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Entering a sale of home for Form 1041 in ProConnect Tax

by ProConnect Tax Online• Updated 7 months ago

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

During the administration of the estate, the personal representative may find it necessary or desirable to sell all or part of the estate's assets to pay debts and expenses of administration. Or, the representative may need to make proper distributions of the assets to the beneficiaries.

  • While the personal representative may have the legal authority to dispose of the property, title to it might be vested (given a legal interest in the property) in one or more of the beneficiaries. This is usually true of real property.
    • To determine whether any gain or loss must be reported by the estate or by the beneficiaries, consult local law to determine the legal owner.
  • Sale of decedent's residence: If the estate is the legal owner of a decedent's residence and the personal representative sells it in the course of administration, the tax treatment of gain or loss depends on how the estate holds or uses the former residence.
    • If the estate intends to realize the value of the house through sale: The residence is a capital asset held for investment, and gain or loss is capital gain or loss (which may be deductible).
      • Even if the house was the decedent's personal residence and it wasn't rented out, the above rule applies.
    • If the house isn't held for business or investment use: If the estate intends to let a beneficiary live in the residence rent-free and then distribute it to the beneficiary to live in, but then later decides to sell the residence without first converting it to business or investment use, any gain is capital gain, but a loss isn't deductible.

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

  1. Go to Input Return
  2. Select the Income, then Dispositions, then the Schedule D/4797/etc section.
  3. Enter the Description of property.
  4. Enter the Date acquired.
  5. Enter the Date sold.
  6. Enter the Sales price.
  7. Enter the Cost basis.
  8. 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:

To claim Section 121 without generating a statement:

  1. Select the Income, then Dispositions, then the Schedule D/4797/etc section.
  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. Click the [+] tab to add a second asset.
  4. Enter "Section 121" in the Description of property.
  5. Enter a 2 in, 1=short term, 2=long term [Override]
  6. Select Less Common Scenarios from the top tabs.
  7. Scroll down to the Overrides section.
  8. Enter the exclusion amount as a negative in Total gain (loss) [Override].

To claim Section 121 with a supporting statement:

  1. Select the Income, then Dispositions, then the Schedule D/4797/etc section.
  2. Enter the information about the sale:
    • Enter the Description of property
    • Enter the Date acquired
    • Enter the Date sold
    • Enter the Sales price
    • Enter the Cost basis
  3. Complete any other applicable entries.
  4. Select Less Common Scenarios from the top tabs.
  5. Scroll down to the Overrides section.
  6. Click into the Total gain (loss) [Override] field and click the + to open a statement.
  7. Enter the Description and full amount of gain in the Amount column.
  8. Enter the Description for the Section 121 exclusion with the amount of exclusion entered as a negative in the Amount column.

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

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