what am i missing...estate tax question

What is the name of your state? NJ

i seem to be missing a very fundamental part of estates and taxes...

i thought that estates are exempt from taxes up to a certain amount (~$550K). but i keep reading about capital gains taxes owed from the sale of inherited homes. wouldn't that money be considered part of the estate??
if the inheritance is completely in cash is the estate then exempt?

thanks for your patience

[Snipes5]

The amount is actually over $1M.

Yes, a cash estate less than that would be exempt from tax.

If a house is inherited, the capital gain is taxable because it would have been taxable to the deceased. However, the "basis", or value of the house is generally the fair market value on the date of death, so if the house is sold quickly, there won't be capital gain because the sale price will be very close to the basis.

Snipes

ohhhh.

gotcha...thanks so much!

one more question, please...

if the property is sold through a trust is the gains tax rate computed according to the profit?
IOW, is the 5% or 15% rate chosen according solely to how much the property sold for?
if, OTOH, it is sold by the beneficiary then is the gains computed according to that person's income bracket?

thanks.

[abezon]

If the estate/trust sells the house, the estate/trust will have income & will have to file a fiduciary income tax return (Form 1041). On the 1041, the estate/trust can pay the taxes on the income & distribute the net to the heirs (bad), or it can pass the gross income directly to the heirs & the heirs pay the taxes on their annual returns (good). Individuals pay much, much less income taxes than an estate or trust.