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Generally for IRAs, the custodian will put the full amount as taxable in Box 2a, but will check the "Taxable amount not determined" box in 2b. That's because the custodian does not usually know if there is any basis (and is not required to track basis). It is up to the taxpayer (or you) to keep track of the basis using Form 8606, which is required each year there is a distribution.

If there's a capital gain and it's not a final return, the estate will pay taxes on the gain.

You really seem to want the estate to pay tax on the gain, although posters here are unanimous that this choice will be expensive. The estate will pay 20% on its gain, plus net investment income tax. Are any of the beneficiaries in that high a bracket? The way around this may be to file a fiscal year for the estate. Say the person died in July 2018. The fiscal year runs from DOD to June 30 2019, the second from July 2019 to June 2020, the third from July 2020 to June 2021. If no activity, no 1041s. If the home was sold and the proceeds distributed between July 2021 and June 30, 2022, you can file a single initial and final return. All the proceeds and expenses will pass to the beneficiaries, who will likely pay much less in taxes. Whatever you do, you will have to attach an explanation to the return as to why the estate was open for more than two years.

This proves why DIY software can be dangerous. It takes a tax professional to know what the return is supposed to look like and catch these data entry errors. To me, the most important part of tax prep is looking at the return when it's completed to be sure everything makes sense and is where it's supposed to be. Believe me, I am not looking for new business and rarely take new clients, and I would be beyond bored if all I did was easy 1040s. (At this time of year, is there such a thing?) Lots of folks could easily do their own returns with no problems, but EIP and ACTC and premium tax credits and on and on make that less likely for many. As I've said before, at least half of the returns I do have something missing, and if software doesn't alert the DIY folks who knows what they're missing out on. Like attempting your own electrical work or plumbing, it's important to know what you don't know and turn to a pro.

Yes, your year dates would be if only activity is the sale of the house then that could be your stating date and close any time before 12 months. First and final return.

Then the estate sold the house. File a fiscal year 1041 now and take FMV at time of DOD to determine the gain. less improvements made to the house and selling expenses. You can also take final estate expenses on the return. Attorney fees, tax prep fees. You don't want the estate to pay the tax because of higher expense and they can't anyway.

Unless the pension file did not get uploaded into the IRS computers correctly and there is a mismatch between the return and what they have? Tom Longview, TX

But again if the sale is the only thing going on, do a fiscal year return as first and final and be done with it. Check out the tax rates for the 1041 and see what it would be on the gain.

And the answer is...there isn't one! I neglected to see that I didn't give enough info regarding what kind of penalty, etc. Now I could say I sprung out my back and was loopy from muscle relaxers, but that's just whining, isn't it

Why would they be prohibited from paying the tax in the final year of an estate? The 1041 shows the required minimum income distribution, it doesn't declare that all other assets have been distributed. Estates have 65 days after the due date to make their income distribution payment anyway. If an estate pays the tax, the required minimum income distribution is $0. Lots of estates and trusts pay the capital gains tax because they don't want disabled beneficiaries showing income on their personal tax return.

Precisely. I sometimes do calendar year on estates when it's going to be open for more than one year, but fiscal years usually work out better for most estates.

I have. We supplied a copy of the W2 / 1099, showing the withholdings. That satisfied their inquiry.

I'm confident that a link will work there. I do something similar with MD, who require a taxpayer's physical address, which for us 95% of the time is the same as the mailing address already on the return.

I found it ! left off line 30, once that was done it worked as supposed to.

Since my client has never been treated as an employee or received a W-2 for the services she providing,I have been deducting QBI.

Same here! I'm wondering if this might also be able to solve one of my other pet peeves, of home address info that doesn't roll over to our local Property Tax refund return. Every stinking year, have to enter all the address info, even though it can only be claimed on the filers home, so it's 99% of the time going to be the same address as the 1040. Way to go Abby!! I too have my best ideas in the shower, but I seldom remember them by the time I'm done.

