When to file 1041

[RPini]

A deceased parent's home - who died in 2020 - has been sold in April 2021.  It was in a trust and left to beneficiaries.  Due to COVID delays, the home was not on the market and and not sold until this year.  The home increased in value from date of death of the deceased parent so there is capital gain effective April 2021.  The estate has no other earnings for 2021 (no earnings at all in 2020) as the home was vacant.  When does the 1041 etc get filed and the capital gain get taxed?  I'd like to file now but the only existing 1041 forms from the IRS are for 2020 and prior years.

[tagteam]

---

@RPini wrote:

.....I'd like to file now but the only existing 1041 forms from the IRS are for 2020 and prior years.

---

You can use the 2020 forms for a tax year beginning in 2021 and file now if:

1. The estate or trust has a tax year of less than 12 months that begins and ends in 2021, and

2. The 2021 Form 1041 isn't available by the time the estate or trust is required to file its tax return. However, the estate or trust must show its 2021 tax year on the 2020 Form 1041 and incorporate any tax law changes that are effective for tax years beginning after 2020.

See https://www.irs.gov/instructions/i1041#idm140229151930800

Note that if you use the 2020 edition of TurboTax Business, you will have to print and mail your return since you will have to manually write the 2021 dates on the forms and schedules.

[Mike9241]

Sorry for your loss. The estate’s tax year begins on the date on which the deceased person died. You, as executor, can select any year end as long as it not more than 12 months and ends on the last day of the month preceding the month of death. 

so if the death occurred in March 2020 you can have any year-end up until 2/28/2021. the next year would start on 3/1/2021. a short year return can be filed by using the 2020 tax forms - indicate the beginning and ending dates when asked. 

the question I can't answer because i know nothing about the documents that govern the estate is whether the trust pays the taxes on the gain or the gain is distributed to the beneficiaries who pay the tax. generally, if this is the final return the gain would be distributed to the beneficiaries. 

[tagteam]

@RPini indicated that the house was in trust.