Form 1041 preparation

Forum|Forum|5 months ago
January 18, 2026
2 replies
13 views

I am looking to prepare the 1041 for a residential house in trust wit 2 daughters as beneficiaries.

Client got ID # for trust return as they were going to sell the house out of the Trust. Then one of the 2 beneficiaries changed their mind about selling and bought her sisters half from the irrevocable trust.

That day the proceeds were then transferred from escrow to a trust bank account. House titled to one sister received the cash from the trust bank account. The only asset in the Trust was the home and no income on the house while in trust.

Best way to report a non taxable transaction and file final return. Just complete schedule D with in and out?

Thank you in advance.

ProConnect Tax

Best answer by IRonMaN

There was no income yet I was concerned about the cash transaction to sell the 50% to sister. I do have a substitute 1099S for this transaction yet not sure if they sent it in or just gave as proof of transaction

It's a pretty good assumption that it was filed. Just prepare the 1041 with a schedule D and you can safely move on to your next return. 😀

IRonMaN

Level 15

You don't say how the trust came into being. If the parent recently died and the house went into the trust upon death, then it sounds like the trust sold half the house to one beneficiary. If the price was equal to or less than market value, you have a sale on schedule D with sales price equal to basis.

Slava Ukraini!

D

DAPAuthor

Level 3

Yes the mother passed away and an appraisal was done date of death of $575,000.00 and sister paid the trust for half so she could solely own home. No profit as used the appraisal for value. so sales price did equal basis

BobKamman

Level 15

Trick question. You can't call it a nontaxable transaction. The trust sold half the property, and that should be reported on a Form 1041 (at least, if there was a gain; we don't know the basis.) The escrow agent has probably reported it using the trust's EIN. Since it's a final return, the gain flows through to both beneficiaries.

George4Tacks

Level 15

@BobKamman could it be a loss? Sell at step up basis for that value, but escrow expenses?

Answers are easy. Questions are hard!

George4Tacks

Level 15

@BobKamman Could there be a loss? Sell at basis, but expenses of sale? Maybe the market value dropped since date of death.

Answers are easy. Questions are hard!

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