1041 and rentals

[rwm221]

In December of 2024 my client passed away. She had 2 rentals. In 2025 the executor of the estate sold the rentals. When doing the 1041 for 2025 do I recoup the depreciation for the rentals? Also, my client had a carry forward loss on her 2024 tax return which I could not use. Will I be able to use it on the 2025 1041.

Thank you

[Uncle Sam]

I believe you should get an appraisal of the property as of the date of death, since the property is being sold after death.

You cannot transfer a carryforward loss on a 1040 to a 1041. It's lost.

[rwm221]

Since both houses are rentals will I need to recoup the depreciation?

[TaxGuyBill]

If it was only owned by the one person (who died), the entire Basis is stepped up - which means all prior depreciation adjustments reset and disappear. And as Sam said, the Passive Loss Carryover would also disappear.