Allocation of Capital Gains

[RandyTax]

I am working on a form 1041 for an estate in TurboTax Business. One of the items asks for allocation of capital gains to beneficiaries.  Everything has been distributed except for a small cash balance to settle taxes, so should I respond to this item by answering that the entire capital gain is allocable to beneficiaries so that each beneficiaries' K-1 will show the applicable portion of that gain?  In what cases would it not be allocable?

[ThomasM125]

If the proceeds of the sale that created the capital gain were not distributed to the beneficiaries, then the trust would pay the tax on it so the gain would not be allocated to the beneficiaries. It sounds like in your case the proceeds were paid to the beneficiaries so you would be correct to allocate all of the capital gain to them.

[RandyTax]

The capital gain was long term to the decedent but received after the date of death and therefore part of the estate's 1041.  Would it still be long term when allocated to the beneficiaries.

[Anonymous_]

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@RandyTax wrote:

Would it still be long term when allocated to the beneficiaries.

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Yes. The holding period for property acquired from a decedent is automatically considered to be long-term.