Originally Posted by Kasanami
Thank you for your time in answering my questions. I really appreciate it.
I do have some follow up questions....
1. So to be clear, I am unable to write off closing costs from the sale of estate--these closing costs are to increase the basis of the property. Additionally, then, if the basis of the property is the same as the sold price, adding the additional closing costs would increase the cost basis and would result in a loss of the sale of property.
2. The K-1 (1041) would not indicate a distribution to the beneficiary if there are no capital gains or losses. The distributions to beneficiaries will be noted on Sched. B, Form 1041. Otherwise, any capital gains would be noted in the K-1 (1041), box #14, with instructions I....then those capital gains would also be noted in Form 1040, 15b. Is that correct?
Thanks again for your help!!!
1. So to be clear, I am unable to write off closing costs from the sale of estate--these closing costs are to increase the basis of the property. Additionally, then, if the basis of the property is the same as the sold price, adding the additional closing costs would increase the cost basis and would result in a loss of the sale of property. ===> a loss on a personal residence is never deductible. HOWEVER, It is no longer a personal residence when sold by the estate and a loss can be claimed. You need to file a Form 1041 for the estate and report the loss. The Sch K-1 will report the amount of the loss to the beneficiaries. Many times an estate may have deductions in excess of its income. The Executor has a choice of deducting certain estate administration expenses or losses on either the estate tax return on Form 706, or the on Form 1041. In a situation where it is not a taxable estate , say, all assets are passing to the spouse, and there is an unlimited marital deduction, then, it doesn't necessarily make sense to reflect the estate administration expenses on the estate tax return; there is more value to the beneficiaries of the estate than having those expenses reflected on form 1041. By being reflected on the return, these expenses and losses can be used to shelter any income earned by the estate during the time that the estate is open, and potentially flow to the beneficiaries upon the filing of a final estate income tax return, Form 1041, in the final year for filing the return.You cannot claim the estate administration and other expenses of loses on both returns - if a deduction is claimed for income tax purposes on the 1041, the Executor must file a statement that no estate tax deduction for those items has been allowed and waive any right to take an estate tax deduction for them.if the estate / trust has for its final year deductions excluding the charitable deduction and exemption in excess of its gross income, the excess is allowed as an itemized deduction to the beneficiary succeeding to the property of the estate or trust."
Note that these deductions will be subject to any limitations and be applied to the beneficiary because of his or her taxpayer profile. Even where an estate has no income, a 1041 should be properly filed each year in order to record the deductions and/or losses of the estate, which may, in the estate's final year be passed along, on a pro rated manner to the beneficiaries estate for utilization in their personal tax returns.
2. The K-1 (1041) would not indicate a distribution to the beneficiary if there are no capital gains or losses. The distributions to beneficiaries will be noted on Sched. B, Form 1041. Otherwise, any capital gains would be noted in the K-1 (1041), box #14, with instructions I....then those capital gains would also be noted in Form 1040, 15b. Is that correct?=======> If the income distribution is discretionary, meaning the trustee or estate administrator has authority to decide whether beneficiaries will receive distributions, any income not distributed isn?t deductible on 1041 and is not reported on Sch K-1. The trust or estate is responsible for paying the income tax on this income, not the beneficiaries. it does not include qualified dividends (because they are just a subset of ordinary dividends, which are included) nor capital gains for example say there is a code E then, Code E, Line 14 doesn't appear to have much utility other than reporting the beneficiary's share of "net investment income". If you were to enter only the figure on Line 14 with an E Code into your 1040, you wouldn't see that figure appear anywhere on your tax return unless you were also filing Form 4952 for the Investment Interest Expense Deduction.
If any assets were sold during the year, the fiduciary must also file Sch D with Form 1041. Before completing Sch D, separate your transactions based on whether the asset was held for one year or less before it was sold. You must report short-term gains and long-term gains in different sections of Sch D. You neeed to list each short-term asset on a separate line in Part I of Sch D and report your sales of long-term assets on separate lines in Part II. Include a brief description, the dates you bought and sold the asset, its cost basis, the sale price and the gain or loss you realized on the sale. For stocks, bonds and mutual funds, your 1099-B form may list the cost basis. If it does not, ask your broker for the original purchase price.alsop for Pass Through Gains and Losses
, you also need to list any gains or losses from other estate/ trust in Part I or Part II, depending on whether the gain is short-term or long-term. Transfer your gains or losses from Forms 4684, 4797, 6252, 6781 and 8824 or etc to the appropriate lines on Sch D. you need to enter any capital loss carryover from the previous year and total all of the columns.
You need to add the columns in Part I to find your net short-term gain or loss. Repeat this process for Part II to determine your net long-term gain or loss. Separate each total between gains or losses allocated to the estate or trust and those allocated to its beneficiaries. List these amounts in the appropriate columns on lines 13 and 14a. Include any unrecaptured Section 1250 gain from the sale of depreciable real estate on line 14b. Complete the 28-percent rate gain worksheet if column 3 of lines 13 and 14a are both greater than zero and the trust or estate has sold collectibles or qualifying small business stock. Total each column to find the net gain or loss.If you have a net loss on line 15, column 3 of Part III, complete Part IV to determine your capital loss deduction and any applicable capital loss carryover for the next year. For 2016, you may deduct capital losses up to $3k. If your net loss from Part III exceeds $3k, you need to use the capital loss carryover worksheet contained in the instructions for Sch D..
Use Part V to calculate your taxes due if column 2 for lines 14 and 15 are both greater than zero. If either of these columns does not have a positive value, you must use the tax calculation worksheet from the Sch D instructions to determine your capital gains tax for the year. as said you need to visit an Enrolled Agent or a CPA doing taxes in your local area for Accuarate professional help.