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Level 4
March 15, 2025
Question

Sale of home in a non-grantor trust

  • March 15, 2025
  • 1 reply
  • 15 views

On the form 1041, do you represent the sale of a home on Form 4797 or on the Home Sale worksheet? The home has sat vacant and has not been used for business.  I have seen threads discussing both ways and I have not found clear guidance reading through the IRS form instructions.  By definition, once a house is inside a trust how is the asset characterized as a personal home or a business?  There has been no depreciation so if I use the 4797 I was concerned it may trigger an audit flag because of no depreciation.  However, when using the Home Sale Worksheet if must answer the question whether the home was used strictly for personal residence and if you say no, it automatically says yes to the next question that it was used for investment.  The house sat vacant, so not used for investment nor personal residence.  The net tax effect is not different but just wondering which is the right way.  Thank you in advance for any coaching on how to view the house in the non-grantor trust.

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1 reply

sjrcpa
Level 15
March 15, 2025

do you represent the sale of a home on Form 4797 or on the Home Sale worksheet? 

In this situation neither. Treat as investment property. Enter on Sch D/Form 8949 as if it was a stock sale. For ProSeries I think you go to the 1099-B worksheet. Flag where appropriate to say it was not reported on 1099-B

The more I know the more I don’t know.
Mel7777Author
Level 4
March 15, 2025

Thank you SJRCPA!

Your tag line is great - the more we know, the more we don't know.  Would you share with me how to find your source for this?  I am trying to learn more about this and would love to read it.  Thank you so very much!  

BobKamman
Level 15
March 15, 2025

@Mel7777 Yes, but I wish she would put it in italics or bold face and/or a different font so it wouldn't always look like part of the answer. 

As far as the question is concerned, it's like asking if IRS prefers for you to use a Mac or a Dell to run the program.  Worksheets are meant to help fill out the IRS form, not become part of the form.  That particular worksheet has nothing to do with a 1041 because trusts don't have homes.  

Saying 114 of the Gospel of Thomas