Inherited Home & Form 1041

[KMACK]

My client inherited a home from his mother when she passed away in 2019.  He then transferred the home into his name and still owns it.  Does the transfer of the home from his mother's estate to him need to be reported as a distribution from the estate on form 1041?

[sjrcpa · Accepted solution]

Yes, probably. It's a distribution of principal, not income.

[KMACK]

Thank you for the quick reply.  That is what I was thinking, but I wanted a second opinion.

[BobKamman]

It's probably a distribution of income, for tax accounting purpose -- that is, determining distributable net income (DNI).  The distinction between principal and income is more of a trust accounting concept.  It's probably a second-tier distribution, shown on Line 10, Schedule B of the 1041, but we really don't have enough information here to know.   For example, 

"A specific bequest is not considered a taxable distribution to the beneficiary if it is a distribution of a specific property or a specific sum of money. These distributions do not carry out income to the beneficiary and they generate no income distribution deduction to the estate or trust."

For further pitfalls and loopholes, see

http://www.cchwebsites.com/preview/36/369ce1d22cf8247c13bff0428abed604/content/client/369ce1d22cf824...