I prepared an Estate form 1041 with a small rental operating loss and a capital gain on the sale of the rental property.  There have been no distributions of cash yet to the beneficiaries as there are outstanding medical expenses to reconcile and there may be no cash once completed.  The estate attorney wants the estate to pay all taxes and have no taxable items pass to the beneficiaries.  

Isn’t the estate required to pass the capital gain and rental loss to the beneficiaries eventually on form K-1 ?  Wouldn't it be better for the beneficiaries to report their share of the cap gain and rental loss personally at lower tax rates than the estate pay higher taxes on the form 1041 ?  I'm want the optimal solution for my client the executrix. Thanks