1041 question

[JenMO]

TP dies, pers rep has an auction, personal property (household goods, tools, etc) is sold. FMV is what the property brings, but there are expenses associated with the sale, like advertising, clerks, commissions. Now there could be a loss? Is the loss deductible? Or is it a personal loss? It would be in the hands of the TP, but it was sold in the estate.

[Roberts]

Expenses incurred in selling of household goods are being put on the tax return? That's odd.

[Burke]

In the case of an estate, these expenses are expenses of sale and can be deducted. They would be shown on Schedule D (1041) and added to basis, which is FMV. So you would have a loss in all likelihood.

[Roland Slugg]

Losses on sales of personal property ... i.e. neither business property nor investment assets ... are not deductible.

[JenMO]

I know personal losses are not usually deductible, but when the estate sells the home of the decedent there is sometimes a loss and that is deductible. I just wasn't sure if the personal property (household, etc) could be treated the same way.

[Burke]

It is deductible. The question arises however, in the case of personal property in an estate (which is usually sold within a reasonable time after death) what is the actual FMV? Was an appraisal done by a qualified appraiser? If not, and it was just gotten rid of in a sale conducted by the family, then what it sold for was likely the actual FMV. What you seem to be asking is regarding the expense of the auctioneer, etc. etc. They are administrative estate expenses incurred in obtaining the income for distribution to the heirs.

[Roland Slugg]

It is deductible. They are administrative estate expenses incurred in obtaining the income for distribution to the heirs.

I disagree. To be deductible on an income tax return such an expense ... commissions, fees, etc. ... must be paid in connection with the production or collection of income. Taxable income. An auctioneer's commissions are certainly paid to turn property into cash, but not into taxable income.

Such fees may be deductible on F-706, but they are not deductible on F-1041. See Regs 1.212-1.