Rental income for mother's property

[berndav]

I have a unique situation. My mom passed away in August. Prior to her passing, I had power of attorney as well as the trustee in her living trust. We decided to rent her condo since she's been living with me so we got the place fixed. She passed away on 8/30/22 and the renter moved in 9/1/22. So I have been receiving the rental income since. My mother's property however is still under her name as the owner. Los Angeles County in SOCAL is still to this date has not processed the Transfer on Death change of property ownership. So my question is do I report the rental income for September to December 2021 even if technically the ownership has not been changed?? If so, where do I report this income and do I report the property as capital gains? Thanks you.

[PatriciaV]

Yes. Assuming you were the sole heir and the estate is settled, the property is now legally yours (even if the county hasn't recorded the transfer yet). Any income and expenses after her passing should be reported on Schedule E of your return.

The easiest way to find Schedule E in TurboTax for Desktop is to open your return and use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in "Schedule E", hit Enter, and click the "jump to" link to go directly to beginning of that topic.

In TurboTax Online, go to Tax Tools in the left column >> Tools >> Topic Search. Type in your topic, click the topic in the list and then GO to go directly to the start of that section.

Other details you may need: 

• There are no gains or losses when you inherit property, though there may be when you sell it.
• When you add the home as a rental asset for the Rental Property, your basis is generally the fair market value (FMV) on the date of death or on the alternate valuation date if the executor chose to use an alternative valuation.
• When you inherit property, you are considered to have held the property longer than 1 year, even if you choose to sell it before a year has passed.

Additional References:

• Where do I enter income and expenses from a rental property?
• What kinds of rental property expenses can I deduct?
• How do I handle capital improvements and depreciation for my rental?

[berndav]

Thank you Patricia!  But my other concern is my mom was still alive during the time her condo was being renovated to rent it out. So all the expenses incurred was paid from her account which means I cannot take deductions from those expenses. Also, the tenant paid for the first 2 months rent + security deposit before she passed away. That's why I'm leaning on reporting this on my mom's final tax return instead? Your thoughts?

[AmyC]

All income received prior to death belongs to the decedent. Once passed, it all goes to the heirs. Clear cut.

You should have paperwork, receipts, lease signatures, etc to back up whatever you claim. The day the house went on the market -available for rent -was clearly while she was still alive.

The IRS has a quick  How Do I File a Deceased Person program. It is very detailed and may give you additional information. Caution: There may be a requirement to file an estate tax return. For additional assistance, please refer to Publication 559, Survivors, Executors, and Administrators.

I am very sorry for your loss.