need any and all advice on 1041 estates and trusts please?
I am still trying to do our 2008 1040. We’ve never been late filing our tax return. Father in law died 2/20/08 and we had to sell his home(at his request in his will), and divide it three ways. My husband is co executor. I am having trouble doing our personal tax return, because I don’t know which form to start with. Do I have to do a 1041 first or can I just start right in on our 1040? or do I have to do a sch k-1 then the sch d, then the 1041, then the the 1040? Our lawyer says we shouldn’t owe any taxes on the amount of the sale, but don’t you still have to report it on one of these forms? Any one who knows where to start on the paper work, I would be so grateful. Thank-you so much in advance.
P.s. I have been doing our personal tax returns for over 20 years, but never have I had this much difficulty. I know I could do this, if someone knowledgeable could just explain what comes first briefly. now this has become a challenge for me and it is hard for me to just give up and hire someone. I normally enjoy doing taxes.
If the house was by the estate in 2008 and you are shutting down the estate, you file the 1041 FIRST. Why? Because you will be issuing a K-1 to each beneficiary and they need the data for *their* tax return. If they file their 1040 first and then get the k-1 they’ll have to amend.
When you sell a house quickly after death, there isn’t any gain. There’s actually a loss and the loss gets passed through to the beneficiaries on the LAST 1041 (that’s why I asked if you were shutting down the estate). The 1041′s schedule D will show the sale of the house. With real estate expenses, that’s almost always a capital loss since the odds are the house didn’t go up in value from the date of death.
That loss and the attorney’s fees are expenses of the estate and will offset any income the estate had. This income is usually the interest on the money sitting in the bank, final paychecks, cashing out of IRAs to the estate, etc. Except for IRA’s, I doubt you have income.
If the estate is still open (and likely to have $600 of income), then you don’t pass the loss through yet and if the income is negative, no K-1s.
If you have a question about income to the estate, see IRS publication 559. Income with respect to a decedent. Income before death goes on a 1040. Income after death in his SSN or the estate’s EIN goes on the 1041. Income after death in someone else’s SSN (say interest on a bank account with POD or survivorship) goes directly to their return.
If you did an IRA, come back and let’s talk.
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If the house was by the estate in 2008 and you are shutting down the estate, you file the 1041 FIRST. Why? Because you will be issuing a K-1 to each beneficiary and they need the data for *their* tax return. If they file their 1040 first and then get the k-1 they’ll have to amend.
When you sell a house quickly after death, there isn’t any gain. There’s actually a loss and the loss gets passed through to the beneficiaries on the LAST 1041 (that’s why I asked if you were shutting down the estate). The 1041′s schedule D will show the sale of the house. With real estate expenses, that’s almost always a capital loss since the odds are the house didn’t go up in value from the date of death.
That loss and the attorney’s fees are expenses of the estate and will offset any income the estate had. This income is usually the interest on the money sitting in the bank, final paychecks, cashing out of IRAs to the estate, etc. Except for IRA’s, I doubt you have income.
If the estate is still open (and likely to have $600 of income), then you don’t pass the loss through yet and if the income is negative, no K-1s.
If you have a question about income to the estate, see IRS publication 559. Income with respect to a decedent. Income before death goes on a 1040. Income after death in his SSN or the estate’s EIN goes on the 1041. Income after death in someone else’s SSN (say interest on a bank account with POD or survivorship) goes directly to their return.
If you did an IRA, come back and let’s talk.
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