Gail in Virginia

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A belated :bday:

A belated :bday:

A belated :bday:

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In a perfect world, yes the tax software would have flagged that at some point. However, if tax software were infallible, people would not need us to do their taxes - they could just buy turbo tax or use the free-file programs the IRS refers them to. It is our responsibility to stay up to date on federal and state tax law. And software programs are notoriously weak on state law - usually they are pretty good on the state they are based in, fair on neighboring states and progressively worse as you get farther away. I am sorry that you got caught by this because it is not always easy to keep up to date on state law either - there are many more programs for federal changes than for state. I hope you did not have very many of these that year. Do you belong to any state organizations such as your state's chapter of NAEA or NATP? They will sometimes provide state updates for their members along with the federal updates - at least the chapters of each of those in Virginia do.

A belated :bday:

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According to IRS Publication 537, "Transfer due to death. The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. Any unreported gain from the installment obligation is not treated as gross income to the decedent. No income is reported on the decedent's return due to the transfer. Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments. However, if an installment obligation is canceled, becomes unenforceable, or is transferred to the buyer because of the death of the holder of the obligation, it is a disposition. The estate must figure its gain or loss on the disposition. If the holder and the buyer were related, the FMV of the installment obligation is considered to be no less than its full face value. " This would support Maribeth's statement that the "client 'steps into the shoes' of the decedent."

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