Filing estate tax return for multiple years? (pay, taxes, income)

[OnOurWayHome]

My mom passed in 2013 in NY. We had nine months to file an estate tax return and had to pay taxes as her estate was over the threshold for NY. The largest asset, her home, had not yet been sold at the time so we estimated based on the offers we were receiving.

The house has since sold for about 50K less than we estimated, and there was nominal interest on other investments that was received after we filed the initial return. I understand that we have to file another final return. What surprised me is that the accountant doesn't think we will see a refund based on the reduced home price. If we had estimated more accurately, we would have owed less tax on the initial return, so I'm not clear on why we wouldn't be entitled to a refund. Does anyone have experience in this area? I'm also amazed that in cases where probate and estate settlements stretch out for years, the executor has to keep filing an estate return every year - what a hassle!

[synchronicity]

Originally Posted by OnOurWayHome

My mom passed in 2013 in NY. We had nine months to file an estate tax return and had to pay taxes as her estate was over the threshold for NY. The largest asset, her home, had not yet been sold at the time so we estimated based on the offers we were receiving.

The house has since sold for about 50K less than we estimated, and there was nominal interest on other investments that was received after we filed the initial return. I understand that we have to file another final return. What surprised me is that the accountant doesn't think we will see a refund based on the reduced home price. If we had estimated more accurately, we would have owed less tax on the initial return, so I'm not clear on why we wouldn't be entitled to a refund. Does anyone have experience in this area? I'm also amazed that in cases where probate and estate settlements stretch out for years, the executor has to keep filing an estate return every year - what a hassle!

You may be confusing an ESTATE tax return with an INCOME tax return for an estate. Beyond that, there aren't enough facts to really help you. Interest income has nothing to do with an ESTATE TAX return. As for the house selling for less than estimated, federal estate taxation allows for one to value the estate at the LOWER of the fair market value (FMV) at death or at 6 months after death, known as the "alternate valuation date". Note that ALL assets must be valued at one date or the other, you can't pick and choose.

I'd also note that for income tax purposes, you get a step up in basis on all the assets to their value at death (or the alternate valuation date if applicable).

Regarding filing returns, there will only be one ESTATE tax return filed (although it could possibly be amended). However, there will be INCOME tax returns filed every year for the estate "where probate and estate settlements stretch out for years".

All of the above is general information. Circular 230 disclaimer - I could be Totally Wrong, only rely on a Real Attorney/Advisor, the IRS won't give a darn what you read on the intermawebz.

[Bradmilano]

The argument you have to make is that the home converted to an investment property eligible for a loss between sale price and FMV established on the return. If it's a personal asset then the loss is not deductible.

I agree that getting a refund on the nys et-6 where you pay tax based on the value of the estate probably won't happen.

If the estate income tax return recognizes the loss the distribute the proceeds and close the estate ASAP. Take the loss on schedule d and use it to offset cap gains.