How to extensions in CA. work in regards to filing this year 2023 and things like K-1 forms?

[PJhiker]

Yes, I do know that information for most part. Do I have to pay an estimate by April 18 to the IRS and CA. state? I did not work this year as I left my job in late 2021. I have been working on the house while my GF works and day trading. I might owe a little on that too, but I think I can figure that on here by just uploading the 1099s from the brokerages.

Here is my scenario. I am the beneficiary of a Trust that my brother is the Successor Trustee of. My father passed in August of 2021. There was basically a house for us to sell and split the proceeds. 

We sold the house in March of 2022 and he paid my my half. The appraisal upon the date of my fathers house was for $510,000. We sold the house for $551,000. After closing costs the Title says the amount due to the Seller is $515,188.78. 

My brother wrote me a check for $257,400.  If you multiple that by two you get $514,800. That little difference is for him and a property tax thing.

So, essentially he and would pay capital gains taxes on the $5,188.78 difference between the appraisal price $510,000 on the house upon my father’s passing and amount we received as seller at $515,188.78 correct? So we would be paying capital gains on %5,188.78 total and we would split that between us at $2,594.39 right? That does not include deductions like a $2,000 staging fee we would also split? This is all confusing to me.

I'm not sure if there are any other really significant deductions in the closing cost or elsewhere. How would you estimate that by those numbers?

[Anonymous_]

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@PJhiker wrote:

.....we would be paying capital gains on %5,188.78 total and we would split that between us at $2,594.39 right? That does not include deductions like a $2,000 staging fee we would also split? 

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This is most likely much ado about nothing, really, since the amount is so minimal. You are looking at a long-term capital gain of $2,594 (long-term since the house was acquired from a decedent).

Long-term capital gains are taxed at a rate at 0%, 15%, or 20%, depending upon your taxable income and filing status. It appears as if you are in the lower range so your tax liability on this gain could very well be $0  (or extremely low).

You can use TaxCaster to get a rough estimate or plug the figures into TurboTax.

See https://turbotax.intuit.com/tax-tools/calculators/taxcaster

[PJhiker]

Thanks so much! Where exactly would I input these numbers on Turbo tax? Is there an area (estimates) outside the K-1 form here to put the numbers? So it is long term capital gains? OK, that is great to know. Would Turbo Tax Pay the IRS and State if I enter on here and file as well?

yeah, I don't have a W-2 to enter this year for employee income so I assume I will just be entering or it gets calculated by a preset tier % correct? 

[Anonymous_]

You can either pretend that you already received the K-1 and enter it in the K-1 section of the program (use Line 4a) or you can enter it as if you had sold a stock or mutual fund in the Investment Income section and record a long-term gain of $2,594. Either way should give you a good estimate.

[also, note that if your taxable income, assuming your filing status is single, is less than $41,675, then your long-term capital gains tax rate would be 0%]

[PJhiker]

I will try those. Do you know the long term capital gains rate if I were to not have a W2 form? Is that just federal? Would I pay the state to for these capital gains in the Trust and/or state?

[Anonymous_]

I am not certain about California, but I believe the capital gains tax rate is the same as the regular income tax rate.

[PJhiker]

So my capital gains taxes are zero on these long term capital gains from the taxable income I received of $2,594.00 on the house/estate? Do I even have to enter the K-1 if that is the case? Does my brother even need to file a 1041 and get a K-1 to me?

[Anonymous_]

Yes, you need to enter the K-1 (the IRS is going to receive a copy) and your brother will have to file a 1041 since a 1099-S was issued to the trust.

The only way you would not have to enter the K-1 would be if you were not required to file a return at all.

[PJhiker]

Would turbo Tax pay the state and IRS my estimated payment since I have to pay by April 18? I don't pay the state and feds right on capital gains like these for the house? I mean it appears to be zero from what you are saying.

What are short term capital gains on securities like ETFs and stocks if I had a small gain in 2022 without employment and below that 41k number?

[Anonymous_]

TurboTax does not pay anything in terms of estimated tax payments; you need to do that yourself either by sending in the 1040-ES vouchers or making an online payment (see link below).

https://www.irs.gov/payments

Short-term capital gains are taxed at regular income tax rates. Since I do not know your total income (and the type), I cannot determine exactly how much you would owe to the state or feds (if anything).

[PJhiker]

You have been really helpful. Thank you so much. On the short term capital gains rate I did not work in 2022 when I incurred the small amount of short term gains. So it is obviously below that $41k amount you previously mentioned. What would be rate in that case? 

[Anonymous_]

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@PJhiker wrote:

.....it is obviously below that $41k amount you previously mentioned. What would be rate in that case? 

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The regular income tax rate and note that your standard deduction for 2022 is $12,950.

See https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2022

[PJhiker]

I can still claim that standard deduction still? It appears I would pay 10% then because my short term capital gains is less then  $10,275 on the stocks right? That is in that "marginal rates" list if I am reading it right?

And, I would pay ZERO on the income of the house because the long term capital gains is only over 2k right?

[Anonymous_]

Are your short-term capital gains of $10,275 and your long-term capital gain of $2,594 your only income for 2022? Nothing else? You may very well have zero tax liability.

[PJhiker]

Correct nothing else. I have no other income for 2022 and my short term gains in stocks are not even $10,275. It's more like $2,000.

I had money saved prior to all of this and my GF works full time, so I took the year off and felt with my family stuff and worked on her house renovations and took some courses online. We have no kids and live pretty simply. But yeah, just $2k in short term gains and that gain from the house which is long term of $2,594. And, after that no other income.

What do you think? I should have zero tax liability? Also, on this note should I not even worry about asking my brother to make sure he splits our deductions for the house? I want to appease him if I can to keep it peaceful. It sounds like deductions on the K-1 won't matter to me right?