22 February 2019
Estates – Tax planning for gifts that generate income
When a beneficiary is entitled to rental property as a specific gift in a will, we know they are entitled to the net rental proceeds from the date of death up to the date of transfer of the property to them as a distribution of the estate.
However, is the beneficiary also liable to pay the portion of income tax that was payable in the estate tax return on the rental income profit?
Thank you for the question.
The estate is liable for income tax up to the date of death and the beneficiary thereafter.
Where a beneficiary is presently entitled to income from an asset of the deceased estate, that income is assessable income of the beneficiary in the tax year that the present entitlement arose.
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