1099-S Reporting on MFS Return

My husband and wife elderly clients both died in 2018. I have always prepared MFJ returns for them in the past, but the representatives for both estates want a MFS return prepared for 2018 because different people will be entitled to the refunds. (This was a second marriage for both.) They also sold their house in 2018 before they died with a gain of less than $250,000. The 1099-S was issued in the husband's name for the full amount of the sale price. If I put the full amount on the husband's MFS return (so that there will be no matching problem with the IRS), there will be no tax due since the gain is less than $250,000. I'm not sure if this is the proper way to handle this situation and if the husband's estate might complain that the entire amount is on his return (even though there is no tax consequence.) Do you know how this should properly be handled?

I think your approach is solid and should minimize potential issues with the beneficiaries about the refund amount going to the proper family.

I believe you will have to complete a 1310 for each return and I assume the representative will be different for each return. Hopefully the beneficiaries have already established separate bank accounts for each decedent .

You will have to ensure each return is consistent with either taking the standard deduction or itemizing .

Hopefully the total refund for the 2 separate MFS returns will be about the same as if they filed a married filing joint return. The total refund could even be higher if there was a disproportionate amount of medical expenses for one spouse

If both of them owned the home, then each return should report the proportionate share of the proceeds and basis, despite the 1099-S being in husband's name.

There will be no matching problem whichever way you go . On page 3 of the 1099 S instructions under the heading spouse it states "Only one form 1099 S showing EITHER of them (meaning name of spouse ) as the transferor is required .

I would report the sale on each return. Show it on the husband's return at full sale price, then adjust basis to report only 1/2 the gain, even though in this case it does not really matter.