Will the estate of a decedent pay the due taxes on decedents business

Asked over 1 year ago - San Antonio, TX

My father passed owning a business that is still producing an income. In his holographic will he gives his half of the company to a business associate. This would mean that My step-mother and the business associate now own the company. There are taxes owed from 2012 by the business. Would the estate pay for these taxes? Will that come off the top even though I have no dealings with the company ? would that go under the personal separate property of my step-mothers having her and the business associate pay those taxes?

Attorney answers (4)

  1. Ivan Ramirez

    Contributor Level 3

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    Answered . The answer is, it depends. The nature of the business makes a difference, i.e. is it a professional practice or type of business that requires a special license? As for the tax debt, that also depends on how the will was drafted, when the debt accrued, and what the business company agreement states on the payment of taxes. These are complex issues that require examining many different documents.
    Good luck!
    Ivan Ramirez

  2. Orsen E. Paxton III

    Pro

    Contributor Level 18

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    Answered . Not enough facts. If the business is incorporated, it pays its own taxes. Can't tell if you are talking about income taxes, property taxes, or franchise taxes. No one can inherit tax debt of the decedent. However, estate assets can be required to be sold to produce money to pay taxes.

    DISCLAIMER: This is not specific legal advice and does not establish an attorney/client relationship.
  3. Adam S. Bernick

    Contributor Level 13

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    Answered . You need to consult a probate attorney in the state where he died, resided or owned land. If probate is in process, consult an independent attorney to review the probate documents and any business documents as there may be some form of buyout or other arrangement as part of the corporation.

  4. Stephen Neil Foster

    Contributor Level 15

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    Answered . This gets complicated very quickly. It seems to me that the business has never been dealt with in probate. This needs to be accomplished and the status of the business needs to get settled.

    The form of the business (proprietorship, L.L.C. corporation, etc.) can make a difference. In any case, unless the business utilizes pass through taxation, for example filing an IRS K-1, the taxes would likely be paid by the business.

    If the business is not a separate entity and is a proprietorship then the business is basically just the person which means that when the person died the business died with them.

    The bottom line is these issues need to be handled.

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