Q: Are items sold during probate for cash considered income for the estate?
I sold a vehicle and a mobile home (she owned the home but not the land so the mobile home is personal property not real property) owned by the decedent. The money was placed in the estate account. Is this considered income for the estate which would then require a 1041 estate tax IRS filing? Or is this just a change of form of the assets?
A: I would say there is only income to the extent an asset sold for more than the inventoried value.
A:
This would be a good question for your tax preparer. While it does not appear as income, it could be a capital gain or loss depending on the value of the assets in the Inventory and Appraisal. And, depending on the exact facts of your probate, it may be adventurous to pass on the gain or loss to the heirs/beneficiaries.
Why? Usually an individual pays a lower capital gains rate than an estate or trust due to how the tax brackets are structured. And with a capital loss, an individual can use a capital loss to offset taxable income.
There are, of course, rules and limitations, so I recommend you check with a tax preparer who is well versed in preparing fiduciary returns.
A: Gain or loss for the vehicle and mobile home likely depends on the “basis” for those assets. Basis is the fair market value of the items at the date of death. Since there is an estate account opened, I assume a probate was opened. If the property was disclosed on the Inventory and Appraisal (I&A) and appraised by the probate referee that appraisal should be your "basis." You need to confer with your tax advisor for advice.
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