Sales commission for estate sale deductible on 1041?

[David]

Are sales commissions paid for selling items at an estate sale deductible on form 1041?

I'm thinking they may not be since the income from the sale is not taxable or reported on form 1041. However, it is an expense for the estate.

I don't see this type of commission specifically mentioned in the instructions.

Thanks.

[grandmabee]

Why is the sale of estate assets not reported on the 1041 ?

[David]

Usually these are items that are not sold above their purchase price - furniture, cars, clothing, household items, etc.

Is my thinking not correct on this?

[Bart]

I thought all estate assets got a step up or down to market value on date of death.  Selling price should establish market value if close enough to date of death.

[David]

That too. That's why I thought no sales needs to be reported. But since that is non taxable income, can the estate deduct the commission paid for the estate sale?

[Gail in Virginia]

I don't think so.  It is isn't really non-taxable income; it is a non-deductible personal loss.  The basis in the personal property sold is the date of death value plus the commission paid on the sale, and the income is the sale price.  Since the sale price is the same as the date of death value (or generally pretty close, if they are close in time and the items were valued properly), this almost always results in a loss equal to approximately the commission on the sale.  Since this is personal property, the loss is not deductible.  At least, that is my reasoning for how this works.

[Roberts]

JMO but the commission should be deducted on the 706 and not the 1041. Having said that, I know people who deduct the commission as an administrative expense.

[Catherine]

However, if the sale was mandated by the estate, would that not be an administrative cost?  It's not like heirs can hold a year of yard sales every weekend.  If the instructions in the will are to liquidate any personal items the heirs do not want, then I'd say there is a good case to be made for admin expense.

[SaraEA]

If items, including real estate, are sold to pay the debts of the decedent, the sales expenses are considered administrative expenses.  If they are just sold because the heirs don't want them and the estate is liquidating them to get cash to distribute, they are deductible subject to the 2% AGI rule.  If there is only one beneficiary, the sale was to benefit that one person and the costs are not deductible at all.  You can, however, add them to basis.

Now that the 2% category is gone for individuals in 2018 and beyond, I wonder if it will be gone for estates too.