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Reporting stock sale reported to decedent

MollyA
Level 1

The executor of my client's estate had the brokerage sell her stocks and disburse the proceeds directly to the four beneficiaries without first transferring them to an estate account.  The sale therefore was reported on my client's 1099B.  It seems the substance of the transaction is that it should be reported to her estate with a stepped-up basis and the gain/loss reported to the beneficiaries on Schedules K-1;  however, I would expect the IRS' matching system to look for the transactions on her personal return and generate a nastygram when these sales are absent.  The sale amounts and theoretical capital gains based on the date my client obtained the stocks are significant but negligible using valuations as of date of death.  Reporting the sale on her 1040 using a stepped-up basis might sidestep the nastygram but may not be an equitable reporting of the tax liability vs. reporting the gains to the beneficiaries.  Thoughts?  

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2 Comments 2
George4Tacks
Level 15

This is why IRS has a special column on the 8949 https://proconnect.intuit.com/community/form-1099-b/help/generating-form-8949-column-f-for-various-c...

 


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IRonMaN
Level 15

Report it how it is supposed to be reported - on the 1041.  In case someone might happen to read it, you could always attach notes to the 1040 and 1041 explaining how the 1099B is reported.  Slim chance someone will read it, but there is always the chance.


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