Have a Tax Question? Ask a Tax Expert
Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.
First of all, since you didn't provide any details, the answer to your first question is yes it is possible. As long it is the final year of an estate, any carryforward capital losses are distributed to the heirs.
If you want to get more specific, I'll be glad to assist you further.
Both spouses died in 2011 and are doing their final 1041s. The wife's estate terminated in May and had roughly $580 income from interest and dividends. I thought about putting this amount into the husband's estate since it was still open however, I don't know if that is necessary seeing that it is not $600. The husband's estate had a brokerage account that was liquidated and produced $4500 ST loss and $9900 LT loss. Since this is the final year, is it proper to send the losses to the beneficiaries on their K-1s?
As far as the wife's estate, you could just file the final income tax return for the estate and the $580. would be covered by the exemption. I believe that you must file a return in the final year of the estate irrespective of the amount of income.
On the husband's estate, naturally you would reflect the capital transactions on the Estate's final 1041 and then if as you say there are losses, they may be passed on to the beneficiaries as it is the final year of the estate and you point out.
Perfect - both of the long term and short term is on line 11 of the K-1? I think I was over thinking the situation.
Were these losses generate by the estate subsequent to the date of death?
That is correct. The account was transferred to the estate at the time of death in 2011; the account was liquidated in 2012.
So were the securities tax basis adjusted to the fair market value at the date of death and in this rising market they generated losses?
That is also correct. All of the stock 'acquisition' dates from the brokerage is the date of death. The values were adjusted to that date.
Ok just checking, you realize I have no clue 99% of the time who I'm talking to; so forgive me if I ask obvious questions;
Yes line 11 of the K-1 but coded separately as l/t & s/t
all securities inherited from a decedent are automatically long term; so short term losses would have had to be generated by purchases subsequent to the date of death
you said that they all had the DOD as the acquisition date;
that's ok, but all those would be long-term
no matter when they were sold
That's fine, you have helped big time. I have done individual taxes for over 30 years and these were clients; just don't get into estate taxes that much and am trying to help the daughter as executor. I appreciate your time, I think I have a clear picture. As I look at the brokerage statement, I see some of the activity was not at the date of death. I need to examine all of the dates so that I classify the sales correctly.
OK, good luck
Thank you very much. Good night.
bye, happy easter