A Product Question

Best answer by annfritzi

Thanks @PatriciaV.

PatriciaV

Level 15

Because the estate collection was appraised as a whole, you will need to allocate the appraisal to each item if the collection is not sold as a whole.

You may either 1) divide the total by the number of items, if the items are essentially all the same, 2) use comparable sales for similar items, or 3) have each item appraised separately (as you mentioned).

Whatever method you chose to use, be sure you keep complete and accurate records of the sales and how the cost basis was determined for each sale. Also, be sure you don't allocate more cost basis than the original appraisal amount for the entire collection.

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