Money inherited from sale of property

[sandiegogurl]

My Dad passed away in 2021 and I am the only beneficiary of his estate.  At the time he passed away he had invested and was part owner of a house in another state that was to be a ‘flip’.  The house did not sell for another year and a half after he passed.  The proceeds from the sale of the flip house were sent to me as the executor of his estate and a 1099 was issued in my Dads name for $80,000 in profit made on the sale.  
I filed a tax return for the year he passed but did not know how to handle the 1099 so never filed a return for 2022, the 1099 was issued to him Dec 31, 2022.

Should I include the 1099 on my return (which I would rather not do amended returns) or complete a 2022 return for my Dad, but won’t tax be due on the 1099 ‘income’ then?

Since I inherited the property and it was sold a year and a half after he passed, isn’t my cost basis the value of his share at his date of death?

Thank you so much for any help with this.

[tagteam]

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@sandiegogurl wrote:

....isn’t my cost basis the value of his share at his date of death?

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Yes, that is your cost basis.

[tagteam]

The proceeds would not be reported on your Dad's return.

The proceeds would be reported on the 1041 for the estate or your return if you received the proceeds.

[Opus 17]

You can't file a tax return for your father for 2022.  You could file a return for his estate, but this is needlessly complicated.  An estate is a separate legal entity.  If you want to report the income as being to the estate, the estate needs a new tax ID number (can't use the decedent's SSN) and the 1099 would have to be re-issued with the tax number of the estate.  Then, the estate files a form 1041 estate tax return (not a form 1040) and this requires a special version of Turbotax.

If you are the sole heir, the easier thing to do is to report the income on your 2022 return.  It would be reported under Sale of stocks and other investments, in the category of "other investment" (don't use "your house" because that is only for a home that you occupy as your main residence).

Because you are filing your 2022 return late, and if you owe a tax payment, expect to be billed for a penalty and interest of about 50% of the amount of tax you owe.  I would decline any suggestion in Turbotax to calculate an estimated penalty and include it with your return -- wait for the IRS to bill you.  When you get the penalty notice, you can ask for a waiver for cause.  The interest can't be waived, but if the penalty is removed the interest will be recalculated lower.  (It's harder to ask for a waiver if you've already paid the penalty with your tax return.)

https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver

[tagteam]

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@Opus 17 wrote:

If you want to report the income as being to the estate, the estate needs a new tax ID number (can't use the decedent's SSN) and the 1099 would have to be re-issued with the tax number of the estate. 

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No, the 1099 would not have to be re-issued with the estate's EIN. 

Reporting would be dependent upon who, or which entity, received the proceeds.

You really are not sufficiently knowledgeable in this area of the law (tax law and otherwise) to be commenting or answering questions on this subject.

[Opus 17]

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@tagteam wrote:

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You really are not sufficiently knowledgeable in this area of the law (tax law and otherwise) to be commenting or answering questions on this subject.

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I don't mind being informed when wrong, but the key point still is,

The taxpayer can't file a 2022 tax return in the father's name, using the father's SSN.  If the sale of the house is not going to be reported by the child/heir, it needs to be reported by the estate, and the estate needs an EIN, and estate files a form 1041 instead of form 1040.  Or do you also disagree with that?

There certainly could be more legal nuance to whether the estate must report the income, the child must report the income, or the child has an option.  If I went too far, I'll try and learn from that.  But the income can't be reported in the father's name, it could be reported by the estate or the child/heir, depending on other factors.