Partnership Passive Loss Final Year

[David]

TP's wife died years ago and had a passive interest in a partnership. TP received a final K-1 with his wife's name and ssn listed.

In addition to a passive loss carry forward, the TP's wife also has a $60K remaining basis.

Even though the K-1 is in the TP's deceased wife's name and ssn, can he take the passive loss carryforward and the $60K loss from unrecovered basis on his tax return?

Thanks.

 

[Abby Normal]

If he inherited her investments, get the K1 changed to his name & ssn. He might also have a step-up in basis but all of this should have been taken care of when she died.

[jklcpa]

TP's wife died years ago and had a passive interest in a partnership. TP received a final K-1 with his wife's name and ssn listed.

In addition to a passive loss carry forward, the TP's wife also has a $60K remaining basis.

Even though the K-1 is in the TP's deceased wife's name and ssn, can he take the passive loss carryforward and the $60K loss from unrecovered basis on his tax return?

Thanks.

 

From Pub 925:

Dispositions by death.   If a passive activity interest is transferred because the owner dies, unused passive activity losses are allowed (to a certain extent) as a deduction against the decedent's income in the year of death. The decedent's losses are allowed only to the extent they exceed the amount by which the transferee's basis in the passive activity has been increased under the rules for determining the basis of property acquired from a decedent. For example, if the basis of an interest in a passive activity in the hands of a transferee is increased by $6,000 and unused passive activity losses of $8,000 were allocable to the interest at the date of death, then the decedent's deduction for the tax year would be limited to $2,000 ($8,000 − $6,000).

If you inherited property from a decedent who died in 2010, special rules may apply if the executor of the estate files Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. For more information, see Publication 4895, Tax Treatment of Property Acquired from a Decedent Dying in 2010, and the Instructions for Form 8939.

[David]

Thanks for your help.

[David]

A transfer was not done shortly after the DOD in 2010. There was no will. The TP says his attorney said he would have to go to court to get the partnership transferred and the court costs may not be worth transferring the partnership interest.

I thought since they were married that the surviving spouse would automatically have rights to the partnership interest.