Account question - Closing an estate with the IRS

[LakeCleElum]

I have a very simple tax question. I'm traveling all month and all tax offices I've been to have a sign saying closed, seeing clients by app't only. Haven't had one return my call yet. On hold on the phone 45 minutes to IRS only to be told they don't give advice on "tax estates". So, I turn to my brother and sister Pelicans:

My mother passed in Nov 2016. I am the executor tasked with liquidating assets and distribute to five siblings. I filed my mother's 2016 taxes in a timely manner; reporting here death and a new EIN number on those forms.

One of the last things on my plate was to sell my mothers home in Sequim, WA. It closed on Oct. 31 and my siblings want their share, but the estate attorney suggests I talk to an account about taxes owed. So, 2 questions:

1) Can I file taxes now or have to wait till the end of year 2017?
2) Am I correct in assuming no taxes owed in 2017? There was no income and no capital gain owed on the home.

I had the house appraised at the time of death. We agreed to sell it to a grandson of her's for $29,000 less than that price (no RE commission, no work orders, he/family had been living in the house the last year). My mother had the home as her primary residence in 2 of the last 5 years.......

So, my siblings want their share of the sale as soon as possible. I'm thinking the title company will send me a tax form in early 2018 and I have to file taxes under her EIN number, even if none owed.

Thanks for any guidance....

[wdfifteen]

I would think "As soon as possible" means as soon as the taxes and expenses are calculated and paid.

[ossiblue]

First, unless your mother's entire estate--value of house plus all else--exceeded $5.4million, you have no estate tax obligation to the IRS. Additionally, Washington state does not have a state inheritance tax, so there would be no tax liability there either.

The only likely tax obligation would be the capital gains tax, but that was likely eliminated by the sale of the house at a price lower than the "stepped up" value at the time of her passing. The only caveat to this, in your situation, is how was the stepped up value determined? Is the value given by a private appraiser valid, or did you need the state assessor to make the determination?

I don't know the answer to that. When filing her final taxes for the estate, the value given for the house should be the value at the time of her passing, and would be used by the IRS to determine if any capital gains was generated by the sale. You posted that you filed her taxes for 20016, but I assume that was not the Estate Tax filing that requires form 706. If that's the case, you can file the Estate Tax as soon as it's generated, no need to wait to the end of the year.

Not an attorney, so it would be good to run this by an accountant familiar with tax law.

And, as wdfifteen posted, wait until all expenses have been paid from the estate (including attorney/accountant fees) before distributing the assets. There still may be property tax liabilities that need to be settled as well.

[LakeCleElum]

Thanks much Ossi: One the advice of the estate Attorney, I had a realtor do a formal, written market value of the house as of the date of passing. It is comprehensive, includes comps/photo's etc. Attorney said that is all required. County Assessor values it for less, but we sold for less yet.

I had been reading about form 706. Will download one and get started. Thanks. Much appreciated. Will still talk with an accountant when I can find one.......

[jhynesrockmtn]

I'm a bit surprised your estate attorney isn't able to provide the proper guidance here. Finding a decent tax accountant shouldn't be hard. Tax offices that are closed off season like H&R Block are not who you want to deal with here. Searching the google for CPA in your town would be a good start.