Capital gains liability & filing by Estate

[MrsMacAdoo]

Father died in 2020, Mother died in 2023. Dad's stock was never transferred to mothers name. As executor of Mom's estate I transferred ownership of the stock to mothers estate and liquidated it along with any real estate and other assets.

I filed mothers final returns in April 2024 but stock did not sell until 2025. From date of death to sale of stock it gained about $25,000 in value while held by the estate. The estate was well below any federal limits requiring estate tax. My question is do I need to file another final return to reflect the capital gains of the stock?

Secondary question is that all proceeds are being evenly divided between my siblings and me, are K-1 forms required?

[Hi Palms · Accepted solution]

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@MrsMacAdoo wrote:

From date of death to sale of stock it gained about $25,000 in value while held by the estate.

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You need to file a 1041 (most likely final if all assets have been distribuited and the estate terminated). 

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@MrsMacAdoo wrote:

Secondary question is that all proceeds are being evenly divided between my siblings and me, are K-1 forms required?

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It would almost certainly result in lower tax liability if the proceeds were distributed to the beneficiaries (i.e., gain via a K-1) and allowing them to assume the tax liability rather than have the estate pay the federal income tax due.

Estate income tax rates are highly compressed with the highest bracket starting in the $15k range, which means the estate would pay the top capital gains rate of 20% plus the 3.8% NIIT starting at that level.