Will estate close in 2005? If so sale will K-1 to heirs.
Heirs will pay tax on the sale gain at the much lower long
term capital gain rate.Estate would pay much higher rate if
income kept on Form 1041.

Robert A Moore, EA

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"tobe" <ybotkaSPM[at]cinci.rr.com> wrote:

- quote -

I just went through this same issue. You apparently have
the option - either the estate can pay pay the tax, or it
can pass the income and tax on to the heirs. In my case the
tax was a lot less for the heirs than the estate, so we did
it that way.

Stu

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SNIP
"Quote: Am I correct in stating that the Estate will pay the
capital gains tax from the sale of this property (IRS Form
1041)? One/third of each share of the house sale proceeds
will be distributed to the heirs soon, minus the approximate
capital gains taxes [state and federal - Massachusetts,
ugh!] which will be due next April. Am I correct, then, in
assuming that there will be no tax consequences to the heirs
from this sale, and that nothing concerning this sale will
have to appear on their K-1 forms? "

It depends on what state you are in. In OH real estate
transfers at death subject to being sold for debts &
expenses of the estate. Although the recorded title remained
in your mother's name the legal title belonged to the heirs.
The estate sold the house for the convenience of the heirs.

I assume the estate will be closed soon. On the 1041 the
estate will report the gain but the capital gains will be
distributed among the beneficiaries to be reported on their
personal tax returns. This allows the estate to be closed
and not retain funds or stay open until the tax is due.
Since you said the tax would be due in April I also assume
that the estate is on a calendar year.

Even if the estate is not closed in the year of the sale I
would still report the gains out to the beneficiaries
because the real estate technically can not belong to the
estate.

If a federal estate tax return was required there may be a
valuation issue. Since the sale was 16 months from the date
of death there will probably be no problem but I have seen
them go out 12 months for valuations.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

My mother died last year, and her will left the house to her
three children in equal shares. Recently, the house was
sold. I sold the house, signing as the executor, and the
net sales amount was deposited to the Estate of *** bank
account under the Estate TIN. The house appreciated a fair
amount from its official appraised value at the time of
death, over the subsequent 16 months (location, location,
location).

Am I correct in stating that the Estate will pay the capital
gains tax from the sale of this property (IRS Form 1041)?
One/third of each share of the house sale proceeds will be
distributed to the heirs soon, minus the approximate capital
gains taxes [state and federal - Massachusetts, ugh!] which
will be due next April. Am I correct, then, in assuming
that there will be no tax consequences to the heirs from
this sale, and that nothing concerning this sale will have
to appear on their K-1 forms?

Thanks

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >