the correct answer was by the one that said that each heir would count that $0.5 million as personal capital gains, and hopefully be taxed at a lower individual rate than the estate rate. the 1/2 mil capital gains passed from the estate would be taxed no differently at the individual level as if each had a 1/2 mil long-term capital gain from a publicly held stock.
the tax each would pay depends on their other taxable income, whether they are subject to state income taxes, whether their net investment income subjects them to the net investment income tax. there could be other items affecting the taxes they would pay.
considering the amount involved, think about having all of you sitting down with a tax planner to get more precise info.
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