I just want to echo what everyone else has said here - you're absolutely right to be confused by that EIN letter! I dealt with this exact situation when my father passed away last year. The letter made it sound like filing Form 1041 was mandatory no matter what, but that's just not true. The $600 threshold is the key factor, and it only applies to income generated AFTER the date of death. So things like interest on bank accounts, dividends declared after death, rental income, etc. The actual assets themselves (bank balances, retirement accounts, cars, property values) don't count toward this threshold at all. In your case, if the estate has only earned minimal interest on that checking account and there are no other income sources, you're almost certainly well under the $600 limit. I'd recommend keeping track of exactly how much interest has been earned since your uncle's passing, but it sounds like you won't need to file. One thing that gave me peace of mind was getting a letter from my bank showing the exact interest earned during the estate period. It was only about $67 total, so we were clearly under the threshold. Having that documentation made me feel much more confident about not filing the 1041. Don't let that EIN letter stress you out - focus on the actual tax law, which is much clearer than that confusing form letter!

I'm dealing with a very similar situation right now with my mother's estate, and I completely understand your confusion! That EIN letter really does make it sound like you absolutely must file Form 1041, but as everyone has mentioned, the actual tax law is what matters - not the standard language in that letter. What helped me get clarity was actually reading through IRS Publication 559 (Survivors, Executors, and Administrators), which spells out the filing requirements pretty clearly. It confirms that Form 1041 is only required when the estate has gross income of $600 or more during the tax year, and this specifically refers to income earned AFTER the date of death. In my mom's case, we've had about $120 in interest earnings from her savings account since she passed, plus a small amount from a CD that matured after her death. Since we're still well under the $600 threshold, we won't be filing Form 1041 despite what that intimidating EIN letter suggested. The key thing I learned is to focus on tracking any NEW income generated by the estate assets, not the value of the assets themselves. Keep good records of bank statements showing interest earned, any dividend payments received after death, etc. That way you'll have documentation if you ever need to show you were under the threshold. It sounds like you're in great shape with just that checking account interest - you're almost certainly well under $600 and don't need to worry about filing!

Wait I'm confused about something basic. When you say "disregarded entity" does that mean you're dissolving the LLC? Or just changing how it's taxed? We have an LLC for liability protection but I don't want to lose that if we change the tax status.

Just wanted to add my experience here - my wife and I went through this exact same situation last year. We initially filed as a multi-member LLC but realized we wanted the simplicity of disregarded entity treatment for our small consulting business. Since we're in a non-community property state (Ohio), we ended up filing Form 8832 to elect disregarded entity status. The process was actually pretty straightforward once we understood what we needed to do. We kept our original EIN and just changed the tax classification. One thing I wish someone had told us earlier - make sure you file Form 8832 by the deadline if you want the election to be effective for the current tax year. We almost missed it and would have had to wait until the following year for the change to take effect. The simplified tax filing has been worth it for us. Instead of dealing with Form 1065 and K-1s, we just file Schedule C with our joint return. Much less paperwork and complexity for a small business like ours.

This has been an incredibly thorough discussion! As someone who went through a similar demolition/rebuild project last year, I want to emphasize something that hasn't been fully stressed: the timing of when you place your new condos "in service" for tax purposes. The IRS considers rental property placed in service when it's ready and available for rent, not when construction is complete. This means if you finish construction in November but don't have your first tenant until February, your depreciation for the new buildings starts in February. This timing can significantly impact your first-year depreciation deduction, especially with the mid-month convention rules. Also, don't overlook the potential for bonus depreciation on certain components of your new construction. While the building structure itself follows the standard 27.5-year schedule, items like appliances, carpeting, and some other personal property components may qualify for accelerated depreciation or even immediate expensing under Section 179. One final tip: consider having your CPA help you set up a separate depreciation schedule for each condo unit if you plan to sell them individually later. This makes the accounting much cleaner if you decide to convert from rental to sale partway through the project. The extra bookkeeping complexity upfront can save significant headaches down the road. The consensus here is absolutely right - demolition won't trigger recapture, but the devil is in the details for everything that comes after!

As someone who's been through a similar demolition and rebuild project, I want to add one more critical consideration that hasn't been fully addressed: the potential impact of local zoning and building code changes since your original property was built. When you demolish your existing structure, you'll likely need to comply with current building codes and zoning requirements for your new condos, which may be significantly different from what was required when your original building was constructed. This could affect everything from setback requirements to parking ratios to unit density limits. I learned this lesson when I demolished a 1980s duplex to build townhomes - the new fire safety requirements, accessibility standards, and stormwater management rules added about 15% to my construction costs compared to my original estimates. Some of these "code upgrade" costs may qualify for different tax treatment than standard construction costs, so it's worth discussing with your tax advisor. Also, regarding the timing issues Natasha mentioned - consider whether your local market has any seasonal rental patterns. In my area, units completed in late fall sat vacant until spring, which delayed my "placed in service" date by several months. If you have similar seasonality, you might want to plan your construction timeline to have units ready for your local peak rental season. The tax implications are complex enough without adding construction surprises to the mix. Getting a preliminary review from your local building department early in your planning can help you budget more accurately for both construction costs and their tax implications.

Is anyone else frustrated by how complicated our tax system makes everything? Like, going through a divorce isn't painful enough, now we gotta figure out all these capital gains rules and partial exemptions. Seems like the tax code is deliberately made confusing so regular people mess up and get penalized.

@Amina Bah - I went through almost the exact same situation two years ago. Owned our house for 20 months when we had to sell during divorce proceedings. The good news is that divorce absolutely qualifies you for the partial exemption under IRS rules. Here's what you need to know: You'll get a prorated portion of the $250K exclusion based on how long you owned and lived in the home. So if you sell in November 2024, you'll have owned it for about 15 months out of the required 24 months. That means you'd get 15/24 = 62.5% of the $250K exclusion, which is $156,250 per person. With only $13,500 in total profit, you'll likely owe zero capital gains tax even without the full exemption. But it's still worth understanding the rules and documenting everything properly. One important tip: Make sure your divorce agreement clearly states how the house sale proceeds and any tax liabilities will be handled. This saved me from headaches later when filing my return. You'll report this on Schedule D and Form 8949 when you file taxes. Keep all your closing documents and any records of home improvements you made - those increase your cost basis and reduce your taxable gain even further.

11 I'm in the same boat with Fidelity! Did anyone actually try calling Vanguard the old-fashioned way? What number did you use? The main customer service line has kept me on hold for ages.

I've been dealing with a similar issue with my Schwab account - turns out there can be several reasons why tax forms don't show up online even when they should. One thing that helped me was checking if there were any unresolved account issues or if I had any pending transactions that might be holding up form generation. Also, if you had any dividend reinvestments or automatic investments during the year, sometimes those can complicate the form processing timeline. Vanguard might be waiting for final cost basis adjustments before releasing your forms. I'd definitely recommend calling that tax support line someone mentioned - the regular customer service reps often don't have access to the same information as the tax document specialists. When you do call, have your account number ready and ask specifically about "form generation status" rather than just asking about missing forms.