There can be an estate tax based on the value of the estate. It's paid by the estate, not by the beneficiary inheriting the assets. This tax was not paid because the estate's value was too low. However, what you inherited is deemed income in respect of a decedent (IRD). IRD refers to income that a decedent was entitled to but was not includible in the decedent’s tax return under their accounting method. This includes accrued income, contingent claims, and income that arises solely because of the decedent’s death. The recipient (beneficiary) pays the income taxes on this income IRD includes distributions from IRAs, 401(k)s, or other retirement accounts that were pre-tax or tax-deferred. There is no step-up in basis for IRD items.
your paying a lot of taxes because this income is added to your other income, possibly pushing some of it into a higher tax bracket.
as to the year to report on your tax return, it's the year on the K-1. At the top, it will say something like 202x. For calendar year 202x or tax year beginning xx/xx/xxxx and ending yy/yy/yyyy.
if the beginning and end dates are blank, you report it in the calendar year specified. If not, you report it in year yyyy
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