Estate vs Estate

Today TaxMama® hears from Kelly in the TaxQuips Forum, who is confused. Let me summarize. “Kelly’s father died, leaving the house to the children. But the value is less than $5 million, so no estate tax return needs to be filed. Why do they need to file anything to report the sale of the property?”

Ask TaxMama

 Hi Kelly,

I know how confusing this can be. But, believe it or not, you’re talking about two different things. 

The return that does not need to be prepared is a Form 706 because the value of the estate was less than $5 million. 

But when you sell a property, a tax return must be filed by someone. In this case, it would be the decedent’s estate – a Form 1041. 

Yes, I know it’s confusing. They are both called ‘estate returns’. Wouldn’t it be nice if there were names that were CLEARLY different? Alas, that’s not the case.  

So…to report the SALE, you DO need to file, and issue K-1s. In this case, it will probably be an advantage to the heirs, because they’ll probably get some losses to deduct due to the commissions and other costs of selling the house.  Get a tax pro to do this.

 And remember, you can find answers to all kinds of questions about inheritances, and other tax and business issues, free. Where? Where else? At

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