Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
But more generally, the income taxes will follow the money. If the property is sold at a gain and the proceeds are distributed to the beneficiaries in the same year (or shortly after the end of the year if the fiduciary makes the proper election) then the beneficiaries will pay the income tax. The estate itself pays the income tax only if it holds on to the sale proceeds and doesn't distribute them. (And that's usually a bad idea, as the estate will usually pay more income tax than the beneficiaries would.)

Yes, you make a valid point. specifically, if the house is sold and all of hte remaining estate assets are distributed out to the beneficiaries such that the estate can file a final year return, then I agree, the gains/losses would get distributed out to them and they would report on their 1040's. However, if its not a final year return, then the gain/losses would stay in the estate and be included in the estates computation of taxable income. Generally speaking, Capital gains and losses are usually retained in the estate or trust because they are considered "corpus"..i.e. principle. Other types of income like interest and dividends are frequently distributed out to the benes to the extend of distributions.

Bottom line: need to understand the estate documents and should check w/ executor/attorneys/cpa's who are familiar with this particular situation.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.