I am filing 2011 taxes for my deceased grandmother that passed away April 2011. I will list what I think I need to complete, and if someone can review and tell me if I'm doing it correctly, would be very helpful.
1) Filing Individual Form 1040 for two tax forms with my grandmothers SSN. SSA Income and interest received while she was alive (Jan-Apr 2011)
2) Filing Form 1041 for my grandmothers trust with the EIN created April 2011 after she passed away.
We sold her home which was in trust in July 2011. My parents inherited it April 2011 when she passed away which was also the cost basis for the sale of the home. The sale of the home in July, was less than the cost basis/value of property on day of death when parents inherited it. Will I be able to show a loss on Form 1041 (decendent trust), Form 1040 (deceased grandmothers individual filing) or Form 1040 (parents tax return, beneficiaries of trust)?
Also, will I be able to carry the loss to taxes for the last 2 years and going forward the next 20 years, to my parents taxes since they are the beneficiaries. Any advice would be greatly appreciated. Aloha!
Also, forgot to mention that my grandmothers estate was less than $3 million, so my family shouldn't be subject to inheritance tax.
Last edited by BethAnnE; 03-02-2012 at 10:34 PM..
Reason: adding information that i forgot to add earlier
“1) Filing Individual Form 1040 for two tax forms with my grandmothers SSN. SSA Income and interest received while she was alive (Jan-Apr 2011)”----->Correct.You need to report her income that she earned while she was alive on her final return, 1040. Estates and trusts cannot use Form 1040EZ. Individuals cannot use Form 1041.The process of filing a final income tax return for an individual is not dissimilar and is required by the IRS. The will, or a court, may appoint an executor to manage the estate. When there is an executor, the executor must file the 1041 form. According to the IRS, the executor must file this form each year throughout the entire period in which the executor has authorization to manage the estate, even if the executor transfers all of the assets in the estate to the beneficiaries. Some states have a state version of Form 1041. State eligibility requirements vary; the fiduciary who must file the federal Form 1041 is also responsible for filing any state Form 1041. Income received after death is taxable on Form 1041, not the final 1040, even if reported on a 1099INT/1099R/or 1099B or etc. under your GM's social security number. Interest income, dividend income, and capital gain distributions from mutual funds are often credited at the end of the month. Investment income deposited after death is reported on Form 1041 not Form 1040.
“2) Filing Form 1041 for my grandmothers trust with the EIN created April 2011 after she passed away”-----> For a living trust account, you will continue to use your Social Security number as the account tax identification number. For an estate account, the executor will have to obtain a new tax identification number from the IRS.
“We sold her home which was in trust in July 2011. My parents inherited it April 2011 when she passed away which was also the cost basis for the sale of the home. The sale of the home in July, was less than the cost basis/value of property on day of death when parents inherited it. Will I be able to show a loss on Form 1041 (decendent trust), Form 1040 (deceased grandmothers individual filing) or Form 1040 (parents tax return, beneficiaries of trust)?”---->I guess on 1040 parents’ tax return, NOT on 1041/ 1040(deceased GM’s return) as the LTCL was occurred after her death.
“Also, will I be able to carry the loss to taxes for the last 2 years and going forward the next 20 years, to my parents taxes since they are the beneficiaries.”--->No, I don’t think so; certain income tax losses do carry from an estate on termination to the beneficiaries. Generally, the decedent's carryovers may be used on the final return (regardless of whether it is a joint return), subject to the carryover rules. Any unused carryover of the decedent's not taken on the final return is lost. NOL or capital loss carryovers sustained by the decedent before death cannot be deducted on the estate income tax return or on an heir's income tax return. If an individual dies with a capital loss, capital loss carryover, NOL or NOL carryover, a joint return might be filed in the year of death to enable use of more of the loss or carryover against joint income. Alternatively, if a married decedent had filed separately in prior years, the executor may wish to amend open prior-year returns to file jointly and deduct the NOL. If a couple filed separate returns before the year of death and file jointly in the year of death, any NOL carryovers of the past separate returns can be carried forward combined and deducted against the final return joint income.
“Also, forgot to mention that my grandmothers estate was less than $3 million, so my family shouldn't be subject to inheritance tax.”----->In most cases, no; an estate tax is based on the overall value of the deceased person's estate, not on who inherits the estate. Contrast this with an Inheritance Tax, which is a tax imposed by a state government upon the privilege of an heir to receive assets from an estate or trust. In other words, an inheritance tax is based on who receives the deceased person's property and, in some states, how much they receive. Tennessee imposes a state death tax that is based on the value of property the deceased person's estate to his or her heirs but refers to it as an "Inheritance Tax" in its state statutes. In either case, the applicable estate or inheritance tax is paid from the deceased person's assets. The estates of each and every U.S. citizen are subject to the federal estate tax, but not every estate actually has to pay the tax. Because the Internal Revenue Code gives each U.S. citizen a "coupon" that can be applied against their estate tax bill. In 2011 the "coupon" was $5,000,000.Thus, in 2011 if the value of the net estate meaning the gross estate reduced by allowable estate tax credits and deductions does not exceed $5 mil., then the estate will pass to you, the heirs, free from federal estate taxes. Seven states currently collect a state inheritance tax, which is completely different from an estate tax since it is assessed against who actually receives the deceased person's property, not on the overall value of the deceased person's property. Maryland and New Jersey are the only two states that collect both state estate taxes and state inheritance taxes.For example, in the case of Connecticut, its exemption increased to $3,500,000.This mean s that the amount of the inherited net estate is less than $3.5 mil, then no inheritance(death/state estate tax) tax.
“Do I file Form 709 Gift Tax Return with my parents Form 1040 or the Family Trust's Form 1041?”--->It was a gift not inheritance fromyour father.No Form709;as far as I know, you are a donee and your father is a donor.Then, If your father gives a gift /money to you, he may need to fill out the IRS Form 709. As long as he gives a single recipient $13,000 or less in gifts over the course of the year ,$26,000 for a couple, he does not have to pay taxes on his giving. If he gives more, however, he must fill out Form 709 to inform the IRS of his giving. Your father won't have to pay taxes on this gift unless his lifetime giving exceeds $1.13,000 million( I assume that you are the only his donee), but the IRS requires him to report his giving using Form 709 at the same time he files his 1040.
Great. Thanks for the help. Do I file Form 709 Gift Tax Return with my parents Form 1040 or the Family Trust's Form 1041?
Note: assuming this is all related to your granmothers passing away and your parents recieving assets as beneficiaries of her will , it is NOT a gift from anyone to anyone else, it is an inheritance. Therefore no 709 is required.
I am very thankful to all here who share some notes about filling taxes for a deceased person and give me great advise how to follow all the govt. rules and regulations!! My grandfather was also passed away few days back and i have less knowledge about filling taxes so this post really help me!! Executor of a Will
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