Are you preparing the returns for the two ABC entities also? Do you know how the transaction for the change of ABC entity was structured? Statutory conversion, statutory merger, or nonstatutory merger? From the original post, it sounds like a streamlined process by filing a few forms and that the state allows an S corp to simply convert to an LLC, not that a separate LLC was formed and merged with the S corp. If a simple conversion, I would: make the software split the activity with 9 mos going to the S corp, whatever remaining capital at the 9 mos mark is zeroed out, and K-1 is marked as "final". No liquidation, and no gain or loss reported K-1 for ABC, LLC will show an opening capital balance equal to whatever was zeroed out from ABC, Inc in step #1 above, and the remaining 3 months of activity will be reported on that K-1 to the new ABC, LLC. At least that's what I would do with it if a conversion. If ABC had a merger transaction to go from S to LLC partnership, that's another issue altogether. ~~~~ Or, were you simply asking how to make your software do all of that?

Not on the final year everything is distributed out thru K-1 and also why would you want to? higher tax on estate.

Yeah, I have a client who is a full time Home Health Aide for a wealthy family who gets paid about $ 25 per hour. She doesn't receive a W-2 or a 1099. I have explained the situation to her but she really likes her job and doesn't want to rock the boat. So I report her income on Schedule C,and she pays the SE tax.

The Realtor and Tile Company who handled the sale will be your best friend here. They can tell you who sold the property (it has to be recorded). Get the TIN of the seller and most of your answers will follow. Tom Longview, TX

Not 121 but does get the step-up.

Just a wild guess, but I'm thinking maybe....umm...."Do not pass go; do not collect $200!"

I'm confused. Was the house sold by the estate (and a 1099S issued in the estate's EIN)? In that case it goes on the estate return because that's where the IRS computers will look for it. In your last post you said the beneficiaries sold it. If so, they should each have a 1099S to report on their individual returns, no estate return required. If the estate sold the home and distributed the proceeds in the same fiscal year, it cannot pay the taxes because it distributed all its taxable income and has none. If the proceeds haven't been distributed, do the beneficiaries really want to keep it open another fiscal year just so it can pay taxes (and tax prep for another 1041)? I agree with Lion that estate tax rates are way higher than most individuals pay so the beneficiaries will get less money than if they each paid tax on their share at their individual tax rates. Plus, the estate can deduct tax prep fees where the individuals can't.

I just did this for an S corp. Only one shareholder. The 7203 info was imported and I double checked it with the Basis Statement in the 1120S. I attached it as a pdf. Haven't efiled it yet. Working on the shareholder 1040 now. I don't know if this was from a recent ATX update or not.

We're not required to audit our client's, correct? We're required to ask questions and to obtain a certain comfort level in the positions we make on their returns. I spend extra time with clients when they have a Schedule C, on expenses they claim, including going over the IRS regulations. I'm not auditing them, however. If my client provides a reasonable answer to my questions, I'm good. I always play devils advocate and provide them "what if" scenarios in regard to the IRS potentially knocking on their door. As long as they recognize the issues which may present, I rarely refuse to prepare a return. I think communicating the IRS provisions and making sure clients are fully informed is paramount, but I'm not conducting a full blown audit. In regard to Door Dash mileage, my personal belief is that mileage from your home to the first restaurant/stop, and back home after your last delivery is mileage that should be questioned given the individuals circumstances. Mileage in-between stops, going from customer 1 to restaurant 2, and so on, assuming they are not conducting personal business, seem like business miles. As long as what the client is claiming is reasonable, I'm good and place it on the return.

It was actually not that hard after I fiddled around with it. Actually, I duplicated the return and fiddled in that one until I had it right. I prepared the 8824 first, then went to fixed assets, disposition tab, type exchange. Once I completed the disposition a new asset was created, but I was able to edit the activity. Everything flowed smoothly through to the Sch. E. It is pretty slick. Reminds me why I stick with ATX. This was one of those transactions I don't do very often, so I needed a quiet time to play with it. Tom Modesto, CA