Preparing 1041 as Personal Rep for Aunt's Estate - Deductions Questions

[trishglxk]

My Aunt passed in Dec. 2018, and I prepared her final 1040 for 2018 last year. 

One of her investment accounts generated interest, dividends, and cap gains  totaling $6K, so I am now working on the 1041 Estate Income Tax Return for 2019.  The 1041 will be the first and final return for the estate.  

 The condo she lived in was cleaned up and listed in March 2019, and was eventually sold in Sept of 2019.  The proceeds were distributed to 3 heirs in 2019.  The selling price was $195K; after concessions, realtor commissions, tax stamps, lawyer fees, we received about$175K in proceeds.  The 1099-S the estate received shows $195K.  Never had an appraisal done at time of death, so lets assume FMV=$195K selling price.

While on the MLS, I continued to pay utilities, condo fees, insurance, taxes, and maint. costs.  

Can an expert in 1041 Estates clarify if any of the selling expenses or carrying costs described above are deductible on the 1041?  If so, can you tell me where on the 1041 I would report them?  Also, does the sale of the condo need to be reported on Sch D Gains/Losses?  Using figures above, would there be a loss to report?

Lastly, could use some help determining what line items to use to deduct the lawyers probate fee of $2K, and my costs to administer the estate (which include travel to MA to collect financial records and realtor interviews, mileage, postage, copy services, and tax software, totaling $1.5K)

I have read perhaps too much on these topics, but I still seem to lack clarity.  TY

[tagteam]

The estate can realize the loss on the sale of the condo provided it was held for business or investment purposes as opposed to personal use (e.g., if a beneficiary used the condo as a residence or for other personal purposes).

See https://www.irs.gov/publications/p559#en_US_2018_publink100099687

The estate can deduct expenses incurred to maintain, preserve, and protect estate property which are, generally, listed as Other deductions or added to the basis of estate property.

Regardless, as executor or administrator, you should seek reimbursement for your out-of-pocket expenses from the estate directly (where such expenses are deductible by the estate on its 1041, typically as Executor fees.

Probate and other legal expenses can be entered under Professional, accounting, and tax prep fees.

[Lynn90275]

@tagteam Hope you don't mind my asking an extended question.

"Regardless, as executor or administrator, you should seek reimbursement for your out-of-pocket expenses from the estate directly (where such expenses are deductible by the estate on its 1041, typically as Executor fees."

Is this Executor Fees the same as Fiduciary Fee #12 in deduction section?

If yes, do I need to declare this reimbursement as income on my 1040? I only get reimbursed for the court filing fees, publication, parking, expenses I actually paid out on behalf of the estate. Nothing for my admin of the estate/probate. Thanks

[tagteam]

Yes, executor fees are the same as fiduciary fees.

You do not have to report the reimbursement on your 1040 (unless you are a professional fiduciary).

[Lynn90275]

@tagteam  Thank you so much for your prompt response. 🙏

[bobbibong]

so in 2019,  would the $20K of condo selling expenses result in a capital loss (assume for profit motive) split to the beneficiaries as reflected on the 1041 Form K-1 ??

and fees paid to the probate court on Line 15a (Other deductions) of the 1041 ?

Thxs

[tagteam]

Report fiduciary and probate fees and costs on Line 12.

[tagteam]

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@bobbibong wrote:

so in 2019,  would the $20K of condo selling expenses result in a capital loss (assume for profit motive) split to the beneficiaries as reflected on the 1041 Form K-1 ??

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The $20k worth of selling expenses would be deducted from the gross sales price. 

Assuming the property was not being held (or used) for personal purposes, a capital loss could result.