Estate - Classifying Income

[Forensicacctnt]

On completing Form 1041 (2017) for an estate established in 2014, two forms of income were received by the estate in 2017: monies paid by the state for eminent domain and earnest money received from a potential buyer of property from the estate, who later walked away from the transaction. What is the correct classification in recording these two items? In Lacerte, I am looking at the screen for Other Income, if correct, do these transactions go in the Accounting; Income or Corpus? Thanks!

[ATSMAN]

I had a client's estate that received eminent domain money when thr state took a portion of the land for a highway. I put it under capital gains. I am assuming the earnest money is without any stipulation so I would classify as other income unless the property is on the market.

[Forensicacctnt]

Regarding the eminent domain, if put under capital gains, I have to determine the basis. I will confer with the client.
Thanks

[ATSMAN]

Regarding the eminent domain, if put under capital gains, I have to determine the basis. I will confer with the client.
Thanks

That is exactly what I did. I prorated the basis for the acre or so state forced them to sale. Unfortunately the basis was very low to begin with because the land was in their family for generations. The state paid for all recording fees.

[Burke]

Forfeited earnest money on purchase of property is treated as ordinary income. I would treat it as accounting income, not corpus. As to the monies for land taken by eminent domain, I agree with the treatment as capital gain. You will have to determine basis at date of death. Should be relatively easy. It would have been declared at probate.