Disposing of Assets on Final 1040 Tax Return

[AZ-Tax]

The deceased TP had depreciating rental properties and lawn equipment. Heirs received rental properties and lawn equipment. Am I correct the disposition value and disposition date would be the fair market value the date of TP's death? One of the rental houses sold in 2014, 2 months after the TP passed. Can that gross sale amount be used as a disposition value?

[Burke]

I imagine it is asking for the disposition value as the software is trying to calculate the gain? Since the properties transferred to the heirs, there would not be any. I think you can code it not to calculate gain/loss. I can in my software. The disposition date would take care of the depreciation adjustment for a short year.

[AZ-Tax]

Recapture just disappers?

The deceased TP had depreciating rental properties and lawn equipment. Heirs received rental properties and lawn equipment. Am I correct the disposition value and disposition date would be the fair market value the date of TP's death? One of the rental houses sold in 2014, 2 months after the TP passed. Can that gross sale amount be used as a disposition value?

So the deceased nor the heirs are responsible for any recapture. The recapture just disappears?

[TaxGuyBill]

So the deceased nor the heirs are responsible for any recapture. The recapture just disappears?

Yep.

In my software (ProSeries) I would enter the 'disposition' date (date of death) to stop the depreciation on that date, and leave the 'sales price' blank.

[taxea]

did the property sell in the estate/probate or did the beneficiaries sell it after it was transferred? The basis for him remains what it was before his death. The FMV to the beneficiary is their basis. Asset out of service date is DOD. Sale amount would be zero. Unless, the property continued as a rental between his death and the sale, in which case, ownership for this period needs to be determined.

[AZ-Tax]

Ownership determinted, this may help

did the property sell in the estate/probate or did the beneficiaries sell it after it was transferred? The basis for him remains what it was before his death. The FMV to the beneficiary is their basis. Asset out of service date is DOD. Sale amount would be zero. Unless, the property continued as a rental between his death and the sale, in which case, ownership for this period needs to be determined.

As mentioned earlier, neither rental was included in the Estate/Probate and was transferred to heirs immediately upon TP's death. One rental was sold in Dec 2014 for which the heirs received the proceeds from the sale BUT heirs did receive a rental check from that sold rental. What if it was back rent, rent owed while TP was alive, that should be included in TP final return, correct? OR Assume TP died Sept 30th then rental title transferred to Heirs either on Sept 30th or Oct 1st and tenant paid Oct rent to heirs on Oct 1st. Is the deceased TP still off the hook for depreciation recapture?

[Burke]

Yes. The sale and the rental income should be on the heir(s) return. Any rents received after the date of death would be theirs.