Watch out for state estate or inheritance taxes too! Everyone's focused on federal, but depending on where your father-in-law lived, there might be state taxes to deal with that have much lower exemptions than federal. Connecticut, for example, has a lower estate tax exemption than the federal one.

This is such a complex situation, and I really appreciate everyone sharing their experiences and insights. As someone who works in estate planning, I want to emphasize a few key points that haven't been fully addressed: First, timing is absolutely critical here. The 9-month deadline for filing Form 706 (with possible 6-month extension) isn't just about taxes owed - it's about preserving options. Even if the marital deduction eliminates all estate tax, filing preserves the portability election AND starts the statute of limitations running on IRS challenges to asset valuations. Second, the trust structure really does determine everything. If this was a revocable trust, the assets are included in the estate for tax purposes but may still qualify for the marital deduction depending on how the trust is structured post-death. If it's an irrevocable trust created during lifetime, you need to determine if it was a completed gift (requiring gift tax analysis) or if your father-in-law retained powers that kept it in his estate. Third, don't overlook the generation-skipping transfer tax implications if the trust has provisions for grandchildren or other skip persons. This can create additional filing requirements and potential taxes even when estate tax is avoided through the marital deduction. I'd strongly recommend getting professional help given the $14.5 million estate size - the cost of proper planning and compliance is minimal compared to potential penalties or missed opportunities.

Has anyone compared the capital gains tax calculators from Fidelity or Vanguard? I found they tend to be more accurate than general financial website calculators because they're designed specifically for investment scenarios. The public websites often oversimplify to appeal to a broader audience.

I've run into this exact same issue before! The key difference is likely how each calculator handles the "stacking" of your income. Capital gains get added on top of your ordinary income to determine which tax bracket applies. With your $76,000 ordinary income and $97,500 capital gain, your total taxable income would be $173,500. This puts your entire capital gain in the 15% bracket for 2025 (assuming single filing status). So you'd owe approximately 15% of $97,500 = $14,625 in federal capital gains tax, which matches the Forbes calculator. The SmartAsset calculator showing $5,700 might be incorrectly applying a blended rate or not properly accounting for how capital gains push you into higher brackets. Always double-check that any calculator you use specifically asks for your total ordinary income and properly explains how it's calculating the bracket placement. For peace of mind with such a large transaction, I'd recommend getting a second opinion from a tax professional or using your brokerage's tax center tools, which tend to be more accurate for investment-specific calculations.

I went through almost the exact same situation last year - online gambling losses, PayPal transactions, and a CP2000 notice that had me panicking. Here's what I learned after working with a CPA who specializes in gambling taxes: The IRS often gets confused by PayPal transactions because they can look like business income when they're really just gambling deposits/withdrawals. In my case, PayPal had issued 1099-K forms that made my gambling activity appear to be business transactions, which triggered the CP2000. My CPA helped me respond with a detailed letter explaining that: 1. All transactions were recreational gambling, not business activity 2. I had no profit motive beyond hoping to win (like any recreational gambler) 3. I didn't maintain the kind of detailed business records a professional would 4. I had significant net losses over the period in question We included all my win/loss statements, PayPal transaction history, and a spreadsheet clearly showing total deposits, withdrawals, and net losses. The key was demonstrating that this was clearly recreational activity despite the high dollar volume. The IRS accepted our response and dropped the Schedule C requirement entirely. I ended up owing much less than originally proposed because we could properly claim my gambling losses as itemized deductions on Schedule A. Don't let them push you into professional gambler status if you're not one - it could end up costing you more in self-employment taxes than you'd save.

I'm dealing with a very similar situation right now - got hit with a CP2000 after gambling online through DraftKings and FanDuel, all funded through PayPal. The IRS is claiming I owe taxes on what looks like "business income" but was really just my gambling deposits and withdrawals. Reading through everyone's responses here has been incredibly helpful. I think I was about to make a huge mistake by filing Schedule C just because the IRS suggested it. Based on what everyone is saying, it sounds like I need to push back and clarify that this was recreational gambling, not a business. My situation: Lost about $8,000 overall in 2022 across multiple platforms, but had lots of PayPal transactions that probably triggered 1099-K forms. I definitely wasn't treating this as a business - just got carried away during football season and made some poor decisions. Has anyone had success getting the IRS to reverse a CP2000 notice entirely once they understood the transactions were gambling losses? Or do you typically still end up owing something even after clarifying the recreational vs professional status? Also wondering if anyone knows how long I have to respond to the CP2000 before they just assess the full amount they're proposing?

Has anyone used a specific tax software that handles partnership losses well? I'm using TurboTax and the way it handles my K-1 from our small LLC seems confusing.

Based on your situation, you absolutely must report the K-1 losses on your personal return - there's no option to skip this. The IRS receives copies of all K-1s and their systems will flag your return if the partnership information doesn't match. However, your concern about the hobby loss rule is understandable after three years of losses. The key is demonstrating profit motive through your business activities. Since you mentioned keeping meticulous records, make sure you also document: business plans showing how you intend to become profitable, marketing efforts, time spent on the business, any changes you've made to improve operations, and evidence that you're treating it as a real business (separate bank accounts, business licenses, etc.). The good news is that $2,000 annual losses probably won't trigger an audit on their own, especially if you have W-2 income and file jointly. Just make sure you can demonstrate the nine factors under Section 183 if ever questioned. Your documentation sounds like you're already on the right track.

I went through this exact same frustration when I started my freelance marketing business! The tax rules around personal vs. business expenses can feel so arbitrary, especially when you can clearly see how household help would directly increase your earning potential. After working with a tax professional, I learned that the IRS is pretty strict about the "ordinary and necessary" test - the expense has to be something that's typical for businesses in your industry AND directly related to business operations, not just helpful for freeing up your time. What actually worked for me was taking a two-pronged approach: First, I made sure I was maximizing every single legitimate business deduction (home office, business meals, professional development, etc.) to free up more cash flow. Second, I restructured part of my household help as a legitimate business assistant role - someone who handles my client scheduling, follows up on invoices, manages my business social media, and yes, also helps with some household tasks. I only deduct the portion of their time spent on actual business functions, and I keep detailed time logs to document the split. It's not a perfect solution, but it helps offset some of the costs while staying completely compliant with tax law. Sometimes you have to get creative within the boundaries rather than trying to push past them.

I completely understand your frustration - this is one of those situations where the tax code feels like it's working against entrepreneurs trying to grow their businesses! Unfortunately, the IRS is pretty rigid about the distinction between personal and business expenses. Even though hiring household help would clearly enable you to work more billable hours, they view cooking, cleaning, and childcare as personal living expenses that everyone has regardless of business ownership. The key test is whether the expense is "ordinary and necessary" for your specific type of business - not just helpful for giving you more time. A personal assistant performing household tasks wouldn't meet this standard, even with the logical connection to increased revenue. That said, there are some legitimate workarounds worth exploring: You could hire someone who splits their time between actual business functions (scheduling clients, managing business correspondence, handling invoices) and household tasks, only deducting the business portion. Or focus on maximizing other legitimate deductions (home office, business meals when working late, professional development) to free up cash flow for the household help. I know it's not the answer you were hoping for, but staying within the tax code boundaries is crucial for avoiding audit issues down the road. Sometimes the indirect approach ends up being more effective anyway!