topic Estate account sell of some beneficiary shares and transfer to others in Get your taxes done using TurboTax

Estate account sell of some beneficiary shares and transfer to others

deeMatrix — Tue, 15 Feb 2022 15:26:46 GMT

We have an estate brokerage account with stock in it to be split 25% each to 4 beneficiaries. This is planned to be a "First and Final 1041" for the 2022 calendar year. Three beneficiaries want the estate Executrix to transfer their shares/portion of the account in-kind to a brokerage account they would create (so no capital gains incurred) while the one beneficiary wants the estate Executrix to sell right from the estate which would incur about a $6000 capital gain for the estate for his share and then have the estate send the proceeds directly to him.

It's been recommended from accountant and several others that it should be "all or nothing" with either Executrix selling everything out of the estate and distributing cash proceeds 25% each or all beneficiaris have their shares transferred in-kind to their own account outside of the estate account. Otherwise this can cause problems with pro-rata and K-1 distribution of capital gains, dividends and any deductions.

So question is how can TurboTax handle this situation on the "first and final 1041/K-1 forms" as the three beneficiaries who transferred their shares should not get any portion of the $6000 capital gain reflected on their forms while the remaining beneficiary that had his 25% sold from the estate with proceeds directly distributed to him should get all $6000 capital gains reflected on that K-1 form for him to pay taxes.

Additionally, there is a distribution of dividends and likely some expense in the estate that all four beneficiaries are entitled to 25% each that would need to be distributed so in this case everyone would have this reflected on their respective K-1 forms. Appreciate in advance of any insights on this.

Thanks deeMatrix

Re: Estate account sell of some beneficiary shares and transfer to others

Anonymous_ — Tue, 15 Feb 2022 15:39:58 GMT

TurboTax Business can handle the scenario you described, albeit you may have to resort to Forms Mode.

However, your accountant appears to be correct (at least from the information provided).

The executor cannot (generally) adhere to the demands of the beneficiaries but must follow the terms contained in the governing instrument (and/or state law).

Re: Estate account sell of some beneficiary shares and transfer to others

deeMatrix — Tue, 15 Feb 2022 16:03:31 GMT

Thanks tagteam as you have been instrumental in helping us.

The Will only indicates to distribute everything 25% each and nothing indicating how that gets distributed so Executrix can clearly do whatever is simplest for her. Moreso though the accountant and others were saying the accounting issues with pro rata distribution of gains, etc. and all or nothing should be what's done as gets over complicated.

As such though, from my layman perspective I thought exactly what you said that it could be done in Forms mode by overriding the capital gains amounts on each of the K-1 forms with the entire $6000 reflected on the one beneficiary K-1 form with others showing $0, and letting all other dividends/losses, etc. flow through at 25% to each of the beneficaires K-1 forms.

So was looking at it from a Turbotax accounting perspective. Not sure there is any governing restriction we would need to be concerned with?

Re: Estate account sell of some beneficiary shares and transfer to others

Anonymous_ — Tue, 15 Feb 2022 16:11:49 GMT

The most overarching concern in these matters is typically whether or not all of the beneficiaries are in agreement. If not, one (or more) can create a huge headache for the executor.

Otherwise, most concerns can be left to the discretion of the administrator.