Estate taxes


M

mcmannors

My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
 
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D

D. Stussy

mcmannors said:
My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
Form 1041, with schedules D and K/K-1. There might not be an actual tax
liability depending on the actual facts.
The situation above is why many people have grantor trusts. That avoids the
necessity of probate.
 
E

ed

Usually the title company would waive objectins to no
probate if the widower lived in the house for another 3
years after DOD. No probate necessary and title company
will pay proceeds to dad, not estate. Isn't this a more
practical solution than the hassell of probate?

Dad will owe capital gains tax on the difference between DOD
value and net sales proceeds. The estate can pay the LTCG
tax on its 1041 or distribute it on the K-1 to be taxed on
dad's 1040. If the sale was a loss due to commissions,etc,
the estate can pas the loss onto dad on its 1041 and K-1

ed
 
K

Katie

mcmannors said:
My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
The estate is subject to income tax on any income, including
gain or loss on the sale of property, realized by it during
the period of administration. My recollection is that
income earned during the tax year within which the estate is
closed out and the assets distributed to the heirs is (or
may be) taxable to the heirs, rather than to the estate.

The basis of the house in the hands of the estate is its
fair market value at the date of your mother's death. Since
you probably did not have an appraisal done at that time,
you may have to look at comparable sales in the neighborhood
to determine what that number was. The gain (or loss) on
the sale is the difference between the sales price and the
FMV at the date of death, which should not be a big number
unless the property was in Southern California or some other
really hot real estate market. (I think my house
appreciated about 30% or 40% during the same period.)

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
K

Katie

mcmannors said:
My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
The estate is subject to income tax on any income, including
gain or loss on the sale of property, realized by it during
the period of administration. My recollection is that
income earned during the tax year within which the estate is
closed out and the assets distributed to the heirs is (or
may be) taxable to the heirs, rather than to the estate.

The basis of the house in the hands of the estate is its
fair market value at the date of your mother's death. Since
you probably did not have an appraisal done at that time,
you may have to look at comparable sales in the neighborhood
to determine what that number was. The gain (or loss) on
the sale is the difference between the sales price and the
FMV at the date of death, which should not be a big number
unless the property was in Southern California or some other
really hot real estate market. (I think my house
appreciated about 30% or 40% during the same period.)

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
K

Katie

mcmannors said:
My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
The estate is subject to income tax on any income, including
gain or loss on the sale of property, realized by it during
the period of administration. My recollection is that
income earned during the tax year within which the estate is
closed out and the assets distributed to the heirs is (or
may be) taxable to the heirs, rather than to the estate.

The basis of the house in the hands of the estate is its
fair market value at the date of your mother's death. Since
you probably did not have an appraisal done at that time,
you may have to look at comparable sales in the neighborhood
to determine what that number was. The gain (or loss) on
the sale is the difference between the sales price and the
FMV at the date of death, which should not be a big number
unless the property was in Southern California or some other
really hot real estate market. (I think my house
appreciated about 30% or 40% during the same period.)

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
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K

Katie

mcmannors said:
My mother passed away in April of 2002, and she was the sole
owner of the house she and my dad lived in. In her will, she
left the house to my dad. My father wanted to sell the house
in 2005, when he realized that the will had not been
probated and the house was still in my mom's name. The will
was then probated and due to time constraints, my mother's
estate ended up being the seller of the house.

As executor, I opened up a bank account in the estate's
name, deposited the proceeds, and distributed them
accordingly. The amount was well below the estate tax
exemption.

Are there any tax forms required to be filed, and any tax
liability due?
The estate is subject to income tax on any income, including
gain or loss on the sale of property, realized by it during
the period of administration. My recollection is that
income earned during the tax year within which the estate is
closed out and the assets distributed to the heirs is (or
may be) taxable to the heirs, rather than to the estate.

The basis of the house in the hands of the estate is its
fair market value at the date of your mother's death. Since
you probably did not have an appraisal done at that time,
you may have to look at comparable sales in the neighborhood
to determine what that number was. The gain (or loss) on
the sale is the difference between the sales price and the
FMV at the date of death, which should not be a big number
unless the property was in Southern California or some other
really hot real estate market. (I think my house
appreciated about 30% or 40% during the same period.)

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
S

Stuart A. Bronstein

ed said:
Usually the title company would waive objectins to no
probate if the widower lived in the house for another 3
years after DOD. No probate necessary and title company
will pay proceeds to dad, not estate. Isn't this a more
practical solution than the hassell of probate?
Depends on where you live, I suppose. I seriously doubt
that would happen in California.

Stu
 
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E

ed

As a Bond Broker I handled estates without probate in Cook
County Illinois for many years (where Probate is a real
racket) and found title companys (Chicago Title for
instance) agreeable to waive objections that there was no
probate (under similar circumstances to these). Usually I
had to offer to write a Bond In Lieu Of Probate to jog them
into realizing they could get the amount of the bond premium
without being a bonding company, just realize they had no
risk and waive the objection. Happened all the time and I
lost the Bond sale.

In 30 years I never was able to write the Bond because the
title company preempted me by waiving the objection to no
probate with a fee slightly less than mine. They realized
that if I was willing to write the Bond, and did wirte it
for other assets, they had no risk. I wished they weren't
so agreeable. Probably the same situation exists in
California because I never saw a title company that would
pass up an extra buck and I think CA was the second largest
market for Bonds In Lieu Of Pribate (after Chicago).
Oddly, there was something in New York that prohibited me
from writing a bond on any account there. If it was stock
I usually found another transfer agent in a different State,
so I never tested this in NY.

ed
 

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