May 23, 2014
Authored by: Kathy Sherby and Stephanie Moll
The Internal Revenue Service is now asking for more information from Estates and Trusts in reporting capital gains. In completing Schedule D to the Form 1041, a Form 8949, Sales and Other Dispositions of Capital Assets, will now need to be completed by fiduciaries with the totals from Form 8949 then included on Schedule D. This is the same Form that has been used in prior years on individuals’ Form 1040.
Form 8949 is used to separate out:
1. those sales or exchanges for which the correct basis was reported to the IRS on a Form 1099,
2. those sales or exchanges for which the basis was not reported to the IRS on Form 1099, and
3. those sales or exchanges for which no Form 1099 was issued.
A separate Form 8949 is to be completed for each of these categories for short term and for long term transactions.
Frequently, the basis for sales reported on the return for an estate or for an interim trust (the continuation of a previously revocable trust after the settlor’s death and before funding of any follow up trusts or outright distributions) will not be correctly reported on the 1099 issued to the estate or trust. These transactions with assets that received a basis adjustment on death will now be reported on separate Forms 8949 attached to Schedule D of the Form 1041 to report the correct basis of each asset.