Stock owned as tenants by entirety after spouse dies

[Raeka]

I'm completing or trying to complete the worksheet for shares in our S Corp's stock. We owned stock as Joint tenants by entirety during which time we both owned 100 % of stock. Our CPA for years reported it as 50/50 ownership which wasn't legally accurate and later changed the way he did it after he learned he had treated it wrong. But my spouse passed in Nov. and now they are doubling the amount of shares on the worksheet if I put we both owned all the shares. Am I supposed to split it in the tax return?

[MaryK4]

Since your spouse passed in November, she should have a final K-1 with zero shares and you have 100%.

[Raeka]

This is on K-1 from our S corp. We owned 5K shares as JTWRS. That means under the law each of us own 100% of those shares. I owned 5K and my husband also owned 5K rather than it being 2500 per person. Now that he has passed, when I tried to enter it I had an error. I don't remember now what I did wrong. But the way it is now, is it shows we each started the year with 2500 shares. He ended with 0 shares and I ended with the total 5,000 shares. It would seem it should have been both of use starting with 5K and him ending with 0 and me ending with 5K. 

But maybe TT doesn't know how to do that or under tax law, you have to divide it that way. 

I looked at the old K-1 and they never showed the beginning and ending shares. 

[PatriciaV]

Please clarify if you received one Schedule K-1 for last year. Or did you receive two (one for you and one for your deceased spouse)?

[Raeka]

Hello,

Thank you. I just saw this. I got two k-1s. One for him and one for me. I posted about it little while ago. In the step by step, they ask questions and I don't know if I answered correctly. I got two K-1s. I'm not sure if the shares were correct either.  I have to do an amendment for something else so I can redo it if its wrong.

[DianeW777]

You can do an amendment to see if anything changes. If not, there will be nothing to file, but if there are changes you can send the amendment.

The amended form is ready. If you decide you do need to amend use the steps in the link below.

• How do I amend my federal tax return for this year?

Be sure to check your state rules as well.

[Raeka]

@PatriciaV 

 Should I have One or Two K-1s?

[PatriciaV]

Yes, you should have received two Schedule K-1s. However, the S-Corp should report that you each owned half the shares and received half the income/loss. Even though you had joint tenancy, that only affects who controls the stock and how the investment is handled after one spouse passes. 

The K-1 for your spouse should show half the activity through November. And your K-1 should show half of the activity through November and all the activity for December. At the end of the year, you own 100% of the shares in the company.

Enter the K-1s exactly as they report activity for the year. Answer any stock questions as of the end of the year, unless they specifically relate to the change in ownership after November.

You may wish to consult a local attorney about the joint tenancy, preferably one with experience and knowledge of your personal tax situation.