Schedule D

[JACKSORH]

My client's father passed away in 2007 so he had a 1041 prepared for his parent's estate. The son is the beneficiary and was left the house that his parents lived in. He sold the house 3 months later after the death of his parents for a loss. The preparer filed a schedule D listing the sales price(78,000) and the cost (83, 276) leaving a net loss of (5,276). I see on line 4 of the 1041 that the loss taken was (3,000). Does my client carryover the remaining 2,276. on his personal return for 2008 as well as deducting the property taxes he paid on his deceased father's house of 2008. His tax preparer told him he could deduct the net loss of 5, 276 and the property taxes paid on parent's house for 2008. Is this correct. Should he only carryforward on sch. D the 2,276. or the 5,276? Also, would the description of property be listed as "Residence of the Deceased" and show the date acquired and the date sold for a short term loss. He only had possession of the property from June 2007 until Jan. 2008. The CPA told my client to use for taxes for 2008 the loss on parent's home and also real estate taxes paid on his parent's home. What are your comments?

Thanks,

jacksorh

[kcjenkins]

My comment would be that there is a lot of confusion in Milwaukee, and some of it is yours. I think you need to do some reading, Jacksorn, because you sound as confused as the client.

No, of course he can not take the entire loss again. He takes only the carryover, and for that he does not enter the sale on the D, only the carryover. Last year, when he inherited and sold the house is the only time it is entered as a transaction. And inherited property is ALWAYS LONGTERM, by law, Jacksorn. You should know that. And the description, in the year of sale would not be "Residence of the Deceased" it would be "123 Easy St" and date acquired would be 'inherited'. That will automatically make it longterm, as well as making it clear to the IRS where he got it. And the taxes paid should have been added to his basis, which I expect the CPA did.

[JACKSORH]

I was only echoing what the CPA told my client and the reasoning behind my query was that something was wrong. As far as residence of the deceased, this is what the quote "CPA" put as the description of the property which I felt was incorrect. We are here to assist when possible, I thought, not to belittle or use spurious comments or degrade an individual K.C. because everyone is not as smart as you sir and if you had read the quote you would have surmised what I was getting at, however, thanks for your comment and I hope you come off of your high horse.

[JRS]

If you had stated in your post with a little more clarity YOUR position, you would not have taken KC's reply so offensively. If you scan through other posts and replies by HER, you would realize, for the most part, she can and is a savior for the majority of us.

[Kea]

I know this is probably a basic question, but I'll ask it since I'm confused. What determined why the house sale was shown on a 1041? When my clients have sold inherited houses (or stocks, etc), I've shown it on the recipient's 1040. I have looked at the instructions for the 1041 where it states that it is reported there when the house is sold by the estate. What determines if the estate or the inheritor sold it? Is it the name on the closing papers?

Thanks for helping me wrap my brain around this.

[taxit]

I know this is probably a basic question, but I'll ask it since I'm confused. What determined why the house sale was shown on a 1041? When my clients have sold inherited houses (or stocks, etc), I've shown it on the recipient's 1040. I have looked at the instructions for the 1041 where it states that it is reported there when the house is sold by the estate. What determines if the estate or the inheritor sold it? Is it the name on the closing papers?

Thanks for helping me wrap my brain around this.

If the deed was transferred to the beneficiary and then sold it goes on their 1040 tax return. If still in the deceased name when sold it would go on the 1041.

[Kea]

Thanks.

I figured there was a simple answer I was missing.

[jasdlm]

Jacksorh -- what is the fiscal year of the estate? Did your client receive a k1? I've read the facts several times, and it sounds like your client didn't sell the property until 2008. What, if anything, did your client report related to the death of his parent on his 2007 return?

[BulldogTom]

Jacksorh -- what is the fiscal year of the estate? Did your client receive a k1? I've read the facts several times, and it sounds like your client didn't sell the property until 2008. What, if anything, did your client report related to the death of his parent on his 2007 return?

That is my question also. Did he get a K-1 from the estate? Did that loss already pass through to him? Or did the estate distribute the home and then he sold it? The post is not clear on the sequence of events and how they were recorded.

Tom

Lodi, CA

[kcjenkins]

I was only echoing what the CPA told my client and the reasoning behind my query was that something was wrong. As far as residence of the deceased, this is what the quote "CPA" put as the description of the property which I felt was incorrect. We are here to assist when possible, I thought, not to belittle or use spurious comments or degrade an individual K.C. because everyone is not as smart as you sir and if you had read the quote you would have surmised what I was getting at, however, thanks for your comment and I hope you come off of your high horse.

Sorry that I misunderstood your post, Jacksorn, but if you reread your original post, I think you can see why I got the impression I was responding to. You were questioning the description, for good reason. But you did not explain that it was the CPA's description that you were questioning. I sounded to me like you were suggesting that wording be used on this year's return.

I'm sorry that I sounded like a smartaleck to you. I was just concerned that you sounded so confused. I now think it's just a case of the client being confused, and you being a little too brief in your post so that you left out the item of WHO wrote the description, etc. And this is something we all see from time to time. Heck, even our own clients sometimes quote us wrong, don't they? We tell them something, and they only hear, or at least remember, the part that they want to hear. As the CPA set it up right, and took the $3000 and showed the correct carryover, I expect the client just heard 'You can use the rest of the capital loss next year" and he 'forgot' the phrase 'rest of'.

