Oddball Realty Trust - how to handle this?

[Catherine]

Realty Trust was established for the purpose of providing a client's parent with a home.  Trust was set up, EIN obtained, trust bought an apartment.  Parent, after approving the apartment pre-purchase, later said "I don't want to live there."  So the trust turned around and sold the thing.  Beneficiary is the (grown) son of the parent, and his wife.  Trustee is a cousin.

How on earth do I handle this?  The apartment was not "inventory" (it wasn't a flip), it was never put in service for the purpose it was bought, it never had a business purpose, and it was sold again about four months after the purchase.  Quick glance shows a sales price slightly higher than purchase price, but that will get all eaten up by realtor commissions etc.  

I'm assuming here I don't bother putting it in as a depreciable asset (only to recover depreciation instantly).  Just treat it as an asset sale and use purchase info as basis? Hide under my desk and whimper?  And assuming that after all costs etc there's a loss - that should stay in the trust, yes, and go poof! when they dissolve it, since otherwise it's just a personal loss, yes?  Since it was never intended as an investment...

 

[Margaret CPA in OH]

I vote for whimpering under the desk.  Holding head with aching brain.

[FDNY]

I go with keeping it simple as asset sale with purchase info as basis, nice and neat.  No hiding under desk, no time for this, you have work to do.

[jasdlm]

Is there a 1099-S?  If so, I would just report it as a short-term capital asset sale.  

[Catherine]

2 hours ago, jasdlm said:

Is there a 1099-S?  If so, I would just report it as a short-term capital asset sale.  

I don't have a 1099-S but I do have a closing document (which means the 1099-S is likely buried in someone's pile of papers, unrecognized).

[Catherine]

Short-term asset sale it is.

But what about the loss?  Stays in the trust to be lost, and does NOT transfer to beneficiaries?  Since it was never business, but personal?

[DANRVAN]

2 hours ago, Catherine said:

does NOT transfer to beneficiaries?

except for year of termination

[jasdlm]

18 hours ago, Catherine said:

Short-term asset sale it is.

But what about the loss?  Stays in the trust to be lost, and does NOT transfer to beneficiaries?  Since it was never business, but personal?

I was thinking about this when I responded the first time.  I feel that the loss should not transfer to beneficiaries/is not deductible because personal.  I would think the initial trust return would also be the final trust return.  Just my unresearched opinion.

[Catherine]

21 hours ago, DANRVAN said:

except for year of termination

Except for non-business purpose, making it personal (and therefore, not deductible).  I have no idea how to pass through a loss on a K-1 but also mark it as non-deductible.

[DANRVAN]

On 3/20/2021 at 2:31 PM, Catherine said:

  I have no idea how to pass through a loss on a K-1 but also mark it as non-deductible.

I misunderstood and picked up in the thread that you had decided to call it an investment and a capital loss.

I don't think there is a method or any reason to report a nondeductible loss on the K-1; or for that matter on the 1041

 

[DANRVAN]

Report sales price = basis ?

[Catherine]

I got it figured out.  Thanks to everyone!