The loan is not evident by writing so, although the 600,000 is repayment. David may still be subject to gift taxes. Since the loan was time-barred by the statute of limitations, it is legally unenforceable, and the estate was not obligated to repay the debt. The repayment may also decrease the estate asset.
The executor's decision to repay the loan was a legal obligation of the estate. However, not attempting to collect the equivalent loan from Sarah’s controlled corporation resulted in a loss of $300,000 to the estate.
The successful lawsuit for breach of contract indicates that there was a legally enforceable promise made by Sarah. The estate paid $600,000 to Ida, which was $100,000 more than the original agreed amount. This further reduced the estate's assets.
The residence is treated as a capital asset held for investment purposes, for income tax. The gain or loss is treated as a capital gain or loss, which may be deductible on the estate’s fiduciary income tax return.
Once all assets have been liquidated and all the debt has been paid, the deceased, and the estate must file a tax return. The executor will then divide the cash between the beneficiaries based on the will of the deceased.
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