1041 and k-1's

[oceanlovin'ea]

A lady(Sue) who works with my husband asked me a question that I need to answer for her.

Her deceased husband's mother passed away and owned property. The property wsa sold but after her husband passed away so it came to Sue as stated in her will. Lee(deceased husband) had no will so Sue had to split the money from the sale with his 2 children.
It has been in probate and closed in January 2009.

Does she need to file a 1041 and give K-1's to his children? The children are grown and from a previous marriage. They won't give her their ss#'s.

Someone told her that if it wasn't over $500,000 she didn't need to file a return.

There was no income from the estate. It was just a home that was sold and the money split 3 ways.

Any thoughts would be greatly appreciated.

Thanks.

[DaveO]

Did an attorney handle the probate? I'm surprised he didn't obtain that information (SS#) before issuing checks. If there is no income there should be no need for a K-1. Often there are excess deductions available so a K-1 may be issued to the benefit of the heirs.

[Gretel]

Here are my 2 cents.

It appears 3 people inherited the home and since none of the heirs lived in the home it was investment property to them with step up basis. An appraisal should have been done to have DOD value. There is also an election available to use FMV 6 months after death if this is more beneficial.

With that said and assuming the sales commission was paid, an investment loss was probably incurred and is available to be passed through to heirs.

[DTS]

1041/k-1

They will need all the forms so attorney and fiduciary fees can be deducted.

[Burke]

Sue does not do the 1041 and K-1's unless she was executor and/or administrator of the estate. The person or persons handling the deceased Mother-in-law's estate does that, if necessary. They may wish to do so, even in the event of no income, just to pass along any losses due on termination of the estate, which will include administrative fees, and/or any capital losses on the sale of the property. If it went through probate, someone qualifed as the personal representative. Call courthouse to find out who if Sue does not know. And that person should have the SSN's of any heirs as they should have been obtained up front. When the property was sold, the firm handling the closing for the three owners should have obtained the SSN's as 1099-S reporting was required. The $500,000 exemption has nothing to do with this case. The other 2 heirs may be more willing to cough up SSN's if they discover it will give them tax-deductible losses. The person responsible for 1041/K-1's, can send W-9's. There is a $50 penalty for failure to provide. If they still cannot get them, file the forms anyway w/out the other SSN's and at least Sue will get the benefit of her share of the deductions.

[oceanlovin'ea]

Thanks Burke

That sounds so simple when you say it. Don't know why I didn't think along those lines. I will get in touch with her and let her know that it is probably not her responsibility.

Thanks to all of you.

Linda