1041 ESTATE RETURN (HOME SALE) COST BASIS - multiple owners

[MNAP]

I am not an expert in estate returns. This one to me seems a tad tricky to me when it comes to the correct #'s to use because of multiple owners and dates.

The simplest way i can explain is a Father died in 1997. Left behind a house to one of his 3 sons. Shortly after the death of the father the one whom the house was left to added his two brothers to the deed. One of the 2 brothers added to deed after death of the father has lived in the property as his primary since 1998 up until his passing in April 2022. There was no will for the deceased brother that passed in 2022. The Original son that was left the house went to probate court and became the fiduciary of the deceased brother’s estate which included his share of the home.

My question is. Upon death of the brother in 2022 the home was deeded to son 1 son 2 and son 3. The ownership structure was a 1/3rd each. The remaining two brothers/owners of the property sold the home in Dec 2024 after going through proper legal channels. What is the brother that died in 2022 correct cost basis for his estate return?

Do I use the FMV in April 2022 (as my cost basis on the 1041 for the deceased brother) plus any capital improvements and selling expenses? Or does the basis somehow get stepped up to 2024 numbers.
Im confusing myself since there are a few people involved and multiple dates to consider.
Please let me know if you need any additional info or if i didn't explain enough. And thank you for any help!

[jeffmcpa2010]

you said "I am not an expert in estate returns".

I tend to decline engagements where I do not have the requisite knowledge and experience.

[MNAP]

wow very helpful comment thank you

it is for a very good client, sorry im trying help him out without sending elsewhere,  it is not that hard of a return im just double checking my thought process. not sure why you even needed to respond or have the time to even respond to a post just to be snarky 

[BobKamman]

The property was sold in 2024.  At the time, it was owned by the surviving two brothers, o0r did Brother #3 have other heirs, like surviving children?.  There is no return required for the brother who died in 2022.  The basis of his 1/3 share would be FMV in 2022.  Who received that share?  Brother #1?  Brother #2? Both of them in equal shares?   

[MNAP]

thank you bob. this is music to my ears, no return required

brother that died 2022 was single with no heirs

both remaining brothers are splitting the deceased brother share of the home sale equally.

fyi there was a check Issued @ closing to the "estate of deceased brother"  for his share which is why i initially thought he would need an estate return filed

[BobKamman]

Who cashed the check?  Just because no 2022 return is required, doesn't mean a 2024 return is not required if the estate was not administered.  Were there three 1099-S forms issued?  I just did a return for someone who received 20% of a sale because of a beneficiary deed with five siblings sharing.  Each received a 1099-S for 20% of the proceeds.  

[jeffmcpa2010]

My Apolgies, I wasn't trying to be snarky.

I just have found that I sleep better when I don't take on projects that are outside my comfort zone, and sometimes I do tell a client, I am not familiar enough with X to feel comfortable for either you or I, and if you will approve it I will ask a (professional colleague), to deal with this part of your situation for this year.

That way I can sleep well, keep most of the client's work, and be certain that the new complication is taken care of comprehensively.

[qbteachmt]

1997 the one son gets the step up in basis. The added brothers were gifted their shares from the one brother. That's your baseline.

"What is the brother that died in 2022 correct cost basis for his estate return?"

The gift in 1997. In 2022, if the two remaining brothers inherit the 1/3, they each get a step up of basis for 1/6 from the dead brother's 1997 gift.

"both remaining brothers are splitting the deceased brother share of the home sale equally."

But: Did they already own it? The title conveys ownership. When 3 people own the property, it is JTROS or it is TIC. As Tenants in Common, that 1/3 stands alone and passes on to the estate. As JTROS, the death of one person leaves 2 remaining owners.

[MNAP]

hi bob

i believe the check was deposited into the estate account ( bro 1 is fiduciary and in charge of bank account)

i was just made aware there was one blanket 1099-S issued from the attorney made out to 

estate of deceased brother, bro 1 & bro 2.

i did anticipate that a 2024 return needs to be filed for the deceased bro's estate, correct?

[MNAP]

thanks for the response jeff. i hear exactly what you are saying. sometimes hard to say no and to use the situation as a learning experience to open up other doors if needed and or be prepared for the next one. i never go in blind , i like to check, double check, triple check and then post on a forum lol.

[MNAP]

thanks qb

im starting to be sorry i said would take care of this for them lol , sounds like a cluster you know what for me

**But: Did they already own it? The title conveys ownership. When 3 people own the property, it is JTROS or it is TIC. As Tenants in Common, that 1/3 stands alone and passes on to the estate. As JTROS, the death of one person leaves 2 remaining owners.**

i dont have the full deed just yet to see how it was executed with either jtros or Tic or something else.  brother one inherited the home when dad passed in 1997. he then placed/gifted bro 2 and bro 3 on the deed equally shortly after.

[BobKamman]

It wouldn't have been JTWROS if separate checks were paid, including one to the estate of the deceased brother.  I'm not familiar with the term "fiduciary" used in some states instead of "conservator" (while alive) and "executor" or "personal representative" of the estate, when deceased.  But I wonder if the check was cashed by the brother who had authority while the brother was alive, but not once he had died.  

[MNAP]

yes the brother in charge is the executor. when the brother died in 2022 brother 1 went to the court and was granted authority of his estate. brother that died in 2022 had no will.