Common practice is o assume that there's no gain because residence was sold within 60 months of sate of death (Sales price IS basis)
You should have received a 1099 B from the closing on the house. If that 1099 B listed the Estate federal ID number, than you have to report the transaction on the Form 1041. If however, the deceased's social security number is XXXXX that 1099 B, then you'll have to file another 1040.
In terms of reporting, the 1041 has a schedule D
Estate DOES get the stepped up basis, just to say that specifically
Is there "no gain" because the basis is stepped up to the "sales price" or because there is an exclusion of the gain under section 121? How is this reported on the form 1041?
Good question .. here it's stepped up basis is you're reporting it on the 1041
it's excluded if the 1099 reports it nder the decedent's SS#
sorry for the typo's again if it's reported under the taxID of the estate, you'll have to show that the estate gets that stepped up basis
If the 1099 is reported on a social security number, then it's a 121 issue
Were there other reasons to do the 1041?
Ok, so if the 1099 reports under an estate EIN then the basis is reported as an amount equal to the sales price and no gain or loss results, but if the decedent"s ssn is used then we use the section 121 exclusion. If this is the case , how is the exclusion reported...there is no form 2119 (I think that is the form) for form 1041?
It's excluded from income... there is NO reporting
no income to report
how will irs reconcile the 1099 with the return if no reporting?
IRS knows 1099 B's (to individuals) sometimes result in no reportable income ... that's why I asked about any other need to do the return
On a different series tax ID (as in trusts, estates) they'll be lookingfor an explanation of why it's not taxable every time
Sorry I did not see that question...actually that is the only need to file a return...at least that is what I thought. Are you saying that if that is the only transaction then there is no need to file?
In SCANNN-NN-NNNN the Service ruled that a taxpayer isn't required to file an income tax return if the gain from sale of property is less than gross income threshold for filing income tax return regardless of amount of proceeds that are reported on Form 1099-B, provided that gross income of taxpayer doesn't otherwise exceed filing requirements. This ruling was based on Reg. § 1.161-6 which defines gross income in terms of the "net gain from the sale".
so here the gross income is less than $600
But there's one more point
If there are losses to report (like sales commissions) you WOULD want to file the return
If you do this with turbotax, for example, as long as you mark it FINAL, the losses will flow through to the bene's
No losses...house was purchased about 25 years ago for around $120k and sold for $185K. Some improvements, but not enough to cause a loss.
then you don't need to file .. hang on a minute and I'll get you a citation
OK this works for me...thanks, XXXXX XXXXX
If you'd like to work with ME again just say "For Lane only," at the beginning of your next question