TP deceased 2011 having a reverse mortgage. Estate filing (form 1041) Admin sold house in 2012 paying off mortgage. How would you handle the 12k of interest paid at closing? BTY the adminstrator had the right to sell and included the balance of cash received into the estate checking account. RE was not sold to any heirs or relatives and at a FMV.
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Liabilities
Estate should have listed the second mortgage payable as a liability during the process of valuing the estate, including any unpaid interest which
existed at the time of death.
Between the time of death and payoff of the mortgage, it is most likely some additional interest accrued, such that the 12K was probably more than
the interest due at time of death. The measure of this difference is Interest Expense to the Estate.
While there is no question that the interest is expense, there may be considerable question as to whether this interest is deductible, and if so,
how should it be deducted.
Since there is no Schedule A for itemized deductions on a 1041, I would say it would be deducted as an operating expense on Form 1041 itself. -
Interest is deducted on Line 10 of the 1041. Real estate taxes on Line 11. Other expenses of maintaining the property from date of death to sale are also deducted. Expenses of sale would be accounted for on Sche D-1041 when reporting the sale proceeds and basis info.Originally posted by TAX4US View PostComment
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In addition to what Burke wrote above I would add that the interest accrued during the decedent's life is deductible on F-1041, in addition to the interest accrued after he died. RevMo loans, however, are "home equity" loans, so the interest deduction is limited to that accrued on a maximum of $100,000 of loan principal.Roland Slugg
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