Form 1041 question

[wsbjr]

I am trying to determine if the proceeds from the sale of a decedent residence who died intestate is taxable to the beneficiaries or the estate. I find Reg 1.643 to be a bit confusing in that it states that Capital Gains are not ordinarily included in DNI, but there may be situations when the beneficiary is responsible for the tax. (Reg. 1.643(a)3 b(3))
I need help form someone who has a clearer understanding on this issue than I.

Warren

[veritas]

Normally since the property has a stepped up basis at time of death we don't see gains on sale of decedents residence more likely it's a loss. Keep in mind that when the estate sells the property it is no longer a residence so 121 exclusion does not apply. Now the question is do you get to claim the loss?

[Bees Knees]

It depends on state law. If the house belongs to the estate under state law because there was no will and no joint tenant, then the sale would be reported on the estate return. If the house goes to a beneficiary under state law, the beneficiary would report the sale.

You need an estate lawyer in your state to tell you who owns the house.

However, I would wonder how you could even sell the house if you don't know who owns it. The person or estate who legally owns the house at the time of sale is the one who reports the sale.

[John of PA]

Closing Statement

If the name of the seller on the closing statement is the estate, then i'ts a 1041 sale; if i'ts the beneficiaries name, then it directly goes on the 1040's. If it was not the personal residence of the seller, then a loss on the sale can be deducted, which is often the case due to closing costs and fees.