Filing for Deceased

[annettemoyle]

My mom passed October 2023. I filed her taxes for 2024.

In 2024, we sold her house and I'm wanting to know if there's a way to figure out how much her taxes might be and how much we should hold in reserve in her trust account.

Is there a simple way to figure out 2024's tax return?

[RobertB4444]

Because you sold the house within six months of her passing then the house is valued at what it was when it was sold since that is a reasonable length of time after your mother's passing and the market wasn't fluctuating dramatically.  The value of the house is seen to be exactly what you sold it for, so there is no gain on the sale and no taxable income.

If the trust owned the house there may be a loss on the sale, however.  You can take expenses necessary to prepare the house for sale as well as fees for the sale as expenses.  If this results in a loss that loss can be passed through to the trust beneficiaries for them to take on their personal returns.

Sorry for your loss.

[Edited 4/4/24  12:10PM PST]

@annettemoyle 

@annettemoyle 

[annettemoyle]

I do not understand. The house was paid for long ago. It sold at today's prices far more than what is originally cost to purchase.

Yes, there were some needed repairs, but those costs were minimal.

From the title company, we received tax form under mom's EIN (not SSN). I assumed taxes for 2024 need to be filed under that EIN (and not anyone who inherited money from the same). Am I not correct?

How can we calculate approximately how much taxes will be for a house sale that was many times greater than the initial purchase price?

This is my first experience with this situation, so I may not be asking the right questions or asking them correctly.

[RobertB4444]

The house sold for (my example) $200,000.  Because it sold within six months of your mom's death it was worth exactly what it sold for - $200,000.  There is no tax due on that.

When you enter it into TurboTax the system will ask you what your basis in the house was.  Basis just means the value of the house.  In your case the basis of the house is the exact same as the sales price.

You will also be able to enter the expenses that you had for the sale.  These can turn into a deduction for you and your siblings.  

These things can be very complicated.  You may want to consult a tax professional.

@annettemoyle 

[VolvoGirl]

Sorry for your loss.  When your mom died the house got a step up in value.  So that is now the new Cost basis.  You can forget about the original cost.  So if it was worth 200,000 when she died that is the new basis (cost).  So if it sold for $225,000 you only have a 25,000 gain.  

[annettemoyle]

Again, forgive me, but are you saying that the sale and expenses associated with my mother's house are not HERS (her EIN)? You're saying that they are for each of her dependents?? How does that get divided and reported??

Also, I thought Turbo Tax was to assist to where we didn't need to go to a tax professional. No?

[VolvoGirl]

It goes on the 1041 Estate/Trust return.  The estate can either pay any tax on the sale or can pass the tax on to the beneficiaries using K-1 forms.  Are you going to do the 1041 Estate return?  You should get a tax accountant to prepare it.  

[tagteam]

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@annettemoyle wrote:

...I'm wanting to know if there's a way to figure out how much her taxes might be and how much we should hold in reserve in her trust account.

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I am sorry for your loss.

Was the house held in her trust as well? I presume it was and, if so, and the trust had no tax liability for the 2023 calendar year, then estimated tax payments aren't required.

Estimated tax payments aren't required from:

1. An estate of a domestic decedent or a domestic trust that had no tax liability for the full 12-month 2023 tax year;

2. A decedent's estate for any tax year ending before the date that is 2 years after the decedent's death; or

3. A trust that was treated as owned by the decedent if the trust will receive the residue of the decedent's estate under the will (or, if no will is admitted to probate, is the trust primarily responsible for paying debts, taxes, and expenses of administration) for any tax year ending before the date that is 2 years after the decedent's death.

[tagteam]

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@annettemoyle wrote:

Also, I thought Turbo Tax was to assist to where we didn't need to go to a tax professional. No?

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No. The product you would use to prepare a Form 1041 for the trust (or estate, whichever) is TurboTax Business which is designed for those with a rudimentary understanding of trusts and/or estates (or at least those willing to gain such an understanding). 

If you are completely unfamiliar with either entity, then you should consult a local tax professional and/or legal counsel.

[tagteam]

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@RobertB4444 wrote:

The value of the house is what it was worth on the date of your mom's passing OR six months later, whichever was greater. 

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Per Section 2032(c) the election to use the 6-month alternate valuation date can only be used if (a) the election reduces the value of the gross estate, and (b) the election reduces the amount of estate tax due.

In 2023, the estate would have to be valued at more than $12.92 million in order to make the  6-month alternate valuation date election.