Estate sold home (not deeded to beneficiaries), is there a special way to process the K-1

[roseyday5]

My father's Estate sold home in an "as is" sale. Property was never deeded to beneficiaries and sold within 3 months. The estate gave each beneficiary a K-1; Line 11 D is the only field that has an amount. I see how to enter the K-1 amount in TT.  It's generating a capital loss ($3000 max).  Is this correct?  Estate Accountant said it would be a Wash 

Do I have to enter the sale of the home somewhere else or additional fields ? or the cash I received from the estate selling the home?

[DianeW777]

Yes, you should enter the sale on your return and not through the K1.  Since your cost basis is the fair market value (FMV) on the date of death, then the sale within three months of death would likely also be your cost basis.  This is why the Estate Accountant said it would be a wash.  You can enter the sale as follows:

It is considered investment property, report the sale using the steps below:

1. Under Wages & Income scroll to Investments & Savings
2. Select Start/Revisit beside Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
3. Select Add Investments or continue to go through the screens to select 'Other' > Continue
4. Begin to enter the sale description >  Under Type select Other > Under How did you receive select 'I Inherited it' (if applicable)
5. For TurboTax Desktop you would enter the description 'Inherited Property' and select 'Long Term' as the hold period
6. Enter your sale date and 'Various' as the Acquired date (Select Something other than a date'
7. Continue to complete the screens until you arrive back at the Wages & Income main page.

Please accept my sympathies for your loss.

[roseyday5]

That's what I was told to do originally using 1/3 of the proceeds and 1/3 basis since there is 3 of us.  However, since  the estate accountant read the settlement sheets and believes me that the estate sold the property and wasn't deeded to us, he gave us all K-1s. 

Are you suggesting to disregard the K-1 and go this route?  There should not be a gain or loss, is it a Wash?

I just want to do this correctly and move on with my life.  Ty

[tagteam]

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@roseyday5 wrote:

Are you suggesting to disregard the K-1 and go this route? 

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If the accountant filed a 1041 with the IRS and issued a K-1, you cannot ignore the K-1.

Thus, you need to report the K-1 as issued or discuss the matter with the accountant.

[roseyday5]

No I'm not suggesting  that at all. I'm responding the turbo tax answers. I'm looking for the best informed way to enter the K1. Apparently there's an issue on how to report if sold iby estate vs house deeded to the beneficiaries.  

K-1 has only 1 box entered generating a loss .

1. Should this be a Wash?

2. Do I list k-1 as is?

3. Do I need to enter sales price  cost basis anywhere ?

[dmertz]

It seems that everything is being reported correctly on your tax return.  Your share of the long-term capital loss that resulted from the sale of the home by the estate is being passed through to you on Schedule K-1 (Form 1041) for reporting on your tax return's Schedule D line 12.  This loss is first applied on Schedule D to your capital gains, $3,000 of what remains after that is applied to your other income, and any that remains after that is carried forward on TurboTax's Carryover Worksheet to be applied on next year's Schedule D.  You'll eventually be able to apply all of this loss, but it seems not all on your 2023 tax return (because you've reached the $3,000 limit of what can be applied to your 2023 ordinary income).

Nothing about the sale of the home is reportable on your tax return because you are not the entity that sold the home.  Only the resulting capital loss is to be reported on your tax return, as described above.

[tagteam]

@roseyday5 

@dmertz is 100% correct so follow his post (the loss will be found on Line 11 of your K-1, though).

[roseyday5]

dmertz,  I think you hit every question that I had.   I'll enter the K-1, as it was prepared, and NOT the sale of the home. This would also mean I do not have to enter the money I received from the estate- since it's nowhere near 11 million ?

One other question,  If I enter the K-1, will it automatically transfer to my Pennsylvania state return? I also received a PA-41 Schedule RK-1.  I thought the inheritance was tax exempt for PA, but I imagine it has to be listed somewhere ?

thank you for help 

[dmertz]

It's the estate that would file an estate tax return, if necessary, not the beneficiaries.  I think that PA has an inheritance tax, but payment of that is the responsibility of the estate and has nothing to do with your individual tax return.

I'm not familiar with PA tax returns,