Estate Home Sale Capital Gain Exclusion

[ChiHoang]

My client (George) owned a home that he lived in until he died in 2013.  The home was transferred to his estate in Feb, 2018.  The home was sold in Feb. 2018 under his estate.  My question is if his estate qualifies for $250,000 capital gain exclusion ?

From 2013 to 2018, his brother (Louis) lived in that home. The home was appraised at $725,000 in 2013 when he died.  His brother inherited that estate, the proceeds from the sale were transferred to the trust in 2019 with his brother (Louis) is beneficiary.

[George4Tacks · Accepted solution]

Try to keep things together. This seems to be a repeat of https://accountants-community.intuit.com/questions/1820473-home-sale-capital-gain-exclusion ?

$250,000 - NO George did not sell the house 

Sale of home by the Estate on a Form 1041 in 2018 would show sales price, minus expenses of sale, minus $725,000. If Louis was the sole beneficiary, why did it not just pass to Louis and Louis could sell it an use the $250,000? 

I am not sure you have all of the facts straight. 

[ChiHoang]

I gave you all the facts that I have.  George owned the home until he died in 2013.  His brother Louise lived in the home from 2013 until it was sold.  There was a long probate process and the home was put under George estate in 2018.  George estate sold the home in 2018.  Proceeds from sale of home was later put in Louise irrevocable trust in 2019.
So you said that since George did not sell the home, his estate could not use the $250,000 capital gain exclusion.  I thought that George and his estate are treated as one.  Thanks for your answer

[sjrcpa]

George was one taxpayer. Upon his death his estate was a taxpayer. The house became part of his estate upon his death - no matter how long probate took or when the title paperwork was done.

[IRonMaN]

That's sad, I didn't know George died.  I would have sent lutefisk for the funeral lunch if I had known.  

But how is he answering questions here if he is dead?  

[Just-Lisa-Now-]

"So you said that since George did not sell the home, his estate could not use the $250,000 capital gain exclusion.  I thought that George and his estate are treated as one.  Thanks for your answer"

The capital gain exclusion is for when someone lives there for 2 years out of the last 5...George died and didn't live there for 2 of the last 5.  His estate should get the stepped up basis to the FMV at the time of death though, right?

[sjrcpa]

Yes. But between the death in 2013 and sale in 2018 I guess there was appreciation.

[ChiHoang]

Yes, there was about $250,000 appreciation.   So in what case the estate could  use the capital gain exclusion ?  Is it within 5 years of the death ?

[TAXOH]

No exclusion

[IRonMaN]

"So in what case the estate could  use the capital gain exclusion ?"

Sell it sooner so that there isn't any gain from the date of death valuation.

[rbynaker]

There's a step-up in basis on date of death.  So there's likely already been a tax free gain from the appreciation while in the hands of the decedent.  Any appreciation above and beyond that is taxable income.