5.1.4.3.1 Income Earned Within an Estate Account
When someone dies and leaves behind an inheritance for others, the estate becomes and is taxed as a separate legal entity or “person.” The income the estate earns between the time that person died and the time the assets pass to the heirs is subject to income taxation. This is different from the way the transfer tax (discussed above) works.
Estates earning income, dividends, capital gains, etc., must file their own separate tax returns each year. The tax rates