Entertaining a question that I know better

[schirallicpa]

Taxpayer was a sole prop/dba as a car mechanic.  He died last July 2020.  But the spouse hasn't sold the equipment yet, and apparently there is some insurance being paid and a license is being paid on for an inspection machine to sit in the shop.  So they want to argue that therefore the business is still open and she should be able to deduct these things.  

Why am I even wasting our time with this?  

Sick of people.

[Lynn EA USTCP in Louisiana]

Wouldn't these expenses be part of the estate 1041 return?   Without any 1041 income the losses 'should' carry forward to the final return, when they sell the equipment and distribute the rest of the cash, right ?

[Lee B]

I vaguely remember reading sometime in the past that a SP business ceases at the date of death?

 

[DANRVAN]

17 hours ago, schirallicpa said:

So they want to argue that

Curious, who is they?

 

16 hours ago, cbslee said:

SP business ceases at the date of death

Tax year for decedent ends on date of death  If spouse takes over she basically picks up where he left off.

But in this case the business terminated and wife is holding the equipment as investment so expenses would be added to basis.

16 hours ago, Lynn EA USTCP in Louisiana said:

expenses be part of the estate 1041 return

If the assets transferred directly to wife there might not be a 1041.  But even if 1041 is filed, I don't believe the expenses would qualify as admin expense under the hypothetical person rule of sec 67(e).  In other words, if the assets were held as an investment and not deducible to an individual, in the same token they are not deductible as an expense of the estate.

If the expenses were from the winding down of husband's business then they would be deductible as ordinary. 

[schirallicpa]

The winding down was last year.  "They" are the spouse and the nagging daughter.  Yes - a sole proprietors business ends the day he dies.  The winding up should be within a reasonable time.  They have not sold the inspection equipment because they are basically lazy and haven't bothered yet.  I suspect the son-in-law is printing stickers for the cars of friends and family.  

I was not going to file an estate return that only showed a business license and business insurance expense that would provide less tax savings for them than the cost of my work.  But now I will.

[DANRVAN]

13 minutes ago, schirallicpa said:

"They" are the spouse and the nagging daughter. 

I thought that might be the case.

 

17 hours ago, schirallicpa said:

He died last July 2020. 

I didn't catch that part.

 

13 minutes ago, schirallicpa said:

was not going to file an estate return that only showed a business license and business insurance expense that would provide less tax savings for them than the cost of my work.  But now I will.

Were the expenses paid out of an estate checking account?

If the assets have been transferred to wife and she is paying the expense, then I think a 1041 is not appropriate.