1099-S related to sale of deceased parent's home - questions about the Trust filing 1041, and children filing the capital gains/loss

[Katieimw]

My mother passed away in May 2021. I am the excutor and have three siblings. My mother had a revocable trust that all of her assets were in, including her house. We sold her home in November 2021, and took a net capital gains loss on the sale price due to loss in value from the date of her death + closing costs.   

I received a 1099-S for the sale of the home. It lists the entire sale price, is in the name of the trust, and uses the trust EIN. In this situation my understanding is that the trust needs to file a 1041, 1041D (using calculations from the 8949 worksheet) So the 1041/1041D, would be filed in the name of the trust. Is that correct? 

What I am less sure about is whether myself and my siblings should/can file the home sale and associated capital gains loss, which would of course need to be split between the four of us. 

1. Should we do that - report the home sale on our own returns by completing the home sale info in the Investments section, under "Investment Income>Stocks, Mutual Funds, Bonds, etc.?" 

2. If we do, how do we divide the selling price/costs basis/fees & selling expenses. Do we divide them by four and enter those amounts? Or do we enter the full selling price and cost basis/fees amounts, and then use the  "Some (or all) of the proceeds..." option below in that section to indicate that each of us individually is only eligible for 25% of the total. 

I hope that makes sense, appreciate your help & expertise.

[Anonymous_ · Accepted solution]

I am sorry for your loss.

The threshold question for you is why a return was not filed in the 2021 tax year since the sale apparently closed in November of 2021 (was that a typo or did the sale actually close in 2022?).

Regardless, since the trust received a tax reporting statement in its name and with its EIN, a return is required to be filed (you need to establish a basis for the transaction despite the fact that there was a loss).

[Katieimw]

"I am sorry for your loss." 

Thank you for that. She lived a long, full life. 

"...was that a typo..."

Yes, sorry, she passed in May of 2022. 

Thank you for confirming that the trust needs to file a return for the transaction, per the 1099-S in the name/EIN of the trust.

Regarding the second question - can we, the four children, also need to include the sale in our personal tax filings for 2022 so we will have some portion of the capital gains loss?  If so, do we:

1. Divide the sale price, cost basis, and any adjustments (e.g., closing costs) by 4 (since 1/4 of the estate goes to each of us) and put those reduced numbers in our return in the "Investment Income>Stocks, Mutual Funds, Bonds, Other" section

- or - 

2. Enter the full sale price and full cost basis, and use the "Common adjustments" section so we each only use 1/4 of the adjustments and proceeds 

Thanks for clarifying what has felt like opaque glass. 🙂 

[Anonymous_]

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@Katieimw wrote:

Regarding the second question - can we, the four children, also need to include the sale in our personal tax filings for 2022 so we will have some portion of the capital gains loss?  If so, do we:

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When you (or the fiduciary or other responsible party) prepare the 1041 for the trust, a distribution of any gain on the sale will be split, accordingly, on the K-1 each beneficiary receives. Each beneficiary would then enter the information from their K-1 into their individual income tax return.

In short, the 1041 for the trust will most likely need to be completed (and K-1s issued) before the beneficiaries prepare their individual income tax returns.

[Katieimw]

Thank you for the information, very helpful.