Filing Tax Return For Estate

[LarryKru]

Hi, I will be filing taxes for my deceased father's estate and have a couple of questions.  My father and step-mother were married and owned a paid off home together.  Their will states that when one passes away, the other is in charge of the estate until the other passes away and then the executors take charge.  My dad passed away in January 2023 and my step-mom passed away in July 2023.  Question 1) Would the stepped up basis for the home be considered the time of my step-mom's death (July 2023)?  Or, would my dad's 1/2 of the estate have a stepped up basis based off of his death in January 2023?  The estate sold the home in October 2023 so would think that we would use the stepped up basis from July 2023 and there would be $0 capital gains to the estate.    Question 2)  If there is no capital gains because of this, is there is a need to file a 1041 and $0 taxable income k-1 to the descendants?

Thank You for you input,

Larry

[tagteam]

I am sorry for your loss.

The deed could take precedence so it depends the deed. How did your father and step-mother hold title?

Regardless, if the estate did, in fact, acquire the home after your step-mother passed, then there would be a step up in basis to the full fair market value at that time (i.e., FMV in July of 2023).

A 1041 would be required since the gross proceeds would be more than $600 and the basis would need to be reported on the 1041.