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some questions on reporting form 1041 for a final estate

First let me say I have asked a lot of questions on this forum with a lot of great answers. Thank you for everyone's help.

 I am in the process of trying to find an accountant to help me but I will be transparent, I am having

a hard time finding someone to help.  I have a few call backs I am waiting on, but no one seems to return my calls.  Hopefully as vacations wind down I will start to hear back from those I have reached out to.

 

I purchased Turbo Tax Business to try and help me self-file form 1041 since the estate is rather small.

However, since this is the first estate, I have ever had to deal with I am facing some confusion with the software verbiage that I would GREATLY appreciate if someone would bear with my silly questions and kindly try to help answer.

 

This estate only had to deal with the sale of a home as every other asset was joint with my parent. Any funds distributed to the grandchild as per will came from the sale of the house.

 

  1. Since this was a 2-family home where my parent occupied one unit and rented the other unit, I was able to figure out the rental income/deductions already on the Rents & Royalties schedule.  (This was very similar to how we filed personal taxes each year) Expenses and income were based on the period after her death since I filed her personal taxes up thru her date of death.

When the program asked for # of days personal use I listed zero since the owner-occupied unit was not in use by anyone.

I added # of days for the rental unit from the date of death until date of house sale

 

I also didn’t depreciate the home as we have never done this in all the years of filing personal taxes. No mortgage was owed and home was sold for its fair market value.  I do not know how to even begin to depreciate the home.

 

I am assuming deprecation is a choice here and there is no negative impact in not doing so, correct?  (I ask since the software was asking about this particular point). 

 

  1. The closing costs from the sale of the home were added as a capital carryover loss by turbo tax.

I assume this is not a problem as well, correct?

 

  1. I assume that any expenses incurred to prepare the house for sale are considered estate expenses that are to be deducted on 1041. The expenses are more around cleanup, repairs and removal of an oil tank (which was a huge expense).

Should these expenses be reported on Schedule C by simply listing all expenses?

 

Or should I be recording them under the "OTHER DEDUCTIONS" listed in the 'Expenses, taxes and fees' section?   If yes, then I am confused when it asks if the deduction is Taxable Income, Tax Exempt income or Both?  Am I in the correct section?    What is meant by taxable income vs tax exempt here?

 

Please clarify for me so I use the right form.

 

  1. Will turbo tax automatically create the Schedule K1’s at the end? 
  2. I have listed the 2 beneficiaries who are child & grandchild of the deceased and attorney advised there would be no capital gains (on personal taxes) for the sale of the home based on the will, relationship of beneficiaries and how funds were distributed.

I just want to be sure there is nothing more that is needed other than all of the above.

 

I know I asked a lot of questions and I promise I am trying to find a tax accountant to review based on previous advice I have received. 

But since I am hitting a constant brick wall, I did want to make an honest attempt to do this myself since I purchased the software.  I would be greatly appreciative I you could help clarify my confusion!

 

Thanks for taking the time to read this ad hopefully trying to help answer some of my questions.

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9 Replies

some questions on reporting form 1041 for a final estate

some questions on reporting form 1041 for a final estate


@vze56v6x wrote:

I also didn’t depreciate the home as we have never done this in all the years of filing personal taxes. 


How long did the estate own the property? If the estate acquired the decedent (which is presumed here), previous depreciation deductions disappear and the estate takes the property at the fair market value on the date of death.

 

If the estate has owned (and rented) the property for a number of years, then depreciation deductions should have been taken on the 1041(s).

 

some questions on reporting form 1041 for a final estate


@vze56v6x wrote:
  1. The closing costs from the sale of the home were added as a capital carryover loss by turbo tax.........

 

  1. Will turbo tax automatically create the Schedule K1’s at the end? 

TurboTax will create K-1s provided you make distributions to the beneficiaries.

 

If you do not make distributions to the beneficiaries, then you will see that carryover loss on the 1041 worksheet(s) and note that this is the final return which means you must distribute the remaining assets.

some questions on reporting form 1041 for a final estate


@vze56v6x wrote:

Should these expenses be reported on Schedule C by simply listing all expenses?


Do not list any expenses on Schedule C. The estate is not operating a trade or business.

 

General fix-up expenses prior to sale are usually not deductible. Major renovations and improvements can be added to the basis of the property, however.

some questions on reporting form 1041 for a final estate

@tagteam  thank you. your explanation on depreciation is perfect.  No depreciation would apply as this is just over a year now with the estate.  Thanks so much!

some questions on reporting form 1041 for a final estate

@tagteam  ok so the only major item would then be the removal of the oil tank since that cot several thousand and needed to be done to sell the home.

Do  I deduct utilities and property taxes? I assume those are deductible since the executor paid them out of pocket. But the executor is also the beneficiary so to me this almost is a wash.

 

From what I can tell this 1041 is serving to report the small rental income and expenses and the sale of the home along with the carryover loss. (as well as producing the K1's)

 

Seems straightforward then.

 

 

some questions on reporting form 1041 for a final estate

@Critter-3 not sure why you feel the need to "shame" me for using the community and asking questions.  I've already stated I post a lot. Perhaps I understood the purpose of this community -  if you dont want to offer helpful advice I understand but your reply is not necessary. 

Have a nice week ahead

some questions on reporting form 1041 for a final estate


@vze56v6x wrote:

Do  I deduct utilities and property taxes? I assume those are deductible since the executor paid them out of pocket. But the executor is also the beneficiary so to me this almost is a wash.


The estate can deduct rental expenses (those directly related to the rental unit) from the rental income the estate received.

 

If the executor paid the expenses, then the estate should reimburse the executor for those expenses and deduct them on the 1041.

some questions on reporting form 1041 for a final estate

@tagteam thanks. Since technically there are no funds left in the estate then I guess there is nothing to write off/reimburse. The beneficiary from the sale of the home and the executor are 1 in the same. Funds for all expenses were paid out of pocket so technically it's all in the family and nothing to reimburse.  What I mean to say out of pocket expenses are not being asked to be reimbursed since the funds are 1 in the same in the end.

 

This whole 1041 just got a lot easier.

Thanks

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