Estate Return

[RitaB]

Decedent passed away on 8/22/05. Personal Rep sold mutual funds on 4/06/06. I will need to know the # of shares and price per share on 8/22/05. This will be the cost basis for long term gain or loss (inherited = long term and cost = FMV on date of death). Correct?

The sold shares that accumulated (from reinvested dividends) after 8/22/05 would have to be considered separately in order to figure short term gain or loss. Right?

Also, I want to do this return for the calendar year 2006. It will be the first filed return, since it was not necessary to file a 1041 for 8/22/05 through 12/31/05, so should I mark this first filed Form 1041 as initial return or leave that blank? The first year of the estate is not 2006, but this is the first required return. Know what I mean? Thanks!

[OldJack]

I agree.. Initial estate income tax return 1041 on calendar year 2006 reporting sale of stepped-up basis of shares of stock as long-term except for any sale of stock acquired after date of death. As the final determination of beneficiaries of the estate appear not to have been finalized with distribution, the estate should pay any income tax on estate income.

[Gail in Virginia]

Decedent passed away on 8/22/05. Personal Rep sold mutual funds on 4/06/06. I will need to know the # of shares and price per share on 8/22/05. This will be the cost basis for long term gain or loss (inherited = long term and cost = FMV on date of death). Correct?

The sold shares that accumulated (from reinvested dividends) after 8/22/05 would have to be considered separately in order to figure short term gain or loss. Right?

Also, I want to do this return for the calendar year 2006. It will be the first filed return, since it was not necessary to file a 1041 for 8/22/05 through 12/31/05, so should I mark this first filed Form 1041 as initial return or leave that blank? The first year of the estate is not 2006, but this is the first required return. Know what I mean? Thanks!

I agree also, except that you should check with the personal representative about the valuation date for the stock. Depending on what else is in the estate, and the respective values at each time, the representative may make an election to use the alternate valuation date which is six months after the date of death.

[Don in Upstate NY]

I agree also, except that you should check with the personal representative about the valuation date for the stock. Depending on what else is in the estate, and the respective values at each time, the representative may make an election to use the alternate valuation date which is six months after the date of death.

In this case the funds were sold within six months of the date of death, and so were not part of the estate on the alternate evaluation date. If the alternate date option were chosen for estate tax reasons, the funds would have a basis exactly equal to their selling price. (See instructions for Form 706, page 6, last paragraph.)

[Gail in Virginia]

In this case the funds were sold within six months of the date of death, and so were not part of the estate on the alternate evaluation date. If the alternate date option were chosen for estate tax reasons, the funds would have a basis exactly equal to their selling price. (See instructions for Form 706, page 6, last paragraph.)

I am not sure I follow that Don. Date of Death was 8/22/05. Six months from then would be 2/22/06. Funds were sold 4/6/06. Am I missing a finger when I count my six months?

[Don in Upstate NY]

I am not sure I follow that Don. Date of Death was 8/22/05. Six months from then would be 2/22/06. Funds were sold 4/6/06. Am I missing a finger when I count my six months?

Ah ... well ... ten months in a year ... eight from fourteen ... in the words of Roseanne Roseannadanna ... "Never mind"

[RitaB]

Thanks for all the responses.

I have run into something else with this return:

Decedent had a rental house which the estate sold. Does the estate use FMV at DOD plus selling fees/other costs less accumulated depreciation as cost basis? This is what I'm getting from the instructions for Form 1041, p. 35. The Personal Rep thinks the estate doesn't have to recapture depreciation. I think that would be too good to be true, unless the rental ceased being a rental property before the moment of death?? (It didn't.)

The decedent was a lawyer without a will. The Personal Rep is his niece who is also a lawyer. This info is totally irrelevant except it might help you understand why I'm checking with you all so much. I'm a little intimidated I guess.

I am sorry to be asking so many questions, but I don't have the archives to search, and this is new to me. Thanks again!

[GeneInAlabama]

The decedent was a lawyer without a will.

Reminds me of the shoemaker's kids going barefoot. ;)

[OldJack]

Does the estate use FMV at DOD plus selling fees/other costs less accumulated depreciation as cost basis?

The estate use FMV at DOD plus selling fees/other costs after DOD. Depreciation is considered only for any allowed or allowable after DOD.

[RitaB]

The estate use FMV at DOD plus selling fees/other costs after DOD. Depreciation is considered only for any allowed or allowable after DOD.

Thanks, Old Jack. That makes perfect sense, since we're starting all over with the estate. New entity, and all that. Got it!