Entering a sale of home for Form 1041 in Lacerte

Entering a sale of home in the Fiduciary module differs from an individual (1040) return. To begin, you'll need to determine whether to report any gain or loss from the sale.

Table of contents:

Determining how to report a gain or loss from sale of property

When managing an estate, the personal representative may need to sell some or all of the estate’s assets. This can happen to:

• Pay debts or administrative expenses, or
• Distribute assets fairly among beneficiaries.

Even though the personal representative has the legal authority to sell property, ownership (title) might legally belong to one or more beneficiaries—especially for real estate.

Before reporting any gain or loss from a sale, check local law to determine who is considered the legal owner: the estate or the beneficiaries.

Sale of a decedent’s residence

If the estate is the legal owner of the decedent’s home and sells it during administration, the tax treatment depends on how the property is used or held:

• If the estate sells the home to realize its value:
  The property is treated as a capital asset held for investment. Any profit or loss is considered a capital gain or loss, and a loss may be deductible.
  • This applies even if the decedent used the home as a personal residence and it was never rented out.
• If the home isn’t held for business or investment purposes:
  If the estate allows a beneficiary to live in the home rent-free and later decides to sell it—without converting it to an investment or business asset—any gain is still a capital gain, but any loss can’t be deducted.

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To report a gain or loss from sale on a fiduciary return:

1. Go to Screen 22, Dispositions.
2. Enter the Description of Property.
3. Enter the Date Acquired.
4. Enter the Date Sold.
5. Enter the Sales Price.
6. Enter the Cost Basis.
7. Complete any other applicable entries.

There's no guidance on how to report a Section 121 exclusion on Form 1041. If you determine Section 121 is allowed on your fiduciary return, you must manually enter the exclusion using one of the following two methods:

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To claim Section 121 without generating a statement:

1. Go to Screen 22, Dispositions
2. Enter the information about the sale:
   1. Enter the Description of Property
   2. Enter the Date Acquired
   3. Enter the Date Sold
   4. Enter the Sales Price
   5. Enter the Cost Basis
   6. Complete any other applicable entries.
3. Select Add from the left navigation panel.
4. Enter "Section 121" in the Description of Property.
5. Enter a 2 in, 1=short term, 2=long term [O] under the Dispositions section.
6. Scroll down to the Overrides section.
7. Enter the exclusion amount as a negative in Total gain (loss) [O].

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To claim Section 121 with a supporting statement:

1. Go to Screen 22, Dispositions.
2. Enter the information about the sale:
   1. Enter the Description of Property
   2. Enter the Date Acquired
   3. Enter the Date Sold
   4. Enter the Sales Price
   5. Enter the Cost Basis
   6. Complete any other applicable entries.
3. Scroll down to the Overrides section.
4. Hold down Ctrl+ E in, Total gain (loss) [O].
5. Select Statement under the Print as section.
6. Enter the Description and full amount of gain in the Amount column.
7. Enter the Description for the Section 121 exclusion with the amount of exclusion entered as a negative in the Amount column.

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Additional resources

For information on gain or loss from sale of property, see Publication 559.