inheritance

[dsw-05]

I am the executor of my moms estate.  I am filing her last taxes since the estate is closing.  My mom had several stocks from Etrade that I sold and distributed the funds to my siblings.  She also has a 401 acct with about 30,000 and had a savings interest act.  I have left funds back to pay for the tax that will be needed to pay for the capital gains from the stocks and interest that was accrued.  Her entire estate was less than 500,000.  My question is if the estate is paying the taxes for the funds that were cashed out, do the siblings need to add the funds as income on their own IRS filings?  We also had a home that we inherited upon her death that was not part of the estate.  Who should have gotten the 1099-S form?  There are 7 of us and I am wondering if the oldest would have been given that form.

[M-MTax]

You need a lawyer and a tax pro. The funds are not taxable to the benes as they're the principal of the estate. As executor, do you not know who got the 1099-S? You should. Get local counsel before one of the benes sues you.

[Opus 17]

Something odd here. If I recall correctly, the income tax rate on estates is higher than on personal tax returns.  The heirs would likely keep more money in the end if you passed the income to them and let them pay the tax on their tax returns.  This would happen via the estate's tax return and the K-1 statement issued to each beneficiary or heir.  (As to your exact question, if the estate pays the income tax, the heirs do not, and this will also be reflected on the K-1 statements. But this may not be the best way forward.)

Also, the statement "we had a home that we inherited upon her death that was not part of the estate" is almost certainly wrong.  Was the home in a trust? (It would be part of the estate for IRS valuation purposes, but not part of the estate subject to probate.)

If a 1099-S was issued, it would have been issued at the closing.  Who attended the closing?  Did you have an attorney or closing agent?

I agree you should seek professional assistance.  

[M-MTax]

If I recall correctly, the income tax rate on estates is higher than on personal tax returns. 

Not exactly. Estates get a $600 exemption so there's that and the 0% rate applies to amounts up to $3,150. If there's a lot of income then the tax rate ramps up quickly though. So it depends.

[M-MTax]

Was the home in a trust? (It would be part of the estate for IRS valuation purposes, but not part of the estate subject to probate.)

Could also have been JTWROS, TOD, or LE all of which are not subject to probate.