I swear, I overthink things & need to just keep it simple. Can some of you folks give me an opinion. My clients sibling died suddenly & w/o a will She went to court & was named as his personal rep. (no spouse or other siblings & his mother opted out of being involved in any way, including receiving anything). The attorney received $ from paychecks, retirements, bank accounts, etc & disperse the funds to my client. There was also a house, that was sold (after much $$ was spent to do so), those funds were also disperse to my client. She came into my office with all sorts of paperwork to show FMV and expenses of sale as well as settlement statements. She received no tax documents. I initially thought I'd need to do a schedule D for house sale. However, the settlement statement says sold by Estate of.... and all funds passed through attorneys hands. The value of all assets is very little (under $200K). Does any of this need to be acknowledged on her return? As I looked at the stuff, I think not, although the loss on the home would help her.
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Did your client, as her bother's estate's personal rep, have the estate income tax returns prepared already? Or, is she having you prepare the estate income tax returns now? -
She is unaware of any estate tax return- she assumes that the attorney took care of everything with the estate. She got the money & was told that it was all done. She didn't ever get a copy of an estate return tho.Comment
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Doesn't she remember signing the tax returns? She'll want a copy of the Form 1041 and Form 706, if needed. She'll need her own Form K-1 and probably is responsible for sending Forms K-1 to all beneficiaries.
The estate sold the house, so your client won't report that on her personal return.
Tell your client to speak to the lawyer to find out exactly what he did and did NOT do.Comment
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I wouldn't be surprised if an estate tax return wasn't done at all by the lawyer because I see stuff like that a couple times a year. Client comes in and says something like "Oh by the way my family member died and I had to take care of stuff and I have this tax form (most of the time a 1099-S) what do I need to do with this thing?
I wonder how often IRS systems send a CP notice to people who never bother to file estate tax returns when it's simply some bank acct assets and a home sale soon after date of death? 99% of the time a 1099-S for a home or property sale going on an estate sch D won't show any taxable gains after FMV at time of death, improvements, realtor costs, etc...Comment
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