capital loss after death

[dianne]

taxpayer's beneficiary sold stock after taxpayer died. annuity has a gain that will go to beneficiary. can the loss from sale of stock be offset by the gain on the annuity? Will it be on the beneficiaries tax return or on the estate tax return?

[Burke]

You say taxpayer's beneficiary. So I am assuming the stock was transferred into the name of such beneficiary prior to sale? And I am assuming that the annuity named this same person as a beneficiary and the proceeds will be/have been paid directly to this person?

If so, both the sale of stock and the 1099R for the taxable portion of the annuity will go on the beneficiary's tax return. The sale of the stock is a capital gain/loss on Sche D (loss limited to $3,000 net overall per year) and the annuity is ordinary income, taxable in full. So the stock loss may offset some or all of the annuity, it just depends on the amounts.

If the stock was transferred into the estate's name and then sold by the executor(s), and if the annuity was paid directly to the estate, not to a named beneficiary, then those items go on the estate income tax return, Form 1041. Either way, the tax treatment is the same.