This may be a rather unusual issue. At least I haven't been able to find any answers. Our mom died in November of 2019. At the time, the only real asset was her home, which she had taken out a reverse mortgage on. Since none of us had the money to pay off the mortgage, and the home value was equal to or less than the amount owed, we opted to tell the mortgage company it was all theirs and didn't do any probate. Fast forward to June of 2021. We were contacted by a realtor about selling the house. We told her that we had released it to the mortgage company. She then told us that the property was still listed as belonging to her estate, so we could sell it. I contacted the mortgage company and found out that was true because of the moratorium on foreclosures. So, we decided to sell and had an offer almost immediately. We then discovered we would have to go through probate. Started that and closed on the sale in September, and paid off the mortgage. The rest of the money was deposited in an estate account. Probate will close this month (January 2022). I know I, as the personal representative, will need to file Form 1041. The issue is that the proceeds from the sale and the probate lawyer fees won't be paid out until this year(2022). Will I have to file for both 2021 and 2022? How does that work when the estate funds won't be distributed until this year? After the lawyer fees and distributions there will only be a couple of thousand in Capital Gains. But, if I have to file for 2021, before that is distributed, will I have to pay taxes on the entire difference between the selling price and the value of the property at the time of her death, without being able to deduct the lawyer costs and distribution to the heirs? Can I use a fiscal year even though the date of death is over 2 years ago? If I can use a fiscal year, how do I handle the 1099 for the lawyer and the K-1's for the heirs?
