1041 DNI for Estate

[paulcpa]

I'm preparing a final return for an estate that was open several years after the decedent's death. The only asset was the decedent's principal residence. The home has been sold and I've found (for federal) that the capital gain on the home is distributable net income (DNI), only because it's the final return year, and can be passed through to the beneficiaries. Everything worked on my prep software at the federal level but it would not push the gain through to the beneficiaries on the state return (California). I thought perhaps CA treats the gain differently at the state level (taxed to the estate) but I can't find anything in my research that indicates different treatment. The only thing I find is that the state follows the federal treatment for most items (capital gains was not one of the exceptions). Does anyone know if the treatment of capital gains with respect to DNI is the same for CA as for the federal return?

[Y2KEA]

CA considers LTCG to be ordinary income. What software are you using?

[paulcpa]

I'm aware that LTCG is taxed as ordinary income. My concern is why my software wants to tax it to the entity and not push it to the K-1s. I don't know if I'm misinterpreting the law, miscoding something in my software, or there is a software glitch. My purpose with this posting is to conform the law.

[Lion]

Have you marked the returns Final?

[TAXNJ]

I'm aware that LTCG is taxed as ordinary income. My concern is why my software wants to tax it to the entity and not push it to the K-1s. I don't know if I'm misinterpreting the law, miscoding something in my software, or there is a software glitch. My purpose with this posting is to conform the law.

Some software requires an input as to “who or what” with the DNI. Does the DNI remains in the estate and not distributed to the Beneficiaries or the reverse?

Recommend you contact your software vendor.

[TAXNJ]

If you want to read the attached article mentions CA and Capital Gains in Estates. Capital Gains is addressed at least 3 times if you do a “search” in the article. NOTE: very in-depth article. Also, the authors have a telephone number listed at the end of the article.

https://www.sflaw.com/wp-content/upl...tates-2015.pdf

[paulcpa]

Turns out, my position was correct but there was a software glitch. Thanks for all the feedback.

[TAXNJ]

Turns out, my position was correct but there was a software glitch. Thanks for all the feedback.

Was it a entry glitch or software company programming glitch that needs to fix the glitch with an update?