Filing 1041 Form for Estate - Confused About Estate's LLC Ownership
My mom passed away in February 2023 and I'm the executor of her estate and her only heir. I don't believe she had any income in the few weeks she was alive in 2023. From what I understand, I need to file the 1041 this tax season. I am the beneficiary on her retirement accounts, stocks, and checking accounts, so those have bypassed probate and transferred to me directly. I also sold her vehicle and one of her rental properties, but there wasn't any profit made on these sales - do I need to include this information on the 1041? Where I'm really getting stuck is that she remains listed as a partner in an LLC for the entire year (this is still going through probate). The LLC's accounting team prepared a Schedule K-1 with her portion of the business income assigned to her estate's EIN for tax purposes (since it's set up as a pass-through entity). Is this the only thing I need to report on the 1041? Please help me figure this out! I just recently learned how to handle my own personal taxes lol
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Malik Jackson
The 1041 is for reporting income that the estate earned after your mom's death. Since her stocks, IRA, and bank accounts passed to you as beneficiary, those don't go on the 1041. For the vehicles and property you sold, if there was truly no gain (selling price was equal to or less than the fair market value at date of death), then you don't need to report those on the 1041 either. For the LLC interest, yes - you absolutely need to report the K-1 income on the 1041. This is because the LLC interest is still considered an asset of the estate until probate completes. The estate is responsible for paying tax on its share of LLC income during the probate period. Make sure you include any expenses the estate incurred that are deductible (executor fees, attorney fees, accounting fees, etc.) as these can offset the income reported on the K-1.
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Isabella Oliveira
•What happens to the LLC ownership after probate is completed? Will it get a stepped-up basis? And do the vehicles and property get a stepped-up basis too or is there something different going on there? I'm in a similar situation and trying to understand.
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Malik Jackson
•The LLC ownership interest would receive a stepped-up basis as of the date of death, which means the estate's basis in the LLC interest becomes the fair market value on the date the owner died. After probate completes and the LLC interest transfers to the heir, they inherit this stepped-up basis. For the vehicles and property, they also receive a stepped-up basis to fair market value as of the date of death. This is why there's typically no gain to report when selling these assets shortly after someone passes - the new basis is close to the current market value. If the sales price is higher than the stepped-up basis, only that difference would be taxable gain.
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Ravi Patel
I went through this exact situation last year with my father's estate and the Schedule K-1 from his business interests was a complete headache! I finally found relief using https://taxr.ai which saved me so much time and stress. I uploaded the K-1 and some other estate documents, and their AI analyzed everything and explained exactly what needed to go on the 1041 and what didn't. Their system walked me through the whole process of handling the pass-through income from the LLC and even identified some deductions I had completely missed that reduced the estate's tax burden. It was like having a tax professional explain everything in simple English instead of tax code gibberish.
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Freya Andersen
•Does this taxr.ai thing work for more complicated estates? My situation includes multiple rental properties and a 30% stake in an S-Corp that's still in probate. The accountant quoted me $3k just to handle the 1041.
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Omar Zaki
•I'm skeptical about AI tax tools. How accurate is it really for something as complicated as estate taxes? I'd hate to rely on something automated and then get audited.
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Ravi Patel
•It absolutely works for complicated estates. I had a similar situation with multiple assets including partial business ownership, and the system handled it perfectly. It identified all the special allocations from the business interests and explained which deductions applied specifically to the estate administration. Regarding accuracy, I was initially skeptical too. But the system is actually trained on thousands of real tax scenarios and IRS guidance. It gives detailed explanations with references to tax code sections, and you can even see the confidence level for each recommendation. I had my accountant review the final return and he was impressed by how thorough it was - only made two minor adjustments on a very complex return.
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Omar Zaki
Just wanted to follow up that I actually tried taxr.ai after my skeptical comment about it. I was genuinely surprised by how helpful it was for my mother's estate taxes. It correctly identified that I needed to file both a 1041 for the estate AND report K-1 pass-through income from her LLC ownership. The system even flagged that I was eligible for income distribution deductions I had no idea about, which ended up saving nearly $4,200 in estate taxes. The step-by-step guidance for handling the LLC interest while still in probate was really clear, and I didn't have to pay thousands to an accountant. Honestly wish I'd known about this tool months ago before spending so many hours researching estate tax rules.
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CosmicCrusader
If you're dealing with the IRS about any estate tax questions or need clarification on the LLC/K-1 situation, good luck reaching anyone by phone! I spent 3 weeks trying to get through to someone at the IRS about my brother's estate with similar LLC issues. Finally used https://claimyr.com and their system got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was super helpful and explained exactly how to report the LLC income on the 1041 while the business interest was still in probate. She even emailed me some estate tax publications that specifically addressed pass-through entities. Saved me from making a costly mistake on the K-1 reporting.
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Chloe Robinson
•How does this service actually work? I've been calling the IRS for weeks about my late husband's estate and can never get through. Just endless hold times until they disconnect me.
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Diego Flores
•Yeah right. No way this actually works. The IRS is practically unreachable these days. They're probably just taking your money and you're still waiting on hold like everyone else.
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CosmicCrusader
•The service uses a combination of automated systems and call routing technology to navigate the IRS phone tree and secure your place in line. When they reach an agent, they call you and connect you directly to that agent - so you don't waste hours on hold. It's definitely not a scam. I was connected to an actual IRS estate tax specialist who answered all my specific questions about how to handle the K-1 income on my brother's estate 1041. The agent even referenced my case number from previous communications, so it was definitely a legitimate IRS employee. I was skeptical at first too, but was desperate after wasting so many hours trying to get through on my own.
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Diego Flores
I have to eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it for help with my mother's estate tax situation with an LLC involved. Within 35 minutes, I was speaking with an IRS estate tax specialist who walked me through exactly how to report the LLC income on the 1041. The agent confirmed that yes, the K-1 income flows to the 1041 while the LLC interest remains in probate, and helped me understand how to properly document the estate's administrative expenses to offset some of that income. She even sent me to a specific IRS publication with examples almost identical to my situation. Saved me from potentially filing incorrectly and dealing with penalties later. Definitely worth it when you're stuck with complex estate tax questions.
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Anastasia Kozlov
Don't forget to check if your state requires a state-level estate tax return too! I was so focused on the federal 1041 and the LLC K-1 issue that I completely missed filing the state return for my uncle's estate. Got hit with penalties that were totally avoidable.
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LunarLegend
•Do you know if there's a way to easily determine which states require their own estate tax returns? I'm in Florida but my mom owned property in two other states as well.
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Anastasia Kozlov
•Florida doesn't have a state estate tax, so you're good there. But if your mom owned property in other states, you may need to file non-resident estate tax returns in those states depending on which ones they are. Currently, only 12 states plus DC have estate taxes: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. If the properties are in any of these, you'll likely need to file. Some states have exemption thresholds much lower than the federal one, so even smaller estates might owe state estate taxes. I'd recommend checking the tax department websites for each state where property was owned just to be safe.
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Sean Flanagan
When filing the 1041 for an estate with LLC income, does anyone know which tax software handles this best? I've been using TurboTax for my personal returns but not sure if it's the right choice for estate returns with K-1s from business interests.
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Zara Mirza
•I used TaxAct for my father's estate last year and it handled the K-1 from his business partnership really well. It was much cheaper than TurboTax and had specific guidance for estate returns. They have a section specifically for fiduciary returns that walks you through the 1041 step by step.
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