Rental loss and loss on sale inside estate

[dhawkcpa]

Kids inherited parents home and have been renting it 3 years hoping for a better sale price. The rental showed small losses each year and was sold in 2012, also at a loss. There is also a vacation home in the estate which has been for sale but has not yet sold.

I think the rental losses carry over until the estate closes. I think the loss on sale of the rental home also carries over until the estate closes (when the vacation home is sold). Sound right? Thanks.

[Roland Slugg]

Sound right?

Nope, at least not based on what you wrote above. Since the decedent's children (kids) inherited the rental house, or so you said, the three years' losses were theirs, not the estate's. When that rental sold in 2012, the loss on the sale becomes a deductible loss for those children, in proportion to their respective ownership percentages. That sale also allows the accumulated PALs, if any, related to that same property to be deducted in 2012, as well. This assumes, of course, that the property was completely disposed of in a taxable transaction and to an unrelated buyer.

[taxea]

the properties should have gone into the children's names at time of death not remained in the estate. Is there a reason why the estate is open after 3 years? Who is the trustee/personal representative of the estate? Is this a probate estate? It is usually better to sell outside of the estate, trust, or probate.