topic how to distribute capital loss from deceased parents trust in Get your taxes done using TurboTax

how to distribute capital loss from deceased parents trust

kirtanwalla — Sat, 23 Mar 2019 21:06:21 GMT

I am the trustee of my deceased mothers trust. I have sold all assets and have a net capital loss. As the fiducary and exeutor of the family trust can I use the capital loss for myself before distributing assets to the beneficiaries.

Re: how to distribute capital loss from deceased parents trust

NCperson — Sun, 24 Mar 2019 00:27:31 GMT

is your question whether you can take advantage of the capital losses on YOUR tax return as a benefit of your role in the trust, that is actually a legal question as the trust agreement defines who enjoys benefits

On what basis do you believe the Trust Agreement gives you that benefit? This community board has no visibility into what the trust agreement states

Remember, and a lawyer would tell you this, as the fiduciary, you have a fiduciary obligation to execute the trust as written and under the laws of the state where the trust is administered. Failure to do so , leaves you personally liable; I would not take these responsibilities lightly

Otherwise those loss carry forwards should end up on line 11 of the K-1 with a code B for short term loss carry forwards and a code C for long terms’

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 03:36:46 GMT

What am I doing wrong? I keep getting a code C for a short term loss. What has to be done to reflect a short term loss with a code C on final fiduciary return for a simple trust?

Re: how to distribute capital loss from deceased parents trust

pk — Tue, 11 Feb 2020 03:48:24 GMT

@kirtanwalla , agreeing with @NCperson , I just wonder about the kind of assets that were in the trust because , assuming that this trust was a revocable trust and that the Estate had a pour-over clause, how do you end up with a capital loss. I say this because generally step-up basis of all assets owned by the decedent kind of reduces the chances of any capital loss. So are you saying that this loss is post adjustment of basis or what?

Suggest very strongly that you seek professional tax advice and legal advice on the operation/execution of trustee duties.

What state was the trust set-up in ?

Namaste ji

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 03:52:38 GMT

The trust is in California. The trust sold the residence lower than appraised value for an immediate no strings attached sale. Land was also sold at a loss due to commissions and other sales costs from escrow and broker.

Re: how to distribute capital loss from deceased parents trust

pk — Tue, 11 Feb 2020 04:05:11 GMT

@gnm9135 , wait , we are getting mixed up in two different queries -- so tell me about your trust with loss , who is the trustor/ grantor ( you or somebody else), did the trust buy the house in CA or what i.e. how did the trust acquire the property

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 04:36:04 GMT

The trust was set up by my parents through an attorney in California. My last parent died in March 2018. In 2018, I filed fiduciary, estate and personal tax returns. It was a revocable trust. I am the executor. The property in the trust was the residence of my mother and has been vacant since she died in 2018. The residence was appraised at $590,000 and was sold for $475,000 as is. Sales expense is $1,753. The trust had two parcels of land which were sold and appraised $24,400. Sales expense on the land is $4,434. Based on what I have read is that since this is a Final fiduciary return, it can be taken as a short term loss. I do not know what I have to do to have Turbotax record it as a short term loss. Help please. Thank you for your time.

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 04:38:24 GMT

I agree with the use of Code B. If it is Code B, does that mean it can be used on the 2019 beneficiary personal tax return?

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 04:40:01 GMT

The second question is how do I have Turbotax reflect a Code B on the final fiduciary return?

Re: how to distribute capital loss from deceased parents trust

pk — Tue, 11 Feb 2020 04:42:26 GMT

@gnm9135 I understand the situation. you realize of course that the loss is only available to the inheritors . and that means you have to issue K-1s to them . I cant spend time on this tonight anymore -- but I will replicate the issue on my version of the TurboTax business and see if I can see any errors. Will come back to you tomorrow during the day-- than you for your patience

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 04:44:43 GMT

Thank you. Yes. The loss goes to the 4 beneficiaries at 25% each. Thank you again for all your time.

Re: how to distribute capital loss from deceased parents trust

gnm9135 — Tue, 11 Feb 2020 13:54:12 GMT

I read IRS CFR-1998-title26-vol8-sec1-642h-1 once again but I would like confirmation. It appears that the beneficiaries of a final fiduciary trust with a capital loss may record it as a short term loss on the current year beneficiary personal tax return regardless as to whether it is a Code B short term loss or Code C long term loss on the trust K-1. Is that correct?

Re: how to distribute capital loss from deceased parents trust

pk — Tue, 11 Feb 2020 22:37:56 GMT

@gnm9135 , I have gone through the ref you provided and my opinion is based on :

I.R.C. § 1212(b) Other Taxpayers

I.R.C. § 1212(b)(1) In General —

If a taxpayer other than a corporation has a net capital loss for any taxable year—

I.R.C. § 1212(b)(1)(A) —

the excess of the net short-term capital loss over the net long-term capital gain for such year shall be a short-term capital loss in the succeeding taxable year, and

I.R.C. § 1212(b)(1)(B) —

the excess of the net long-term capital loss over the net short-term capital gain for such year shall be a long-term capital loss in the succeeding taxable year.

that the longterm character remains intact to the extent it is not extinguished by short-term losses. Thus K-1 code C should be applicable -- however the maximum applicable per year is still the $3000. In some ways I wonder , ( unless of course the beneficiaries are in need of , and can use, the losses for the future years ) why bother with this -- the basis of the property is either the valuation at the time of death or alternate date chosen by the trustee and therefore if the house sold for $XXXXX , why not use the FMV as that ( any appraisal not withstanding ) -- makes life a lot easier. Also note that if the property was never used for business, then it could be classed as personal property of the beneficiaries and therefore no loss is recognizable ( only business / investment losses are allowed ). Does this make sense ?