Question

individuals are deemed to have disposed of all of their capital property immediately preceding the death of a taxpayer. as a result there may be significant tax consequences in the final year. which of the following statements is false?

Answer 1

False statement: Individuals do not have to pay any capital gains tax on the sale of their capital property in the final year of their life.

Step-by-step explanation:

When an individual passes away, they are deemed to have disposed of all their capital property at its fair market value as of the date of death. This means that any capital gains or losses realized on these dispositions are reported on the deceased's final tax return. The given statement is False.

If the individual had sold these properties during their lifetime, they would have been subject to capital gains tax on any gains realized. However, in the case of deemed dispositions at death, the capital gains tax is deferred until a later time when the property is actually sold by the beneficiary or heir. Therefore, the statement that individuals do not have to pay any capital gains tax on the sale of their capital property in the final year is false.

The deferral of capital gains tax until a later time can result in significant tax consequences for both the deceased and their heirs. It is essential for individuals to properly plan for and manage their capital property during their lifetime to minimize these tax implications.