Home Sale Worksheet Software Error

[GeorgiaRe Tired]

CLIENT BACKGROUND: 2023 Married Filing Joint; 2024 husband died 4/24, house sold 12/18/24, wife died 12/20/24.

When completing the form home sales worksheet, question 16: 

16  Check if you are a widower who has not remarried and this home sale was within 2 years of your spouses death and the spouse qualified for the exclusion immediately before their death. ( I checked this box)

There is an error for checking this box.  The notation says "Widower should not be checked when the filing status is married filing joint"

I think this error is wrong unless spouse 2 isn't a widower which I think she is!  You do file married filing joint if both spouses died in the same year.

IRS: Married filing jointly if you’re married or if your spouse passed away during the year.

[George4Tacks]

"16  Check if you are a widower who has not remarried and this home sale was within 2 years of your spouses death and the spouse qualified for the exclusion immediately before their death. ( I checked this box)"

Why did you check the box? You are filing a joint tax return for two people that both died in the same year. The widower is not filing a return.

Did you take into account step up in basis on death of the husband? Possibly the sale of home does not technically even need to be reported. Was there a 1099-S?

Yes she is a widow. She is not filing as a widow. She and her husband are filing, but with her death the signature on the return will not be either of their signatures. Who's gonna sign this return? 

[GeorgiaRe Tired]

The date she sold the house after her husband died, it was only her house, she was alive and indeed a widower.  12/31/24 She was not alive.  I guess that depends on interpretation.

Husband never owed the house at all.  Sorry, should have clarified.  No step up.

Widows elects Married Filing Jointly.  There's no box for Widower.

For the year someone dies, you just write DECEASED and the return has an executor or personal representative sign it.  

I guess I can leave 16 blank but it seems she is a widower when the house is sold. 

[IRonMaN · Accepted solution]

If the tax liability doesn't change whether she is a widow or whether she is reporting the sale as a joint filer - no harm, no foul - ignore the box.  Sometimes when filing a tax return you have to go with substance over form.

[BobKamman]

The only purpose of that question is to allow the $500K exclusion, rather than the $250K.  You don't need to do that if both deaths occur in the year of sale and you are filing a joint return.  And, it must have been a very expensive house if even with stepped-up basis you have such a big gain.  

[BobKamman]

But then, I'm not sure what you mean by this:  "2023 Married Filing Joint; 2024 husband died 4/24 . . .wife died 12/20/24".  What does 2023 have to do with it?  Did husband die in April 2024, or on April 24 of 2023?

[IRonMaN]

I think we were just pointing out that they have filed jointly in the past.

[BobKamman]

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@IRonMaN wrote:

I think we were just pointing out that they have filed jointly in the past.

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Which of course is irrelevant.  Like answering that Question 16.  

[IRonMaN]

It's better to give too much information than not enough as is the case for most posts here.

[Skylane]

Assuming house was jointly owned and wife inherits from husband,  then they file MFJ final return reporting income through 12/20/24 (including sale of house). If all other conditions are met they eligible for 500k exclusion. She should also be eligible for stepped up basis for the inherited property. Q16 does not apply.

income after wife’s DOD would be reported on f1041. 

[GeorgiaRe Tired]

You can own a house for a very long time if you are old with a very low basis and not be extremely expensive.  This isn't the first time on this site I've fielded a snarky comment about the wealth of a client.  It's unbecoming and unprofessional.  

I already said that the female didn't inherit the house from her deceased husband.  She owned the house.  There's no step-up. 

[GeorgiaRe Tired]

It was titled client background, 2023 filing status wasn't terribly relevant. Sorry.  

I didn't give exact death of husband. It wasn't necessary.  It was April 2024.  All that was needed was to know it was before the wife's death, the date of house sales and the same year of the sale which changes the capital gains benefit to 500K rather than 250K.

Thanks

[Accountant-Man]

Like Bob said, that box isn't needed since the sale occurred in the same tax year as the H's death.

[Accountant-Man]

As long as H lived in the house for at least 24 months, she can exclude up to 500K on the joint return. He doesn't need to have owned it.

The return can still be filed joint since both were alive during 2024.