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TAXMAN

ESTATE ACCNTG

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What I have is mom died 2011. Estate set up. Real estate value 156K and checking account(<$5000.00). Will passed everything to 4 heirs. No 1041 ever filed. Real estate was sold under the estate name and fed id # in 2016. Funds deposited in estate checking account. In closing account and filing final accounting with commissioner in Feb 2017 all funds paid out. 1 heir during this time frame paid all Ins,taxes, utilities and repairs on said real estate. At time of dispersement , heir was refunded all these expenses. Heir filed annual accountings with commissioner and paid fees each time. The way I see this is that the estate should file a final to clear real estate since it was reported in estate #. The second thing I think is to create a spread sheet on the real estate showing all the fees paid back to the heir that paid them. That being said, do all the expences associated with real estate become deductible by the heirs. BTW Real estate sat empty all this time. What do think is the best possible way to handle this mess?

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>>>>>The way I see this is that the estate should file a final<<<<<< I would prepare a 1041 showing the transactions and distributions as you say. However, I would not check the box as the final return so as to allow time for any unknowns. 

 >>>>> do all the expences associated with real estate become deductible by the heirs<<<<< Why would they be deductible when the heirs were reimbursed as you pointed out in your original post. Out of pocket, and then reimbursed equals a wash.

If the real estate sat empty since 2011, when the heirs sold the property their basis for tax purposes would be FMV at date of death. With that said, and due to recent changes in the real estate market, the heirs may have a gain but then again, may have a loss. That is a transaction for their individual personal tax returns. The proceeds from the sale show show coming into the estate and later being distributed proportionally according to the will. Don't over think this seems pretty straight forward to me.

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The real estate taxes paid by the estate by reimbursing the heir should be deducted on the final return.

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