Discussion Archives:Estate - Sale of decedents personal assets

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Discussion Forum Index --> Advanced Tax Questions --> Estate - Sale of decedents personal assets


Discussion Forum Index --> Tax Questions --> Estate - Sale of decedents personal assets

Japplegateea (talk|edits) said:

2 March 2009
I have reviewed various discussions related to the sale of a decedent's personal residence at loss, and whether that loss is deductible. The general consensus seems to be, yes, if it was not used as a residence by any beneficiary/trustee from the date of death to the date of sale.

Any thoughts on the deductibility of a loss on the decedents other assets (such as autos and personal effects). For basis purposes, I would assume that the basis of the assets was their sale price (sale occured close to the date of death). In this situation, a professional was hired to conduct an estate sale, in exchange, this person received commissions on the sale of the various assets. My thought is that the commission is a selling expense. If that is the case, it would seem reasonable to capitalize the commissions to cost, or reduce the proceeds, causing a loss on the sale of the asset. Assuming that none of the assets were used by any of the beneficiaries/trustees, would these assets be capital in nature (rather than personal)? And, if they were capital in nature, would the loss be deductible to the trust?

I feel like this is a pretty aggressive question to ask, but I won't feel right about not taking the loss unless I find an answer.

Best regards,

Kevinh5 (talk|edits) said:

2 March 2009
1) What trust? You wrote that this was an estate. What trustee?

2) A capital loss will offset capital gains, and then sit dormant until the final year when it is distributed out to the beneficiaries. The assets are capital assets in the hands of the estate (other than the exception for the residence) if not used as personal assets by any beneficiary.

3) Could the selling expenses be considered admin expenses? Perhaps, but make sure they aren't wasted if you use them as such - they are wasted in a non-final year if there isn't enough income to offset them. If not admin expenses, they surely add to basis.

Japplegateea (talk|edits) said:

2 March 2009
1) The trust is the revocable trust of the decedent. The trust is not filing as an estate because a timely election was not made to do so (issue with a non-consenting/adverse beneficiary and resignation of prior accountant at an awkward time).

2) I agree.

3) I am not sure that the selling expenses could be considered administration expenses since there is not an election to include the trust in the estate. In any event, the trust will not be final until this year and deductions exceed income, so the expenses would be wasted if they were deducted.

Taxea (talk|edits) said:

2 March 2009
" I would assume that the basis of the assets was their sale price (sale occured close to the date of death"

Why would the sale of assets of a live person be part of the estate? Wouldn't the basis of assets sold while still alive be the basis held by the owner before sale? If after death the basis is the FMV at time of death, not sale price.

In either case isn't the cost of the sale added to the basis? taxea

Japplegateea (talk|edits) said:

2 March 2009
The assets were sold soon after the death of the decedent. The items were not appraised at DOD, but were sold soon thereafter, so the sales price should be reflective the the "fair value" at time of death. I would agree that the cost of sale is added to the sale price.

My question is, would it be appropriate (in the eyes of the service) to deduct the loss on the sale of these assets. These were personal assets in the hands of the decedent (as was the house), but it seems to me they are capital in the hands of the trust (assuming they have not been used as personal assets by the trustee or any of the beneficiaries).

Taxea (talk|edits) said:

3 March 2009
I haven't researched it in order to answer but, I thought that a revokable trust revoked at time of death which would make it the estate of the owner, wouldn't it? If this is the case, it seems to me that, the FMV at time of death would be the basis and the cost of sale would be part of the basis of the heir or trustee/personal rep of the asset.

taxea

Kevinh5 (talk|edits) said:

3 March 2009
unless a ยง645 election is made, the trust is not part of the estate and files it's own return
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