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About Dan Lively
Expertise
I can answer questions regarding personal, corporate, partnership, estate and gift taxes. These questions can relate to problems, compliance, or planning. I am well versed in IRS audit and collection procedures and can respond to questions you may have in this area as well.

Experience
I am an attorney in the state of CA that is certified as a tax specialist by the State Bar of California Board of Legal Specialization. I am also a Certified Public Accountant, and have an LL.M in Taxation. Further, I am an adjunct professor of taxation at Whittier College of Law.

Organizations
Orange County Bar Association American Bar Association Orange Coast Estate Planning Counsel American Association of Attorney/CPA's California Bar Association

Publications
Apartment Journal Taxing Advice California CPA Journal

Education/Credentials
LL.M (Taxation) - Chapman University College of Law JD (Law) - Western State University College of Law BS (Accounting) - California State University, Northridge

Awards and Honors
• American Jurisprudence Award – Federal Taxation • American Jurisprudence Award – Wills • American Jurisprudence Award – Estate Taxation • Cal Jur Award – Partnership Tax • Cal Jur Award – Corporate Tax • Cal Jur Award – Tax Procedure

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Tax Law (Questions About Taxes) - estate sale of real estae

Expert: Dan Lively - 11/3/2009

Question
In advance thanks Dan for taking time to answer my question.

My mother passed away in January 09, in which I am the personal rep for the estate. In Nov. 08 we converted her residence to a rental property as she could not live in the house due to health issue. It remained rented until Aug 09 in which it was sold at a loss. All proceeds are split 50 50 between myself and my sister. I am planning on closing the estate this year (2009). On which forms do I show this loss on 1041.
It appears I would use 4797 and not schedule D. But then how do I transfer this to the K-1 and from the K-1 where does it go on the 1040 return? Can the entire loss be deducted this year (which I believe is correct) or am I and my sister subject to the 3,000 limitation. I assume we can add selling costs and commissions to the basis.
Thanks so much for your help.

Answer
Unfortunately, you cannot distribute a capital loss on a trust tax return. So it never makes it to the K-1. Capital gains and losses, while subject to the same preferential rates as on personal tax returns, are generally allocated to principal and the trust or estate, not the beneficiaries, pays the capital gains income tax, or carryover the losses.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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