My mother passed away on 6.30.06. She did not earn enoght money to file a trax return th least 5 years of her life. Her entire estate consisted of her home which sold on 6.11.07 for $43,000.

As the personal rep. of her estate I deposited the proceeds from the sale of her home ($43,000) in a bank account which I had to get a tax ID. Ten days laster I received a letter from the IRS saying I had to file a 1041 for Estae Income Tax which, I guess, is a different thing from an estate return.

My question is do I have to complete a 1041 return when the estate, her home, did not generate any income and that is all there is to the estate?

Unfortunately, you DO have to file the Form 1041 to properly document the sale of the house.

I suspect that there will be no capital gains (as the cost of the sale will probably eat up any profit from the stepped-up Fair Market Value of the hose), so no tax will be due.

Any reasonably experienced tax pro can prepare this return for you. DO NOT DO IT YOURSELF, as the IRS will be looking at it and will be looking for possible errors.