My brother (55) unexpectedly passed last May in Illinois. He had a 'small estate' situation assets less than $100K, so no probate required. I was in the process of disposing his liabilities and found that he bequeathed a 401K to me (~$240K, his only brother).
From my research (http://www.nolo.com/legal-encyclopedia/illinois-probate-an-overview.html) assets subject to a beneficiary designation does pass through probate either. I reside in CO. The company 401K administrator is awaiting my distribution plans.
Ok, here are the some tax questions and scenarios:
A) I plan to roll-over a portion to my IRA, then take the remainder as cash-out. The rollover is T/F, but the cash-out would declared on my 1040 as a capital gain, yes? Plus 10% penalty?
B) Can I rollover a portion of the 401K to someone else? Or can I transfer via a rollover to another party from my IRA account?
C) I plan on selling my house soon and could sell it at a loss to help offset the tax penalty of the cash-out net? eg: Would the taxes on $100K cash at 23% be offset-ed from a $100K declared loss on a sale of house?
C-ALT) A little clarity on the selling of a house here as related to taxes; A 'loss' is considered the difference from sale price to original purchase price OR is a 'loss' considered the difference from sale price to appraised (market) price?
D) My brother was essentially indigent living on his savings until his passing. We figure the 401K was his 'backstop' with the required distribution date soon to arrive. From what I have found, he had not filed taxes for as many as 10 years. Do I need to file for him this year? Considering the 401K distribution or since there was no probate is this academic?
Thanks in advance, T