[WSBAPT] WA estate tax deduction question

[Philip N. Jones]

Let's assume that the house is sold on the open market a few months after the date of death, through the services of a professional real estate broker.  That sale usually determines the fair market value of the residence, and it is not unreasonable to use that sale price as the fair market value on the estate tax return and as the post-mortem income tax basis of the residence.  But how are the broker's commission, the title insurance premium, and related closing costs handled for tax purposes?  The expenses of sale are usually not deductible on an estate tax return under §2053(a)(2) or against ordinary income for fiduciary income tax purposes.  Instead, those expenses are offsets against the selling price to reduce gain or to increase loss.  Scull v. Commissioner, T.C. Memo 1994-211, n. 14.  But because the sale price is also the basis, offsetting those closing costs will produce a capital loss.
Phil Jones
Portland

Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 - office
(503) 853-1482 - cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Sara D. Longley
Sent: Thursday, March 4, 2021 1:46 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] WA estate tax deduction question

Hello listmates,

I'm preparing a WA estate tax return, and of course the PR would like to deduct expenses relating to getting the real estate ready for sale.  Taxes and utilities are deductible since they go to maintaining the asset, but the instructions seem to disallow expenses of selling (Realtor fees, etc) unless "the sale is necessary to pay the decedent's debts, the expenses of administration, or taxes, or to preserve the estate or carry out distribution."

There are two beneficiaries and the value of the real estate is less than half of the estate value, so the sale is not technically necessary to divide the estate, nor are the sale proceeds needed to cover debts, taxes, or other expenses.

Is there any reasonable basis on which to claim the expenses relating to the real estate sale are allowable deductions from the estate?

Many thanks in advance for your sage advice!

Best,
Sara Longley

Sara D. Longley
Ivy Law Group, PLLC
1734 NW Market Street
Phone: (206) 706-2909
Fax: (206) 834-6044
sara at ivylawgroup.com<mailto:sara at ivylawgroup.com>
Pronouns: she, her, hers


[cid:image001.jpg at 01D71107.0E26B520]


-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20210304/df99ef50/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 3152 bytes
Desc: image001.jpg
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20210304/df99ef50/image001.jpg>