1041 Filing Year?

[starpal]

My mother passed away in November 2022. The only income was an increase in the value of her home between the date of death and the sale. This was distributed in early 2023 and will need K-1s. Can we now file a final short year return using a 2022 1041 with TurboTax 2022?

[Critter-3]

Yes you can use the 2022 TT Business program however you may not be able to efile it. 

[Mike9241]

sorry for your loss.  if you have not yet file the estate income tax return you can choose a fiscal year starting with the date of death and ending with the end of the month in which all the assets were distributed. so if by Feb (28) 2023 the assets were distributed the return would be due  06/15/2023 - 3 1/2 months after year end

using a fiscal year only one return would be needed. if however you already filed a return on a calendar year basis. (date of death througn 12/31/2022) then a second return would be required. it too would be due 3 1/2 months after the assets were distributed.  yes you use the 2022 business version of Turbotax. 

[starpal]

Thanks very much to all for clarifying that for me. That's a big help!

[Anonymous_]

One additional thing to note is that the beneficiaries will report their K-1s on their 2023 federal income tax returns since the ending date on the K-1s will be in the 2023 tax year.

[Critter-3]

@Anonymous_ 

If you use a 2022 program a 2022 K-1 form will be issued to the beneficiaries  so doesn't it go on their 2022 returns?   Personally I would wait for the 2023 program to come out next Jan since it was a 2023 sale and issue a 2023 K-1 for to go on the 2023 personal returns.  By holding the estate open a few more months after the house sale  to see if anything else needs to be paid or any other income comes in will keep from having to amend the return later or reopen the estate.  The majority of the corpus can still be issued to the benies now and just hold back a couple of hundred to pay for the 2023 tax program later. 

[Anonymous_]

@Critter-3 

The 2022 Form 1041 is used for the calendar year 2022 and fiscal years beginning in 2022 and ending in 2023 (and that is applicable to the 2022 Business edition of TurboTax).

Per Section 662(c), the beneficiaries report items of income, gain, etc., on their individual income tax returns based on the year ending that appears on their K-1s.

[starpal]

Thanks again for all the help. May I ask a few more questions to clarify things before I finish the return?

Our mother passed away last fall, leaving her house to us which was sold about 5 months later with a gain over the appraisal on the date of death. There was no personal use of the house.

I understand the Closing Costs for transfer tax, title, real estate attorney are deducted from the gain.

Is the Estate attorney's fee deductible as a Professional fee in line 14? How about the probate court fee and TIN fee?

Is the Property Tax paid for the time between the date of death and closing deductible as Taxes on line 11?

Are expenses necessary to transfer title deductible? (Our municipality requires a sewer inspection to be passed for title to be transferred, so there were expenses for that.)

How about other costs to maintain the home during the interim period such as lawn care, utilities, and building insurance?

Do I understand correctly that the house should be treated like part of a business for income tax purposes of the estate on Form 1041? The distributed gain will be reported on K-1s to us.  

Thanks again!