questions with estate tax return

[JP5912]

I just started an estate tax return with turbotax Business.  I have a few questions regarding K-1 forms, beneficiary and acquired dates with sold dates in two different tax years.  First of all, the only item with the estate were stocks with no beneficiary listed so they were transferred to the estate name and sold under the estate name.  The check was deposited in the estate checking account and then a check was made payable to the only person in the will. The will listed only one person who is also the Executor.  Would a K-1 form still need to be completed ?  Would the person listed in the will be the beneficiary even though no one was named one with the stocks ? Also, during error check, it was flagged that the acquired date was 1/5/2021 (date of death) and sold date was 1/14/2022 which was two different tax years.  Will that be an issue ?  Sorry I have many questions but any help would be greatly appreciated.

[Anonymous_ · Accepted solution]

If the return you are preparing is the final return and you made a distribution, then any gain or loss from the sale of the shares would be passed through to the beneficiary on a K-1 (along with any income - dividends - that might have been earned).

You need to adjust your tax year, If you select a fiscal year for the estate, that year could begin in the tax year the estate had income and was, therefore, required to file a 1041.

The fact that the named beneficiary was not on the account that held the stocks, is irrelevant; that is still the beneficiary according to the will. 

[JP5912]

Thanks Champ I appreciate your help.  I just have a few more questions. I noticed on the letter from the IRS issuing an EIN # back in June 2021 that it says form 1041 must be filed by 4/15/2022 but in 2021 there was less than $600 in income.  In 2022 the 1041 form needs to be filed because of a stock sale and receiving a 1099-B Proceeds from Broker and Barter Exchange Transactions.  Will that be an issue ?  Is the amount distributed the proceeds from the sale of stock or just the loss from the sale ?  Finally, on schedule D - date sold was in 2022 but date acquired was 2021 (date of death) will that be an issue ?  Sorry I tend to over think things.  Thanks again.  

[Anonymous_ · Accepted solution]

You can use "inherited" for the date acquired (since the securities were technically acquired on the date of death).

The estate is not required to file a return for the tax year in which it has less than $600 in income, so that is not problematic (it can be explained in a response to an IRS notice if such notice is ever received, which is highly unlikely).

You can enter the total amount distributed, but only the actual gain or loss (if the return is the final return for the estate) will appear on the K-1s.

[JP5912]

Thanks for getting back to me so fast.  I really appreciate it.  

[JP5912]

Hi Champ,

Sorry I have one more question for you.  For date acquired I can only put an actual date, I can't write inherited.  I put the date of death which was in 2021.  Will that be o.k. ?  Turbotax is flagging that date as being in a different tax year.  Thanks again.

[Anonymous_]

Did you check the "Yes" circle in the screenshot below?

[Anonymous_]

Also, I had no problem with typing "inherited" in the date acquired box.

TurboTax did not flag that as an issue. Ensure that your tax year is correct in the GENERAL INFO tab.

[JP5912]

I can't get back to that screen but I am almost positive I checked yes.  

[JP5912]

I looked at the general info tab and it just states summary estate created in January 2021 date of death and tax year fiscal.  I don't where else to look for the tax year.  thanks

[Anonymous_]

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@JP5912 wrote:

I can't get back to that screen but I am almost positive I checked yes.  

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I really do not know what to tell you at this point because I am having no issues with typing "inherited" in the date acquired box on a test return. TurboTax is not flagging the entry and it appears properly on Form 8949.

[Anonymous_]

You can change the tax year by clicking the Edit button.

[JP5912]

Hi Champ,

When I go to edit button, the only choices I have for tax year - calendar year, fiscal year and short year with ending month drop down as well.  I put fiscal year and april as the ending month.  With the date of death being January 2021 and the distribution of stocks being 2022 when doing error check it says date sold is not in the current tax year.  Not sure how to proceed.  thanks

[Anonymous_]

If the estate was not required to file an income tax return (1041) for the 2021 tax year, and this is the initial return for the estate, then you can use a calendar year (2022) for this return.

Note that if the estate has distributed all of its assets and has terminated, then this return should also be marked as the final return.

[JP5912]

Hi Champ,

I am almost done but noticed on form 8949 part ll F is checked (long term transactions not report to you on form 1099-b.  In the 1099-B I received it shows the cost basis reported to the IRS with two of the transactions but not checked for one of the transactions. They were all sold the same day with one transaction but shouldn't I have checked box D and box F for the one without Basis reported to IRS ?  thanks