tax question on estate selling property

[stressed2024]

My dad passed in June of 2024, he didn't have any money only his house with a mortgage.

In order to payoff his mortgage and other normal bills (power, water, etc) the executor sold the house during probate. In the will the house was to go to my brother. but he agreed to let the executor sell it and signed a quit claim deed.

We don't have a FMV of the house from June 2024 but in September 2024 (3 months later) we had an appraisal done during the sell process. I plan on using the appraisal value as my basis on the tax forms as a stepped up value.

In October 2024 we sold the house for 190K which is less than the September 2024 appraisal value 218K because we really could not afford to keep paying his mortgage and other monthly bills.

Question 1 On the tax forms you have to put when you acquired the house.

I am not sure if they want when my dad acquired the house in 2005 ( For 128K) or when the estate acquired the house in June 2024 ( September 2024 appraisal 218K) when he passed. This date would make the difference between long term and short term capital gains on the tax forms.

Question 2 is it ok to use the September 2024 appraisal value of 218K at my stepped up cost basis? it is 3 months after his death but it is all I have to go on. I assume the house value on his date of death would be close.

Question 3 I know I have to do a 1041 for the estate and a 8949 and schedule D ( reporting it as capital gain/loss) and some K1 but they should all be zero because we sold at a loss.  Form 8949 asks for proceeds which I assume is the 190K sales price. But I don't see where on the form where i deduct what we spent on commissions and closing costs. Where do I enter what we paid for commissions and closing costs?

So far I have proceeds = 190K  sales price minus my stepped up cost basis of 218K = 28K loss

but it should be more than that because we paid $9,500 in commissions, $55 for a lawyer fee and $1,262 in property taxes (total = 10,817) so my total loss should be like $38,817

Obviously we shouldn't own any taxes but I at least want it to be correct so the IRS don't come knocking on my door. And because we own no tax the K1's should be zero.

Question 4 any other forms I'm missing beside 1041, 8949,  schedule D for 1041 and K1?

Question 5 Am i right in assuming the stepped up cost basis of 218K since the house is being sold by the estate in probate and it never actually was inherited by my brother? no one lived in the house and we never rented it out either.  My dad used it as his primary residence for 20 years and paid 128K for it back in 2005.

anything that is left from the estate which isn't much after the mortgage is paid off and executor fees will be split evenly among the heirs

Thank you for your help

[M-MTax]

     Condolences on your loss. Are you using tax software? You should if you're doing the 1041 and K1s because even simple estate 1041s can be hard to navigate. 

     Assumption is the brother executed a QC deed that served as a disclaimer of his interest.

[M-MTax · Accepted solution]

Question 1 On the tax forms you have to put when you acquired the house.

That date would be the date of your dad's passing.

Question 2 is it ok to use the September 2024 appraisal

It's close enough in time that the appraisal should be sufficient. An appraisal on the actual date of death would be better but one within 3 months should be passable.

Question 3 Where do I enter what we paid for commissions and closing costs?

You can add the costs to the basis if the software doesn't allow you to deduct the costs from the sales price. The K1s should reflect the loss on the sale. You can pass that loss through to the beneficiaries on their K1s.

Question 4 any other forms I'm missing beside 1041, 8949,  schedule D for 1041 and K1?

Not for the feds but you need to figure out if there are state requirements. 

Question 5 Am i right in assuming the stepped up cost basis of 218K

The basis is stepped up to the FMV as of the date of your dad's passing no matter what and because it was never used personally the loss becomes deductible by the beneficiaries on the final return.

[stressed2024]

Thank you  M-MTax

My brother did sign a quit claim deed and the executor has a copy of it.

What to you mean by executing it?

The only software that I can find for non-professionals is Taxaxt.com and H&R block business.

Taxact will cost me about $200

H&R block business will cost me about $120 but I read where people have issues using the software.

so I will probably use Taxact or fill the paper work out manually.

My state is Georgia which has no estate form or tax on estate.

My understanding is you send Georgia the exact same paperwork that you send the IRS

https://dor.georgia.gov/estate-tax-faq

Can you restate this sentence.  I think there is a word missing.

Question 3 Where do I enter what we paid for commissions and closing costs?

You can the costs to the basis if the software doesn't allow you to deduct the costs from the sales price.

But I think your saying add the cost to the basis if the software does not allow me to deduct the cost from the sales price.

In Taxact under deductions there is a place for Fiduciary/executor Fees, property taxes, and Attorney, accountant, and return preparer fees. Which is on a separate form than the 8949

But I didn't see anywhere to deduct the real estate commissions.

I was kinda expecting it on the 8949 form because that is where you calculate your loss.

Thanks again

[M-MTax]

What to you mean by executing it?

Just means that your brother signed and had notarized the QC deed.

Can you restate this sentence.  I think there is a word missing.

Yes and the word is "add". I changed by previous message. "Add' to basis.

But I didn't see anywhere to deduct the real estate commissions.

Sorry, not familiar with TaxAct BUT you would deduct real estate commissions when you enter the sales price and basis for the sale of the house. If there's no place to deduct selling expenses you can add the costs to your basis.

[M-MTax]

The only software that I can find for non-professionals is Taxaxt.com and H&R block business.

Intuit sells a product called Turbotax Business 

.....or fill the paper work out manually.

Do NOT do that!!!!!!!!!!!! Even the most straightforward 1041s are complicated with the forms schedules and K1s.