Estate Tax Return - Required to file?

[conniehoward0570]

I am the court appointed personal representative for my mom's estate. My mom passed away in June, and we sold her house through the estate in December.  With the stepped-up basis, we may have a loss due to the fact that housing prices dropped a lot between June and December, and we had to put in almost $10,000 in clean-up, repairs, and new flooring. Other than the house, there is no income for this estate, and I have not disbursed any funds from the estate account yet. The beneficiaries are myself and my sister.

My question is, am I even required to file a 1041 for this estate? I have been trying to confirm with a CPA or tax professional in my area, but they either do not do estate returns or they are not getting back to me. 

I've read about the gain/loss being taken by the estate or passed to the beneficiaries through a K-1. Is that my decision to make or is a K-1 required? Also, since I have not disbursed the funds yet, would the K-1 apply to 2022 or 2023 taxes?

[Anonymous_ · Accepted solution]

If the house was sold out of the estate, the estate will most likely receive a 1099-S but, regardless, the estate would be required to file a return (1041).

See https://www.irs.gov/instructions/i1041#en_US_2022_publink1000285942

[Anonymous_ · Accepted solution]

Note also that you could use a fiscal year for the estate which would allow you to file one 1041 (an initial and final return). The fiscal year could run from the date of death in June of 2022 through May 31, 2023.

K-1s could be issued to the beneficiaries with a year-end date of 2023 which means they would include any gain (or loss) on their 2023 individual income tax returns.