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Without knowing more detail it's difficult to say, but here is some information that may be helpful. Check with the preparer of the estate tax return for better clarification.
Inheritance is money or property that was owned by the decedent prior to death, then distributed to the beneficiaries. If applicable inheritance tax would be paid on the value of property and liquid assets. This is separate and distinct from personal individual income tax. Although paid by the estate, the beneficiaries would not again pay tax on the proceeds.
Any sale of property distributed to the beneficiaries would have a stepped-up basis (the value on the date of death) so the gain at sale would be very little if any to report on the individual tax return if sold immediately or very closely in time after death.
Retirement income would be handled differently. This is usually set up with beneficiaries so any distribution would go directly to the beneficiary, not the estate. In this case the beneficiary would report the income and pay tax on anything over and above what the decedent may have contributed with "after-tax" dollars.
The Form 1040-K1 is provided to the beneficiaries with income that was earned or received after the death of your uncle but money he had a right to receive while living and before full distribution to the beneficiaries.
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