How do I handle a trust rental property that is no longer being rented but not sold until next year?

[david3]

I'm preparing a 1041 for a trust that has rental property that hasn't been rented since August 2021. The property was sold in March 2022.

I know that I can enter the August 2021 date as the disposition date on the Asset Entry Worksheet and not include a sales price. However, the instructions say that the asset won't transfer to 2022.

If the asset doesn't transfer to 2022 then how will PS report the sale of the property on the 2022 tax return? Also, there are suspended losses on the property.

How will the sale and the suspended losses be handled when preparing the 2022 1041 in PS?

Thank you.

[Just-Lisa-Now- · Accepted solution]

as long as you dont check Box H on the Sch E worksheet, it will still be there for 2022 along with teh suspended losses. You may have to reenter the asset on the 2022 return if you want to use the asset entry worksheet for the sale, rather than making the entries manually for the sale.

[david3]

Thank you, Lisa.

[david3]

I am now preparing the 2022 1041. The trustee kept the trust open until 12/31/22.

Like your post said, the Sch E and suspended loss carryforward were both transferred from the 2021 tax return to the 2022 tax return.

However, the asset entry and depreciation schedule were not carried forward since I entered 8/20/21 as the disposal date (date the property was no longer rented) with no sale price.

When setting up the asset entry in the 2022 1041, I get an error message when I enter the 8/20/21 disposal date. 

How do I set up the asset entry so that it shows depreciation stopped on 8/20/21 and so it can be used to report the gain from sale of the property? I can't put 1/1/22 as the disposal date because that will report depreciation for one day.

If I'm not supposed to set up the asset entry but manually enter the sale, then how do I do that and make sure the suspended loss gets accounted for? Do I leave Sch E as is since it shows the suspended loss? Or do I delete Sch E, since there was no rental, and manually enter the suspended loss somewhere?

Thank you.

[david3]

Since the 2021 asset entry disposal date was not allowed to be reported in the 2022 tax return, I gathered that I need to manually complete F 4797.

I've done that and the trust has a capital gain from the sale of the rental property. 

I know that a loss in the trust final year can be allocated to the beneficiaries. However, I'm reading conflicting information on whether a capital gain reported on the trust final year can be allocated to the beneficiaries.

Can the capital gain from the trust final year be allocated to the beneficiaries?

Thank you.

[sjrcpa]

On a final return everything-gain, loss, excess deductions on termination-gets allocated to the beneficiaries.

[david3]

Thanks for your help.