Final 1041 for a trust

[olga-santoro-wes]

I have to file a 1041 for a trust that has only a house in it.  The house was put in the trust as part of a Will.  Now that the spouse has also passed, we  sold the house and want to distribute all the proceeds from the house sale and a small amount of dividends (the funds were invested for a few months) to the beneficiaries and terminate the trust. I have entered the dividends, and house sale but I am not sure how to enter the distribution of all the house proceeds in Proconnect.   The house sale is entered in dispositions but the K-1s are completely empty.  We paid taxes on the sale already in 2024 so the beneficiaries should not have to pay any tax.  Any suggestion is appreciated.

[IRonMaN]

"We paid taxes on the sale already in 2024 so the beneficiaries should not have to pay any tax."

I think that comment needs a little more explaining.  

[olga-santoro-wes]

Sorry I meant that the trust paid taxes in Q3 for the sales proceeds and dividends.

[IRonMaN]

But if it is the final 1041, the beneficiaries should be paying any potential tax liability instead of the trust.  Out of curiosity, Did you factor in the step up in basis for the house when computing any gain or loss if the house went into the trust because of a death?

[olga-santoro-wes]

The house went into the turst in 2017 when one of the spouses died and it was stepped up then.  The other spouse died in 2024 and that's when the house was sold.  The sale happened in June 2024 so we had the trust pay the taxes on the gain in September 2024 (Q3 payment). 

[IRonMaN]

But since it is the final year and the beneficiaries received the distribution of the proceeds, the gain is taxable to them, not the trust.

[sjrcpa]

The trust will show a refund on the final 1041.

Not a ProConnect user, but generally you have to tell software to distribute all income and capital gains and provide a distribution percent or dollar amount for each beneficiary. Sometimes just marking Final is not enough.

Do you have any Diagnostics about this?