Capital Gain on sale of decedent's home left in tr...
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RPini
Returning Member

Capital Gain on sale of decedent's home left in trust

Mother died and left her home (only) in trust to four beneficiaries. Home was left empty and sold eleven months later (March 2021) at $80,000 above her date of death step-up basis for the home resulting in that amount in Capital Gain. Will the trustee be required to file form 1041 to pay the capital gain tax for the home/estate before distribution of the proceeds from the home sale or can the capital gain tax be passed on and paid separately by the beneficiaries? Depending on the answer, can this type of filing be done on Turbotax?

 

thank you

3 Replies
tagteam
Level 15

Capital Gain on sale of decedent's home left in trust


@RPini wrote:

Will the trustee be required to file form 1041 to pay the capital gain tax for the home/estate before distribution of the proceeds from the home sale or can the capital gain tax be passed on and paid separately by the beneficiaries? Depending on the answer, can this type of filing be done on Turbotax?


The preparation of a Form 1041 (and associated K-1s) can be done with TurboTax Business, which must be installed and run in a Windows environment; there is no online or Mac version.

 

See https://turbotax.intuit.com/small-business-taxes/

 

Depending upon the terms of the trust, the capital gain from the home sale can be distributed to the beneficiaries and reported on each beneficiary's K-1 and, as a result, any tax due will be the responsibility of the beneficiaries.

Mike9241
Level 6

Capital Gain on sale of decedent's home left in trust

under IRC 663(b)(2) the distributions needed to be made within 66 days of the end of the year. this election applies to complex trusts and estates.  distributions after 65 days don't count as to distributing out current year taxable income

see this link

however, if the trust terminated on or before it's year-end then this rule does not apply 

https://blog.skodaminotti.com/every-fiduciary-know-65-day-rule/ 

 

tagteam
Level 15

Capital Gain on sale of decedent's home left in trust

This particular trust, having become a nongrantor trust in March of 2021, and assuming this will be the initial and final return, can still select a fiscal year so it would be 66 days from the fiscal year end (i.e., still time to make a distribution).

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