[taxit]

My client's father passed away in 2007 so he had a 1041 prepared for his parent's estate. The son is the beneficiary and was left the house that his parents lived in. He sold the house 3 months later after the death of his parents for a loss. The preparer filed a schedule D listing the sales price(78,000) and the cost (83, 276) leaving a net loss of (5,276). I see on line 4 of the 1041 that the loss taken was (3,000). Does my client carryover the remaining 2,276. on his personal return for 2008 as well as deducting the property taxes he paid on his deceased father's house of 2008. His tax preparer told him he could deduct the net loss of 5, 276 and the property taxes paid on parent's house for 2008. Is this correct. Should he only carryforward on sch. D the 2,276. or the 5,276? Also, would the description of property be listed as "Residence of the Deceased" and show the date acquired and the date sold for a short term loss. He only had possession of the property from June 2007 until Jan. 2008. The CPA told my client to use for taxes for 2008 the loss on parent's home and also real estate taxes paid on his parent's home. What are your comments?

Thanks,

jacksorh

Your client may have the full loss to show on their return. They should have a 1041 K-1 which should show what they have to use. If the expenses on the 1041 were enough to wipe out the income on the 1041, the capital loss may not have been used. Although it still would have been shown. I believe there is a 1041 K-1 floating around somewhere.

[JACKSORH]

Yes, I was questioning what he told me that the CPA told him that was a little astonishing. If he had already take some of the loss, I know that the rest 2,276 must be carried forward. Yes, I think you are right, my client must have misunderstood. I saw a note on the K-1 that he or someone wrote also home taxes for house can be taken in 2008. I agree that real estate should have been added to the basis and a 2k-1 was filed also in which CPA listed on line 11 - short term capital loss carryover

Fed. amt.(5276), and State (5,276). On sch.D (form 1041) listed below it he writes in the description of the property "Residence of the Deceased" which I question. The father had no other income. I wanted to make sure that my queries weren't in vain so that I could tell my client what my perspectives were regarding what was written in pencil at the top of form 1041 so that he could echo what his CPA told him to do for next year. I am sorry that the facts were nebulous but even though I felt disappointed in KC's response to my queries, but I did understand what he was saying. I accept your apology KC and I have been with this board for over 10 years and have learned a lot from all of you and again I want to say thanks for all of your help and no harm no foul.

[RoyDaleOne]

Is not the date of when the estate closed, important to know, to assist in answering this question?

[Bart]

I am sorry that the facts were nebulous but even though I felt disappointed in KC's response to my queries, but I did understand what he was saying. I

KC is a she not a he.

[BulldogTom]

>>even though I felt disappointed in KC's response to my queries, but I did understand what he was saying<<

KC is a wonderful southern lady. I have had the distinct priviledge of meeting her personally. We should all aspire to match her grace and generosity.

Tom

Lodi, CA

[michaelmars]

I am confused about the original post. Didn't the first line say the beneficiary inherited the house, then it is a personal item and doesn't belong on the 1041 for the estate. The tax treatment is ultimately the same whether on the client sch d or as a k-1 flow though but.... gotta get it right to avoid notices down the road.

[ed_accountant]

My client's father passed away in 2007 so he had a 1041 prepared for his parent's estate. The son is the beneficiary and was left the house that his parents lived in. He sold the house 3 months later after the death of his parents for a loss. The preparer filed a schedule D listing the sales price(78,000) and the cost (83, 276) leaving a net loss of (5,276). I see on line 4 of the 1041 that the loss taken was (3,000). Does my client carryover the remaining 2,276. on his personal return for 2008 as well as deducting the property taxes he paid on his deceased father's house of 2008. His tax preparer told him he could deduct the net loss of 5, 276 and the property taxes paid on parent's house for 2008. Is this correct. Should he only carryforward on sch. D the 2,276. or the 5,276? Also, would the description of property be listed as "Residence of the Deceased" and show the date acquired and the date sold for a short term loss. He only had possession of the property from June 2007 until Jan. 2008. The CPA told my client to use for taxes for 2008 the loss on parent's home and also real estate taxes paid on his parent's home. What are your comments?

Thanks,

jacksorh

It sounds like the Estate reported the sale on form 1041 of the house probably since the house was still in the deceased name. Your client can not deduct this loss on his 1040 until he receives a final 1041 K-1 from the estate. The Estate filing the 1041 has reported the sale, loss and claimed 3,000 in loss. The Estate 1041 can ONLY pass the unused loss to the beneficiary in a final 1041 and final k-1 issued to the beneficiary. The Final K-1 to the beneficiary would be the balance of the Loss of $2276.

However, if the Estate files a second year 1041 return, the Estate would claim the unused loss on Schedule D and nothing would pass through on the K-1. Many other variables here such as other income etc..

You should review the 1041 and question whether it is first and final return. Often 1041 filed in the first year does not file any k-1 in Estates. Also look for the 1041 K-1 if a final return was filed.

Good luck

[Maura]

If the Estate had no taxable income and was just reporting the sale of the home... then the entire capital loss would carryover to the final return and the Bene would use it on his personal return. Without knowing the numbers actually reported one can only guess.