@jeeppadre89 to be clear, the normal scenario would be that the estate pays no income tax on income that occurs after the death of the decedent. However, the estate reports that income to the beneficiaries and the beneficiaries report that income on their tax return and are responsible for any tax.
The estate would report the income on form 1041 and supply the beneficiaries with form k-1 to reflect each beneficiary's fair share of the estate's income. And that form k-1 would be reported on the beneficiary's tax return. The beneficiiary would pay any income tax on that income.
But I think you are missing a point somewhere. if the land is "stepped up" to market value on the date of death and the estate sells off 10 acres shortly thereafter, why wouldn't the value of the 10 acres be just about the same as it was on the date of death and hence very little or no capital gains to report.
The capital gains is the sales price of the 10 acres less the value of those same 10 acres on the date of death.
are you concerned about something that won't occur? or is the 10 acres magically worth a lot more than it was on the date of death?
@M-MTax huh? there is no estate tax if the value of the estate is less than $13.99mm (2025) or $15mm (2026). THAT is a totally difference conversation than whether the estate pays INCOME tax. I am NOT confused at all.
What is the 'which' you are referring to in your statement that "which is solely the step up in basis".
