You indicated there is 200 000 of taxes to pay...........that there has been/is no sale..........that there is a gain on one property of 900K and the other 300K.

IS IT POSSIBLE..........that you are referring to estate taxes, and NOT capital gains taxes??

Capital gains taxes are ONLY due when a property is sold or otherwise terminated.

Estate taxes would be due from the estate BASED UPON the value of the property owned by the deceased at time of death.

If the properties are VALUED at 900k and 300K for the estate..........ie listed in the estate's ESTATE return (ie not an income tax return)..........I would have guessed that the exemption would have covered the FEDERAL taxes of that magnitude........200K / 1.2 = 17%................but there could be STATE taxes, whatever.

So..........if the estate is cash dry but owes taxes of 200K, the option for paying the taxes is either    A.   for the owned properties to be sold and then the NET cash after tax payments be distributed to the beneficiaries........OR.........B.   the beneficiaries cough up enough cash to meet the cash needs of the estate...........which merely allows them the keep the physical properties.

If the above is the case...........allocation of the tax payment from my perspective would be based upon the valuations of the properties received...........900/1200 = 75%, and 300/1200 = 25%...........one pays 75% x 200 000 = 150 000..........other pays 50 000.

If the above is true.........then the ESTATE's VALUE of 900K and 300K would be the "tax basis" of the respective properties-------PLUS the amount of cash put back to the estate to pay the estate taxes (but check on this..........might be a deduction as itemized deduct...........cannot remember for sure, and it might also be based on the way the cash is put back in..........but the attorney handling the estate should know, or shouldn't be paid, and your tax person can research it.)

The one thing that makes me wonder as to whether or not there is not more to the story is that the tax rate computed of 17% would not fit a FEDERAL tax situation-------federal estate tax rates zoom to 20%+ for everything over 10 000 before application of the unified credit.   So, unless it is state estate tax...........I don't think the entire story is out yet.

And.......with respect to the terminology again...........poster indicated that the 900K and 300K were the "GAINS".................for applying tax terminology........the term "gains" would be the net sales price in excess of tax basis........ie the "taxable gains"............and that would then be computed using the stepped up basis already.........but, again, he indicated there was no sale..........so "capital gains" application dies.

If there is, as poster indicated below, a problem between the beneficiaries with respect to coming up with tax money, the executor MUST sell the properties, and pay the taxes.

Fed or state..........makes no difference............and, in addition, if the taxes go unpaid, I THINK there are severe civil/criminal penalties on the executor for not satisfying the tax authorities.

AND........as I think about it, there exists an automatic federal lien against the property until the IRS receives the estate return, is satisfied that it is ok, and receives the money to pay any taxes.............which is why a lot of attorneys will ask for the "expedited" IRS review process for estate returns........so they can close it out faster, and distribute any remaining property (usually due to heat from the beneficiaries!)

I would bet that the states have a similar law.

I don't monkey with many estates........the attorneys usually handle most of the finalizing aspects of an estate........and let them do it-----lots of legal liability goes along with the estate handling..............

..........BUT you guys surely didn't think the IRS wouldn't have a method to ensure themselves collecting their share!!??

To get more definitive answer, poster is going to have to tell the complete story, so the terminology differences can be sorted out.

Poster.........if you choose to do that, merely describe the ALL the events, and in "layman's terms", and don't sweat the terminology.

Or I have to drink more coffee.........