USA Selling expenses house 1041

[Raymond Lyle]

I am working on a 1041 and I am confused on how to handle selling expenses of a house sold after death by the estate. It was sold shortly after death so there would have be no appreciation. According to the IRS, “Selling expenses (such as broker fees, survey fees, or transfer steps) are deductible if the sale is necessary in order to pay debts, expenses, administration or taxes, to preserve the estate, or to effect distribution.” The estate has sufficient assets to pay expenses, but would the selling expenses still be deductible since they effected distribution?



Also below is a sample settlement statement. Would the Sales price and Cost be $307,803.34 and the expenses I can deduct be the Brokers commission of $20,220? I can not find anything in the code or a pub that specifically says what I can do. Is there an IRC or pub that discusses this circumstance?



Thank you

 

[kirby]

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[MoralesTax]

Assuming it is a qualified personal residence, I would report the sale and disallow the resulting capital loss due to selling expenses. This would be a conservative approach and you can certainly make an argument against it. The IRS states that now capital loss is recognizable unless the decedent's personal resident is "converted [for] an income-producing purpose".

Assuming it is NOT a qualified personal residence, I would report the sale and allow the resulting capital loss, as long as the sale is NOT to a beneficiary.

See IRS advice on this: https://www.irs.gov/pub/irs-sca/1998-012.pdf