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Decedent estate tax return

LGTX — Wed, 25 Feb 2026 23:49:05 GMT

I am the executor and sole beneficiary of my sister's estate. She died November 2024 and I filed her last 1040 for 2024 in April of 2025. I closed all her financial matters during calendar year 2025. I am getting ready to submit her 1041 Estate Return and I am wanting to know what needs to be included in this return.

Most of her accounts I was the listed beneficiary. Some of these I know are not taxable (to either the estate or me personally) but the rest I received a 1099 in my name. For these I have included them in my 2025 1040 tax return. I opened an interest-bearing estate bank account to receive some checks from a gross distribution of an IRA (of which I received a 1099 in my name) and some benefits from a supplemental cancer AFLAC policy that were all paid to the order of the Estate. The only 1099 received in the name of the Estate was a 2025 1099-INT with the interest earned from these above listed checks. The 1099-INT for the Estate was for $703.00. This also represented the only income of the estate for 2025. I changed the Estate bank account to a noninterest bearing account on 12/31/2025 and left a small balance in that account in the unlikely event I receive a future check made out to the Estate.

Since the only income that was earned by the Estate in 2025 is the $703 in interest, is that the only reportable item that should appear in the Estate's 1041 tax return?

My sister's only other assets were a five-year-old vehicle and a one-bedroom condo. Since I am the sole beneficiary of the estate, I transferred the title of the vehicle and deed of the condo to my name during 2025.

I am using the vehicle for personal use and plan to keep it. The condo had been vacant for many years and needed extensive renovation which I have now completed and paid for on my own. I plan to sell it in 2026. I am assuming there are no tax reporting requirements for 2025 for either me personally or the Estate regarding these two items. If and when I sell the condo, I am assuming it will be reflected on my personal 1040 and my basis on it will be the FMV at the time of my sister's death. Please advise on this and the question above.

Re: Decedent estate tax return

guywong — Thu, 26 Feb 2026 00:06:48 GMT

Since your sister's estate had $703 in interest income, you do have to file a Form 1041 Fiduciary Income Tax Return for the estate. Estates with taxable income over $600 is required to file. You may also have to file a fiduciary tax return with the state where your sister and you reside as well.

As to the sale of the condo, since you have changed the title to your name, when you sell the condo, you will have to report the sale on your 1040. The cost basis is the appraised value of the condo as of her date of death, plus all your remodeling costs. You may also be able to include the maintenance costs since her death as part of the cost basis. The sale will most likely produce a long-term capital loss.

Re: Decedent estate tax return

LGTX — Thu, 26 Feb 2026 02:48:00 GMT

Thank you for your answer. Do I have to generate a Schedule K-1 for the estate so I can report it on my 1040?

Everything is in Texas, therefore, there is no state inheritance reporting.

Re: Decedent estate tax return

DianeW777 — Sat, 28 Feb 2026 19:08:08 GMT

Yes, you will generate a K1 from the Form 1041 for the interest income. This will then be reported on your individual tax return.

When the condo is sold the cost basis is the fair market value on the date of death plus the cost of any capital improvements made after you inherited it (not repairs but improvements that are capital in nature). Maintenance expenses would be part of the selling expenses.

If you never lived in it or used it as a personal residence it will be an investment sale and you can report it as follows in 2026.

The expenses of sale will reduce any gain or increase any loss as well. This is entered as the sale of investment property and can be entered as follows.

Enter the inherited property sale in TurboTax using the steps provided.

Open or continue your return: Choose the Search box and type 'sale of second home' then use the Jump to link to enter your inherited sale) or follow the menu. In TurboTax Online select 'See more' in the FAQ then click 'sold second home'.
Under Wages & Income scroll to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2025? screen
- If you land on the Your investment sales summary screen, select Add More Sales
On the OK, let's start with one investment type screen, select Other, then Continue
On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale
On the next screen, select Other (choose this also for inherited homes) then select I inherited it under How did you receive this investment? (For TurboTax Desktop you can enter a description of 'Inherited Home' and long term holding period).

Note: If you do or did use it as your personal home or second home, no loss will be allowed and any gain would be taxable.

@LGTX

Re: Decedent estate tax return

LGTX — Fri, 13 Mar 2026 20:16:25 GMT

Diane, thank you for your thorough response. It answered my questions completely. Sorry for my delay in acknowledging your comments. I had submitted it earlier but for some reason wasn't going through. Thank you again.