Tax Filing Sale of House

[joesxm3]

My stepdad sold his house last year for $215,000. So even without basis he is under the $250,000 exclusion limit. We passed all the questions and did not receive a 1099-S.

Mom died in August. So she had social security of less than $800 for 8 months.

Stepdad had SS of less than $1700 for 12 months.

The only other income is about $2000 savings account interest and less than $1000 pension for the year.

Filing jointly it seems that half the SS plus income is low enough that SS is not taxed.

They have not filed for years.

My worry is whether there is some requirement to file to report the house sale which has no taxable LTCG.

It seems to me that their taxable income is less than the standard deduction and they owe $0.00 tax. So it is not necessary to file. Is this correct.

Also. Stepdad died in February 2024. He received two months of SS plus 4 or 5 months of interest. So basically business as usual owing $0.00 tax.

I realize that I have to file an estate tax return and a 1041 income tax return for the estate.

Is there anything spacial causing a need to file a $0.00 tax return for the year of death?

Once I get my computer running I will put 2023 into Turbo Tax to see if any special form gets generated for the house sale. But I figured to check here first.

Thanks in advance.

 

[joesxm3]

I managed to get Turbo Tax running on the new computer. It downloaded a state update. I guess I better double check my state return that I filed a couple weeks ago. I think it will be fine.

In any case.

I entered all of the SS, pension and interest info and did the sale of house section.

Turbo tax said that even though it is married filing jointly, my mother did not live in the house for 24 of the past 60 months so only $250,000 exclusion which is fine.

At the end of the section due to no 1099-S and under exclusion, TT said that it would not even mention the sale of the house on the tax form unless I checked a special box to override.

So I guess the question about reporting the house sale is answered. And I am probably ok not filing the $0.00 tax form for 2023 unless there is something special because my mother died during the year.

I suppose I could file the $0.00 form. But why go looking for trouble.

I will probably engage a CPA for the estate forms and file a late 2023 if they say that I have to.

 

[jebmke]

Normally if there is no taxable gain on a primary residence and no 1099-S it is not reported. That is the guidance we get at TaxAide.

 

[gauss]

joesxm3 - I am sorry for your loss.

When I have sold houses, there was often a 1099-S prepared and included as part of the closing documents by the closing firm. It was never sent out separately like a financial institution does.

As such, it was never really clear to me whether they didn't report it to the IRS. As such, I have always reported the gain on Schedule D / 8949 with the appropriate code and adjustment to net out the gain when the primary residence exclusion applied.

You may want to file their final 1040 and mark them as deceased, if nothing else to help prevent identify theft in the future with regards to the IRS.

You would only need to file a Federal 1041 (estate income tax) if the estate received more than $600 of income in a year after the person died. (ie mutual funds spinning off dividend & capital gain distributions but before you could change the owner / tax id on the funds ).

You would only need to file a Federal 706 (estate tax) if the value of all the assets in the estate was on the order of ten million dollars.

It is possible that your state may require these due to more restrictive rules.

-gauss

 

[joesxm3]

Thanks.

Since I already entered everything into turbo tax I may as well file the return to report the deaths as you suggest. I think my TT comes with up to 5 federal submissions but will charge me $25 to submit state, which seems worth it just to get it over with.

Even though the estate is barely over $200,000 my state requires the estate tax form to be filled out (not sure about filed) so they can calculate the state probate court fee.

There will likely be over $600 interest waiting for the creditor time period.

Thanks for the prompt responses.