Who pays the tax?

[RightOn]

Estate sold a property in 2016 with capital gain.

Based on my understanding, if the distribution of income is not required to be made to the beneficiaries in the current year and the administrator of the estate has the authority to decide on the timing of the distribution, the estate will pay the tax on the capital gain.

But if the distribution of income must be made to the beneficiaries in the current year, then the beneficiaries will pay the tax on their share of the capital gain in their individual tax return.

Now, what about if the estate administrator has the authority to decide on the timing of the distribution and she decides to distribute the income to the beneficiaries in the current year. In this case, does the estate pay the tax on the capital gain or do the beneficiaries pay the tax on it?

[Burke]

Bene's pay the tax if sufficient distributions are made to them within the estate's tax year (calendar or fiscal, whichever is chosen.) The gain flows through on the K-1. If income is required to be distributed but is not, it will still enter into DNI. This is rare in estates, but is more common in trusts. (Executors almost always have discretion to distribute funds to bene's when they see fit.) Check the will.

[RightOn]

Bene's pay the tax if sufficient distributions are made to them within the estate's tax year (calendar or fiscal, whichever is chosen.) The gain flows through on the K-1. If income is required to be distributed but is not, it will still enter into DNI. This is rare in estates, but is more common in trusts. (Executors almost always have discretion to distribute funds to bene's when they see fit.) Check the will.

Thank you.

What has confused me is that, based on what I have read, the estate will pay the tax if the administrator has the authority to decide the timing of the distribution. And it is the situation in this case. But then the administrator has also decided to make the full amount of the distribution in the current year. Now it also fit the criteria that the beneficiaries have to pay the tax. So I was not sure which way it should go.

I agree with you that based on of my interpretation of what I have read, the beneficiaries should pay the tax in this case. Thank you for the clarification.

[taxea]

Can the trust pay the allotted tax on behalf of the bene's (ie by way of estimated taxes directly to each bene IRS/State) and deduct it from their allotted distributions?