How does nominee/decedent (i.e. me the Executor) pass capital loss to Estate, then Estate to beneficiaries?

[davidsson]

Note:  The loss is in a revocable/living trust account, whose final taxes will be completed with the decedent's return (for income prior to death) and with the new trust (with new TIN) and estate under a 645 election (after completing form 8855) for after-death income.  I'm not sure that makes a difference, but thought I'd include just in case it does...

What little I could find showed the decedent can not pass on the loss... that the loss would stay with the decedent's tax return even though the sale/loss was after the decedent passed.

This doesn't seem correct, so I'm probably wrong.  If I'm wrong, what form does the decedent (me the executor) use to pass on the loss?  I understand I need to transfer 1099-DIV and 1099-INT income but do not understand how I would pass on the loss. What would I do?

What is correct?  ANY advice is appreciated.

Note:  These are funds from the sale of a defunct (Puerto Rico Power) bond that could not be transferred and had to be sold to close decedent's account when assets were transferred to beneficiaries.

Thanks in advance!!

[tagteam]

The simple answer is that any excess capital losses essentially die with the decedent; they cannot be transferred to the estate.

If the loss was incurred as a result of a sale that was effected after the decedent passed, then the loss would be recognized either by the estate or the trust (whichever entity owned the asset).

EDIT: Since you made a 645 election, the loss would be recognized by the estate since the trust is treated as a part thereof (again, assuming the sale was after the decedent passed).

[davidsson]

Thank you for your response!!!

The sale/loss was after death, in a living trust account that shared Mom's social security number. 

The brokerage transferred almost all assets to a new trust account with a new TIN (for post-death income) but was unable to transfer this defunct bond, which had to be sold in the original trust (with her SS#) to allow that account to be closed.

Because it was sold in an account with her SS# (after death) does it...

1.  Get transferred by some nominee form to the new-trust (1099-B?)?  If so, which form?

2.  Die with the decedent?

3.  Count as a loss against her estate (even though it was sold after her passing)?

4.  Something else?

Thanks again!!

[tagteam]

Depends upon the terms of that particular trust.

The trust could continue with the mom's SSN as a grantor trust (i.e., disregarded).

[davidsson]

The trust is a grantor/living trust that  ceases (legally turns irrevocable) when she passed.

Following the terms of the trust it has been completely distributed to the beneficiaries and now only exists (in my mind) as a means to file taxes.

So, does it...

1.  Get transferred by some nominee form to the new-trust (1099-B?)?  If so, which form?

2.  Die with the decedent?

3.  Count as a loss against her estate (even though it was sold after her passing)?

4.  Something else?

Thanks again!!

[tagteam]

OK, so she passed which basically means that any capital losses while the trust was grantor trust (prior to the trust become irrevocable) disappear. 

[davidsson]

The sale that incurred the loss was (in the trust account with her SS#) about 3 months AFTER her passing... when it was irrevocable.

Because it was sold in an account with her SS# (AFTER DEATH) does it...

1.  Get transferred by some nominee form to the new-trust (1099-B?)?  If so, which form?

2.  Die with the decedent?

3.  Count as a loss against her estate (even though it was sold after her passing)?

4.  Something else?

Thank you again for your help and patience with me!!

[tagteam]

If a 645 election was made then the trust is treated as part of the estate and the estate can use the loss.

If otherwise, then the trust has a capital loss that can be passed through to its beneficiaries on the final return (or prior to the final return to use to offset capital gains in the trust).

[davidsson]

So I send the nominee information documenting/transferring the loss to the estate/trust on a 1099-B... or something else?

Thank you!

[tagteam]

You stated that there was a 645 election in effect, right?

If that's the case then the trust is treated as part of the estate and, as a result, there should be no document necessary. Of course, you could always issue one for your records, such as a 1099-B or 1099-S.

[davidsson]

The trust account with the after-death loss is identified with my Mom's SS# (used during her life and for her final 1040).

I assume, to move the data for that loss from her SS# to the the new T.I.N. (for the after-death trust and the estate/trust 1041), I'll need to use a 1099-B.

Is this correct thinking?

[tagteam]

That would be the correct tax reporting form, but the final return should indicate (or should have indicated) that the proceeds were received as nominee.

[davidsson]

Agreed.  Thank you again!!