Estate NOL?

[Kea]

The 1041 I'm preparing has a net loss. TaxWise is including a 1045 NOL. Estate is not in business. There is rental income and an installment sale. If this was a personal return, there would be no NOL.

There's no NOL here, right? Do I really need to put this puppy on extension to research estate NOLs?

[Maribeth]

Don't know much about NOL's in an estate. I am currently batting one around for a trust that has the business of renting equipment in it.

However, I do know that a rental loss is cosidered to be a business loss for NOL purposes. So you might have an NOL.

[Kea]

The rental was a gain. The overall loss came from sale of house and the expense of that sale.

I did fill in the capital loss and that made the NOL $0. Just making sure I wasn't missing something that had to be done differently with an estate. I have done 3 or 4 NOLs on 1040s over the last 15 years - so I know all about that kind. (yeah right!)

[Crackerjack]

I have run into this before. If the decedent had a business activity (including rentals) which sustained losses during the administration of the estate, the estate has an NOL. You would calculate the NOL pretty much the same as you would on a personal return. If the duration of the estate is more than one year, you would carry the NOL forward from year to year. In the final year of the estate you would pass the NOL through to the beneficiaries on K-1. If the house is a personal residence, the loss on its sale is nondeductible. If, in the final year of the estate, nonbusiness deductions (such as the administrative fees I love so much) exceed income, you have Excess Deductions on Termination. You can pass this through to the beneficiaries on their final K-1, but it is only a miscellaneous itemized deduction for them.

[Kea]

Thanks! The loss was only related to the house. Client lived in it until she passed away. Her "kids" cleaned it up and made minor repairs and sold house within a few months. Loss was only cost of sale. Was no longer a personal residence after she passed.