My father died on Thanksgiving last. We immediately sold all stock. There was a significant capital gains. The total amount of his estate was distributed the next week. The accountant argues that the basis changed on midnight of the day he died. Therefore my father's estate = the tax return filed under his social for last year, has to pay no capital gains. I argue that I and the other beneficiaries don't have to pay capital gains because the basis for us is the basis on that midnight, but his social has to pay capital gains tax as part of the return for last year. What is the law?
The second part of my question is: shouldn't his income tax return have been filed under a federal ID for the estate? Exactly how does the transition between a personal income tax (1040) and an estate income tax (1041) work (and when)?
