I hate it when...

[JG EA]

I think I know something - it is established - then someone throws me a curve. I learned through *someone who should know these things* that on a 1041, FMV of a home should equal the sale price *minus* the closing costs!!! This is of course assuming the time of sale is near the date of death. What? I didn't know that. I always thought the conventional wisdom was that the beneficiaries would benefit a little on their K-1 just because of the closing costs.

I would appreciate comments on the above point and I also have another question:

Facts: MFJ, TP dies in May, their rental house continues to be rented until date of sale in July. Spouse gets FMV for the TP's portion or in a community property state FMV for the whole thing as of the date in May.

Question: Does all depreciation get 1250 treatment like normal?

[Bees Knees]

Really?

I learned through *someone who should know these things* that on a 1041, FMV of a home should equal the sale price *minus* the closing costs!!! This is of course assuming the time of sale is near the date of death. What? I didn't know that. I always thought the conventional wisdom was that the beneficiaries would benefit a little on their K-1 just because of the closing costs.

Gee, I didn't know that either. And apparently the IRS doesn't either.

Rev. Rul. 2003-125 makes the following comment: “The estate tax regulations provide that the fair market value of property is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. See section 20.2031-1(b) of the Estate Tax Regulations.”

I don’t seem to see any mention of reducing FMV by the selling costs in that Revenue Ruling, nor any other ruling I have read. Who made that one up?

[Unregister]

depreciation

Quote
Question: Does all depreciation get 1250 treatment like normal?

Since the property gets new base at date of death, you start new depreciation for two month with the new base. So you will only have two month of depreciation to recapture.

[S T]

1041 sale and closing costs

I think I know something - it is established - then someone throws me a curve. I learned through *someone who should know these things* that on a 1041, FMV of a home should equal the sale price *minus* the closing costs!!! This is of course assuming the time of sale is near the date of death. What? I didn't know that. I always thought the conventional wisdom was that the beneficiaries would benefit a little on their K-1 just because of the closing costs.

JG, Oh curves, Actually not sales price minus selling expenses, but fmv (basis) of property + selling expenses. Sales price, is sales price. Depends on your facts and circumstances, but generally, researching PPC 1041, closing costs or selling expenses on sale of property should be considered "administrative expenses". In order to qualify the regulations "require that selling expenses must be incurred to sell property to pay debts, administration expenses, or taxes, or preserve or maintain estate property, or to make a distribution of estate property, reg 20.2053-3(d)(2)" You can only deduct on either the 706 or the 1041 form, not both.

Goes on to say that if the selling expenses qualify as administration expense (sale was necessary to pay the decendent's debts) the costs may be deducted on Form 706 or Form 1041, Schedule D. OR IF the selling expense does not qualify as administration expense, they are included on Form 1041, Schedule D, as an increase in basis of the residence. Example that is given is "inclusion of the selling expenses in the property's basis results in a $4,500 capital loss."

I see no reference to time frame, so I think you can add the selling expense to the cost basis and generate the loss to pass onto the beneficiaries or to offset other income.

Sandy

[JG EA]

Thanks

I am relieved at your opinion and reg reference Bees! My source was very authoritative, but with Sandy's comments I think I know now how it happened. I think *X* was reading into using the selling expenses as administrative expenses that the FMV meant to reduce the sale price by those selling expenses. I must say again I am relieved that FMV is FMV. Otherwise the universe would collapse unto itself in shear frustration of wishy-washiness.

Thanks also, ST to my depreciation question. That makes perfect sense.

Sandy I really appreciate the thought "sales price is sales price".

(Take a note TheTaxBook, that to reiterate the obvious is greatly appreciated by some, and essential to others. It certainly is to me.)

[Unregistered]

I hate duplication

[Bird Legs]

Hate Duplication?

Then do not duplicate.
This is one more post to becoming a regular member. Not a Junior member.
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[Bees Knees]

I hate duplication

So do I, especially when you have to pay for it. Like buying something you already have just to get a portion of something new.

[S T]

Jr Member to Member

Then do not duplicate.
This is one more post to becoming a regular member. Not a Junior member.
tweet...

Bird, you are almost there!, Total of 30 postings for Member. Bob W made it, Lion made it, DTS made it and I forgot to look at Gene's count, and Snags!

Black Bart, where are you?

We are all in the "cheering" section, with that pitcher of lemonade, or margaritas, or whatever!

Sandy

[Bird Legs]

Almost a full member

Sandy, how about a slice of cold watermelon?
tweet...

[BOB W]

watermelon?

Sound good to me. Do you like the pitless kind or the ones with the pits? I like to spit them out. My 6 yr old gets a kick out of it when I do it.

[Bird Legs]

Watermelon Seeds

Bob, there is a small town about 40 miles from here, Luling, where they have an annual watermelon thump. One of the events is a seed spitting contest. See which contestant can spit the seed the furthest. Quite exciting.
To answer your question I like the one with seeds better.
tweet...
Just crossed my mind. With this post I might have made regular member status.

[S T]

Bird "Member Status"

Sandy, how about a slice of cold watermelon?
tweet...

Bird, you can have watermelon, lemonade, margaritas, or what ever you would like.
Congrats! Member status according to the postings!

I am so glad that so many old friends have been posting here, your answers and information are valuable to all of us!

Sandy