Stock sales for a decedent

[ptspringer]

My father passed away last year and I am the Successor Trustee for his estate/Living Trust.  

I created an Administrative Trust to gather their assets and then distributed assets to a Family/Bypass Trust and Survivor Trust (both with my mother as beneficiary). I am in the process of completing the 1040 tax return and the 1041 returns for the Administrative and Family/Bypass trusts.  The Survivor Trust reports under my mother's SS so that can go on their joint return.

After his death, sales of stock were made in a managed account and reported in a 1099-B under his social security number.  He also received 1099-DIv and 1099-INT proceeds that were reported under his social security number after his death.  Because the income of all trusts goes to my mother, I did not bother to make a nominee distribution on the 1099-DIV and 1099-INT.  However I need to make a nominee distribution on the 1099-B sales that occurred after my father's death because 1/2 of these belong in the Family/Bypass Trust. 

In the 1040 joint tax return, I adjusted the gain/loss to 1/2 the values, and on the 1041 I entered a 1099-B titled Nominee Distribution from My Father (deceased) listing his SS number and account from which the sales took place. 

Is this the correct method to transfer these capital losses to the Family/Bypass Trust?  If not what should I do  instead?

Thank you,

Paul

[tagteam]

I have a threshold question:

Was there an account (or more than one account) that was being held in your father's name, but not as trustee (i.e., not in the name of the trust, but in his name individually, even if the account had his SSN)? If so, was there a pour-over will?

I believe you have a complicated post-mortem structure and should seek professional guidance. Specifically, if your father maintained accounts outside his trust (or one of the trusts in which he was a grantor), then those accounts would become part of his estate after his death; they would not automatically become part of his living trusts unless there is language to that effect (either as a schedule in the trust or language in another testamentary document).

[ptspringer]

The Living Trust used my father's SS number because it was revokable and that is common practice.  My Family Trust is the same way.   I hired several attorneys and a CPA to advise on the trusts and prepare the 706 estate tax submission last year.  The structure of the Trust is pretty well defined by the Trust document.  All Major assets were in the Trust, personal possessions etc not in the trust pass to his wife (my mother), and there was a pourover will as part of the Trust.

My question is how to handle the tax reporting for Nominee distributions in Turbotax.  If the 1040 program could issue a 1099-B for the recipient it would be easy (Turbotax doesn't handle this)

Respectfully

Paul

[tagteam]

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@ptspringer wrote:

My question is how to handle the tax reporting for Nominee distributions in Turbotax.  If the 1040 program could issue a 1099-B for the recipient it would be easy (Turbotax doesn't handle this)

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You are correct that the program does not support the issuance of a 1099-B. In fact, past years' editions did not support nominee distributions for capital gains.

This year, however, nominee distributions for capital gains are supported (at least in the desktop versions) and Code N can be entered on Form 8949 for that purpose.

[ptspringer]

Thank you.  I have successfully adjusted the 1099-B on the 1040 form that reduces the capital loss reported on my parents return.  My question is how to include the Nominee distribution as the recipient on the 1041 form for the Bypass Trust.  What I did was enter data for 1099-B titled "Nominee distribution from My Father (deceased) SS number Account Number" Then listed each stock sale reported on the 1099-B and halved the values because I was transferring 1/2 to the 1041 and leaving the other 1/2 on the 1040.

I'm not sure that is the proper way to do it.

Paul

[tagteam · Accepted solution]

I believe it is substantially the correct approach.

The other way would be to report just the gains/losses rather than the individual transactions.

Regardless, as long as the data reported is identified, it should not present an issue.

[ptspringer]

Thank you very much for you help TagTeam.

Paul