Estate Tax Losses

My father passed away on November 2. He had a non-retirement account consisting almost entirely of highly appreciated securities. Their values, of course, have gone down since them. The bulk of his assets were in retirement accounts, for which tax basis is irrelevant, and all the IRA's are of course passing to the named beneficiaries. The only other asset of any consequences is the house, which is left to me. The estate's expenses are mainly loans that one of my brothers and I made to pay the nursing home and funeral home, and state inheritance tax (the amount is will under the Federal limit).

If the estate sells the securities to pay the expenses, in theory the estate will have a tax loss, which will be of no use. If the securities were to be left to the heirs per the will, they could sell them and make use of the tax loss. But after the estate pays the expenses, there won't be any securities left.

FWIW the heirs are three children and one grandchild.

Any brilliant ideas on how to get use of the tax loss (assuming the market doesn't recover anytime soon)? Could the executor (probably me; that's a tiny bit complicated) settle debts "in-kind" - if someone loaned the estate $25,000, could I give that person $25,000 market value worth of securities, which might have a cost basis of $30,000 or $35,000?

Reply to
Roger Fitzsimmons
Loading thread data ...

You can distribute the assets and have the heirs pay the estate's expenses (you can distribute the obligation to pay too).

In the scenario you propose, you would actually be selling the stock, no matter what you call it. So the heirs might not get that deduction after all.

Reply to
Stuart O. Bronstein

Keep in mind that an estate can pass through any remaining unused capital losses to the beneficiaries on its final estate income tax return (Form 1041) via the final 1041 Schedules K-1 that are issued to the beneficiaries.

Reply to
Kobac

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.