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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4670
Experience:  35 years tax experience, including four years at a Big 4 firm.
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My father passed away in April 2017. He had an equity

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Hi, My father passed away in April 2017. He had an equity membership in Naples, Fl.( at an incorporated not-for-profit corporation-a country club). Membership was purchased for $35k in 1996. Subsequent mandatory assessments for clubhouse/golf course renovation over the last twenty years have totaled $33k. Upon membership transfer to a new member, the estate received $52k as the equity payment from the club and a 1099-misc for the $52k.
Would the estate be liable for federal income tax for all $52k, the "gain" of $17k or nothing at all, due to the accrued assessments added to the basis cost?

Hi from Just Answer. I'm PDtax, and can assist.

There should be no tax due of any kind.

Upon your father's passing, his assets receive a step up in basis to fair market value at his date of death. This is typically used to value assets sold upon passing, creating a sale of asset for its (stepped up( basis, and $0 capital gain to the estate or to decedents.

This is the general rule. If the asset appreciated or depreciated between estate valuation and sale, that change would be taxable gain (or loss).

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I'm PDtax.

Customer: replied 7 months ago.
Ok-so this would explained away as a zero net gain on a separate tax form of some kind? Is that correct? His estate has no other "income" from the time of his death in 2016 till now. The 1099-misc caught us off guard as it seemed like a reimbursement, not any kind of earned income. Just want to be able to explain that money in a way that will satisfy the IRS.
The estate reports the sale on form 1041, schedule D. Asset sold for 52k with 52k basis, no gain and cash to distribute.PDtax
Customer: replied 7 months ago.
Ok, just so I'm clear-
For reporting purposes, "the basis" is based on the current membership cost OR the old membership cost+the assessments? I realize they both are equal to or higher than the 52k we received....just want to be accurate.
The basis is typically the fair market value. In your case, you have another option. Since the cost basis exceeds the fair market value, you could claim a loss.You could claim a capital loss for the 68-52, with the loss passing out to beneficiaries.PDtax
PDtax and 2 other Tax Specialists are ready to help you
Customer: replied 7 months ago.
Ok. Thank you