Proceeds generally means the gross sales price - what the seller paid for the property less commissions and other selling expenses. When the estate makes a cash distribution to the beneficiaries, the total would be split according to their respective shares of the estate.
Capital gain would be the net taxable income from the sale (proceeds minus cost basis). As DavidD66 said, if the estate pays the tax on the gain, the K-1s would report no income. But if the tax isn't paid by the estate, the gain is reported on Schedule K-1 to the beneficiaries and would be taxable income on their personal returns.
Think of it this way: If the estate pays the tax out of the proceeds, the distribution to the beneficiaries would be proceeds less tax. If the income is reported to the beneficiaries, they would receive more of the proceeds but have to pay the tax out of the distribution.
This may not be relevant if, as zeelimit mentioned, there is no taxable gain from the sale - and therefore no tax to be paid.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
