rental property owned by recently deceased

[bobbibong]

husband owns rental property and died on July 1 2021

understand new FMV step up on July 1

deed still in his name and still in NY probate

property has yet to be turned over to children

Estate has no other assets, but did get an EIN #

who records rental activity on their taxes for 2nd half of 2021 ?

100% on 1040 (spouse and deceased husband final return )

children  even not legal owner yet?

[Mike9241]

sorry for your loss. was there a will that dictates what happens to the property or was the property held in trust even a grantor trust? then they would dictate who reports the post-death activity.

did you live in a community property state/  if not, and there was no will or trust holding the property, it would seem that for 2021 the activity thru the date of death gets reported on the 1040 while the activity for the rest of the year gets report on the estate's 1041 income tax return 

[Anonymous_]

I am sorry for your loss. You need to discuss this scenario with your probate attorney and/or a local tax professional.

Considering that the property is in probate, there is almost certainly not a trust involved here (which would bypass probate). 

Regardless, New York State law, to the extent of my knowledge of same, provides that title vests in the heirs (legatees or devisees) immediately upon death. Whether this would dictate reporting the rental income, expenses, et al, on a 1041 or individual income tax returns should be discussed with your attorney or tax professional (although I suspect the second half of the year could be reported on a 1041 with the children as beneficiaries).

[bobbibong]

so the rental loss for the year, on 1041, will flow 100% to the K-1's (beneficiaries) with the 1041 Line  23 (Taxable Income) reflecting ($600) Exemption amount ? 

[Anonymous_]

No. If you distribute 100% to the beneficiaries, then the estate does not get the $600 exemption.