Capital Gains on Property Sold by Decedent's Estate in Oregon

[cferg]

This is a state specific question. Our mom passed away and the only real asset in her estate was her home. It was valued, at her time of death, at $287,800.00 and was sold by the estate for $316,500.00. I was able to figure out Capital Gains for Federal tax purposes, along with the 1041,but I am having a hard time trying to figure out what it would be for the state and how to file it if there is Capital Gains tax. The estate is not required to file an estate tax return for Oregon because the value was well below the threshold. I am trying to find out if I need to file a Capital Gains form, how to figure the rate for an estate, and what other forms I would need to file. We have been granted permission to close on the estate, but I can't distribute funds to the heirs until I get the state tax question solved. Anyway, as I stated, the step-up value was $287,800.00 and the sales price was $316,500.00. There were $23,659.24 in costs associated with the sale.

[M-MTax]

I'd call customer service for this or see a tax pro. not many here are going to have an answer for a state estates question.

[Hal_Al]

I’m not an expert on estate income tax, but based on my personal experience (a different state than OR) and the reference below, I think this is how it works:

Even though there is no estate tax (“estate transfer tax”), the estate owns the decedent's assets. If these assets generate income, it's subject to income tax. Report the income, including any capital gains,  on Form OR-41, Oregon Fiduciary Income Tax Return.  This is the state equivalent of the federal 1041.  The  $23,659 in sale expenses reduces your capital gain.

On both the federal and state estate (fiduciary) income tax returns, the executor has the option of passing the income and any tax to the beneficiaries  via a Schedule K-1. You have to do both the federal and state the same way.

Reference:

https://www.oregon.gov/dor/programs/individuals/pages/estate.aspx 

[cferg]

Thank you. I'm not sure why the tax people have to make everything so complicated. The Federal form 1041 was fairly easy to complete. The Oregon form OR-41 is the most convoluted thing I have ever seen and calls for information from a federal schedule that isn't even showing up on the IRS website. The only thing we have to deal with is the sale of our mom's house. It should be as simple as the difference between the step-up value and the sale amount, minus the expenses of the sale, and whatever other deductions there might be. Then a decision as to whether or not the estate is going to pick up the tax, if any, or pass it on to the heirs along with their share of the estate. Instead, there are 4 pages of confusing legalese. I was hoping to be able to do this myself and not have to put out more money for a tax preparer. I do the taxes for my husband's business, and they are way more comprehensible than this.