Question regarding how to handle 1099/1040/1041's after a parent's death

[eagleman1]

My mother passed away in late-November 2024. From what I've read (and please correct me if I'm wrong), this is how I'm supposed to handle her 2024 tax situation. Note that I had POA prior to her passing, I'm the executor of her estate, and I'm also the sole beneficiary.

1) File her personal 2024 1040 with the 1099's sent to her (and her SSN). Note the income from 1/1/2024 to the date of her death and adjust her 2024 income accordingly. Issue "new" 1099's to the newly created estate for the remainder of the income for 2024. The "new" 1099's will list her as payer and the estate as recipient.

2) I do have a EIN for her estate, and I will pay any taxes due on her 2024 1040.

3) File an estate 2024 1041 with the "new" 1099's and then write a K-1 with myself as the beneficiary. The estate will then pay zero taxes for 2024 and simply move the remaining tax burden to myself and my personal 2024 1040.

My question... for 2025 I expect to still get some 1099's issued to her SSN. Would I repeat the same procedure above for 2025? Or does the fact that  her personal 2024 1040 is her "final" 1040 complicate matters? I wasn't able to close/transfer all her accounts by the end of 2024, so there's 1 or 2 accounts that will send her 1099's with her SSN. Or is there an easier way to handle all of this?

Thanks in advance!

[M-MTax · Accepted solution]

The remaining 1099s would ordinarily be reported on the 1041, estate income tax return.

Otherwise, it appears as if you have a good handle on the general procedure, However, since your mother passed in November of 2024, you could file one 1041 which would be both an initial 1041 and a final 1041 (aka a fiscal year return).

For example, your fiscal year 1041 could begin on the date your mother passed in November and end on October 31st of 2025. In that event your filing deadline for the 1041 would be February 16th of 2026.

I am sorry for your loss.

[eagleman1]

Thanks M-MTax for the information! I'll read up on the fiscal year return

[M-MTax]

https://www.irs.gov/instructions/i1041#en_US_2023_publink1000285977

[eagleman1]

I had a follow-up question regarding how to fill out the 1099-B's that my mother's tax return will issue to the estate created upon her death.

- She had some stocks in a brokerage account. After her death, I sold the stocks. The 1099-B that I get from the brokerage will list these sales as if she was still living.

- I realize that these stocks will get a stepped-up cost basis equal to the FMV on the date of her death.

- I read that all these stocks that were sold after her death become long-term with respect to the holding period.

- I'm going to issue a 1099-B from her personal SSN to the estate

My question is:

1) should I list the new stepped-up basis on these 1099-B's in box 1e?

2) should i check box 2 as LT gain?

3) what date should I enter in box 1b? The date of her death?

4) I assume if I have to issue a 1099-B for every stock sale?

Or do I simply copy that portion of the brokerage 1099-B to these "new" 1099's and let the estate handle the changes?

[M-MTax]

- I'm going to issue a 1099-B from her personal SSN to the estate

Why? You do NOT have to issue a 1099-B to the estate.

[eagleman1]

I thought I had to issue 1099-DIV, B's etc for the period from her death in November to Dec 31, 2024.

For example, I will note on her personal 1040 that portion of income that occurred after her death even though the 2024 1099's that are issued to her under her SSN will show the entire 2024 year.

Don't I have to create a paper trail that leads to her estate's 1041?

[eagleman1]

I might have omitted an important item... I sold these stocks in December 2024 after she passed in November ... so the sales will show up on her 2024 1099-B

[M-MTax]

You can then simply report the sales on her final return and indicate that she received the proceeds as nominee for the estate. 

Frankly, I've had almost identical situations and have just reported sales on the decedent's final return. 

[eagleman1]

ok, I think I see your point.

It sounds like the easiest way to handle this:

- as you described, list all the 2024 sales on her 2024 1040 as recorded on her 2024 1099-B from the brokerage

- determine the nominee income (stock sales occurring after her passing) and subtract off from her 2024 1040 Sch D

- adjust for the new FMV cost basis and holding period with respect to these nominee stock sales

- issue one 2024 1099-B to the estate with the total nominee stock sale income and note that it reflects an increased cost basis (and thus less taxable gain) and a new LT holding period?

I agree that any 2025 1099's will be handled by the estate and there's no need for me to issue any 2025 1099's for any 2025 1099's that I receive from a bank/brokerage.

[M-MTax]

That's correct. You would note the basis increase (decrease) on the 1041 if you're filing a return for the estate.

Also, you would show inherited or the date of death as the acquisition date and ensure that, either way, the holding period is long-term.

[eagleman1]

Thank you!

[morlanb]

I have a similar situation to eagleman1.

Mom passed in July 2024. She had a trust which I became the successor trustee and assigned an EIN. The trust consisted of her bank account. I have received a 1099-INT from the bank which contains her SS number. Do I report all the interest from 2024 on her final 1040, all the interest on a 1041, or does the interest get split between the 1040 and the 1041?  

[M-MTax]

You can split the interest between the pre-death period and post-mortem period. On the other hand, reporting the entire figure on the 1099 on her final return should not cause any serious issues.

I'm sorry for your loss.

[morlanb]

Thanks for your help.