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Inherited Property Sale

Level 2

I have a client that will inherit the proceeds from the sale of property.  I understand that this will be entered on their tax return.  The issue is the sale may have completed the end of the year but they will not get their proceeds till 2021.  Do they claim the income on 2020 return or 2021 when the proceeds are received.

I appreciate any answers that will clear this for me so I can pass on to my client.

Sandy

 

 

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14 Replies 14
Level 15

Is your client inheriting the property or the proceeds from the sale?  There is a difference between the two.

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Still an AllStar
Level 13

"the sale may have completed" in 2020?

May have? Either it did or it did not.

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Level 15
Was the sale completed by the living owner, or by the estate of a deceased owner of the proprety?

ex-AllStar
Level 2

The original owner is deceased the children of owner inherited the building but it is being sold.   Not sure if that is done yet.   I just need to know if they claim the proceeds when sale happens or when proceeds are received

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Level 13

"The original owner is deceased"

When, relative to this sale?

"the children of owner inherited the building"

Did they? Or, did the person who owned the building die, and this building is part of the estate of the deceased, and once the building is sold, the Funds are then part of the estate, and the funds are dispersed?

Or, the children really did inherit the building (in which case, when, relative to the death)/ And they own a building and all have agreed it should be sold and all will get their share of the proceeds?

You are not giving any perspective to the sequence of events. You seem focused on the distribution of Funds, but no one can answer until you help determine what happened and when and it what sequence, for purposes of tax reporting.

Here is an Example of how to tell the story to us:

The person died last week leaving a home that was wholly owned and had three adult children that will inherit the home and any remainder of the estate through a will. The building is considered to be part of the deceased estate that totals about $1million, so the sale, which is timely and at FMV, might mean that nothing will be reported on the tax returns. The inheritance is no longer "share of building" but "share of proceeds" with no gain to report.

 

Or, the children inherited the commercial building a few years ago, and now they have decided to sell that building.

 

See how the story matters?

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Level 15
Level 15

Im guessing your client will see a K-1 at some point for this event, once you have that you'll know how it all went down and what your client needs to report or not.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 2

Yes there will be a k1

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Level 11

Did your client inherit the home, which they then sold, or did the home go to the estate and was sold by the estate?

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Level 2

It was a business part of the decedent s estate

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Level 13

@kabbabkkg 

Your answer to this: "Do they claim the income on 2020 return or 2021 when the proceeds are received."

Is Yes and No or Maybe not at all. We have asked many questions, so it should be clear to you we don't have enough info from you. Let's go back to this statement: "I understand that this will be entered on their tax return."

Why do you think this will be needed? Tell us your determination based on the facts and circumstances.

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"Level Up" is a gaming function, not a real life function.
Level 2

The only info i have is the family inherited a bakery that blonged to the father it has been closed since he died and they are selling.  My clients question was if they sell in 2020 but do not receive the proceeds till 2021 they will get a k1 which has been stated by the lawyers but my thinking is they will put on 2020 return i just need this verified that my thought is right before i get with my client

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Level 15
Level 15
They need to ask the attorney or tax preparer thats doing the trust/estate return what to expect.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 11

@Just-Lisa-Now-  "They need to ask the attorney or tax preparer thats doing the trust/estate return what to expect."

The first question might be, is the estate going to use the calendar year or a fiscal year for filing its 1041.  

 

Level 15

The income will be reported on 2020. How much income? 

 

 

 
 

 

 


ex-AllStar