Where do i report that my former wife's rental homes were transferred into her Estate at time of death?

[JulieC14]

I'm very sorry for your loss.

In TurboTax, the rental assets will need to be marked as being disposed of (since the ownership has changed to the Estate) with the effective date being the date of your wife's death.  This will prorate the depreciation being applied to the personal tax return as of the date of death. Then, the tax return for the Estate would include the income, expenses and deprecation (based upon value of asset allowed for transfer into the estate) from the date of death forward.

In your personal tax return in TurboTax, search for rentals (after your return is open)  and then click the "Jump to" link in the search result to be brought to the Rental section of the software.  Continue through the screens until you see options to edit the rental asset and can mark that the asset was disposed of and enter the effective date.

If you have other questions regarding the rental property asset value in the estate, you should consult an estate tax professional.  

[Carl]

I'm sorry for your loss. Just need to clarify a few things.

my former wife

I'm assuming you reference that way because of her unfortunate passing, and that you were still legally married to her on the date of her passing.

Another assumption is that she passed in 2019.

I am also assuming that for 2018 you and your wife filed a joint tax return, she was identified on that tax return as being the one and only owner of those rental homes, and all rental income/expenses was reported on SCH E as a physical part of your joint 2018 tax return.

Basically, on your personal 1040 joint tax return for 2019, work through the rentals starting out "as if" nothing happened. At the start you will select the checkbox for "I sold or otherwise disposed of this property in 2019". (I know you didn't sell it, but you still select that checkbox anyway.)

Next, you'll report all rental income received *only up to the time of her passing* and all rental expenses incurred *only up to the time of her passing*.  The "date of disposition" will be the date of her passing.

Next you'll work through the "Sale of Assets/Depreciation" section. At an absolute minimum, the rental property itself will be listed there. If there is more than one asset listed, then you must work the below through each and every single asset listed, one at a time.

 - Start working through the asset and when asked, indicate that "I stopped using this asset in 2019"

 - On the "Special Handling Required?" screen you ***MUST*** select the YES button. If you select NO, then you will be forced to enter sales information. You did not sell it - you're transferring it to her estate.

 - For the date of disposition enter the date of her passing.

You must do the above three steps for each individual asset listed.

Once done with all the rentals, go ahead and completely finish the joint tax return in it's entirety - but DO NOT file it yet. You will not file "ANYTHING" until you also have the 1041 estate return completed.

After you have completed the 1040 joint tax return in it's entirety, you will need to print out the IRS Form 4562's for each rental property. You will "NEED" these forms when you start entering data in the 1041 estate return.

Now for each rental property there are two IRS Form 4562's and they both print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax (AMT) Depreciation Report." For completing the 1041 you will need information from both of those 4562's for each rental property.

If you need assistance with the estate return, we can help with that too. But take things one step at a time and get the 2019 joint 1040 tax return completed first. (Just don't file it yet.)