Inherited Property adjusted basis

[tracyb]

Property was inherited, transferred to estate in 2005 and just sold in 2016. Can the taxes paid on the property (2005-2015) by the estate be added to the basis (1041 Sch D) for the estate tax return or is there any way for the estate to deduct
the 1041? None of the property taxes were taken as a deduction previously.

[ATSMAN]

Property was inherited, transferred to estate in 2005 and just sold in 2016. Can the taxes paid on the property (2005-2015) by the estate be added to the basis (1041 Sch D) for the estate tax return or is there any way for the estate to deduct
the 1041? None of the property taxes were taken as a deduction previously.

I did one of these returns few years back. Because property taxes are paid each year they should have been deducted each year and not added to basis. I amended the previous 3 returns. Fortunately my client only lost 1 year's tax deduction.

[tracyb]

I did one of these returns few years back. Because property taxes are paid each year they should have been deducted each year and not added to basis. I amended the previous 3 returns. Fortunately my client only lost 1 year's tax deduction.

The estate just had real property so the executors have been paying property taxes all these years. How would they deduct the taxes each year with no estate income?

[Roland Slugg]

This issue comes up on this Board frequently. You may wish to do a search for similar posts. There have been some recently.

If the real property is unimproved and unproductive real property, the estate could have made an election to capitalize the taxes. The election had to be made and attached to the estate's original return each year. (Regs §1.266-1(c)(3)) Look at the estate's prior years' returns and see if the election is present in each one. If it isn't, it's too late to add the election now.

Ten years is a very long time for an estate to be open. I'm kinda curious how the executor managed ... THAT.

[tracyb]

Roland,
This is the estates 1st 1041 to be filed. The only income has been from this sale. The 1099S is in the estates name. The 2 executors have paid the taxes for the estate since 2005 and the estate paid them back out of the proceeds from the sale.

The property is unimproved and unproductive real property.

[taxea]

So for all intent and purpose the estate did pay the taxes.

[tracyb]

So for all intent and purpose the estate did pay the taxes.

so the estate reimbursed them in 2016 for the taxes from all the prior years (returns not filed prior-no income) so....would the estate be able to deduct them in 2016?