sale of deceased residence

[gman]

Taxpayer was in nursing home for past 8 years. Her personal residence remained
vacant. Once taxpayer died, residence was sold. Title company will issue
1099 on sale of residence in deceased social security number. Deceased children
will receive proceeds. How would this be handled on tax return(1040 or 1041)?

[OldJack]

A deceased taxpayer can't sell a residence but her estate can. Therefore, when you get the 1099 it will be for her estate selling the residence. The cost basis will be stepped-up (because the estate is now owned by beneficiaries) to the selling price showing zero gain and reported on the estate tax return 1041 if one is required to file. The 1041 passes any taxable income to the beneficiaries for tax to pay or pays the tax from the estate funds. Proceeds then go tax-free to the beneficiaries.

[gman]

Social Security #

Is it o.k. for the title company to use her social or should the estate get
a federal ID # of its own?

[OldJack]

You first have to determine if the estate needs a federal ID# in order to file a tax return. An estate is required to file form 1041 if it has gross income $600 or more or has a nonresident alien beneficiary. The sale of a residence would report gross income more than $600 even though it would be zero taxable so you should probably get a number and file. This usually is a decision made by the attorney or person handling the estate.

If the 1099 uses the decedents social security that doesn't change the proper place to report the income or transaction. (1041)

[Mark Goldberg]

Time out

You need to find out who sold the house. It will be on the settlement statement. If the estate sold the house then 1041 with gain or loss on a K-1 to the beni's. If the individuals sold it then each reports their share on 1040.