Can gift of 50,000.00 that has been paid on by an estate be taxed in later years by the person who received it

Answer 1

The only people responsible for paying tax on a gift from an estate are:

1. The executor of the estate. Perhaps that is what the previous poster's friend is experiencing. If it is, the friend should be suing the shirt off the broker's back.

2. individuals who receive "gifts" but which are, in reality, income generated on assets held by the estate. The executor should issue a 1099 in that instance. A gift of $50,000 may include an income element. Check with the executore, or their advisor to be sure, so that you can hold back tax on the income element if necessary.

In the circumstances, you may wish to consult a CPA as $50,000 is a lot of money to pay tax on.

Answer 2

It can never be taxed BY the person who received it. As long as the taxes were handled properly by the estate, the gift itself is not taxable to the receiver at the Federal level. Some states my have an inheritance tax in the year on the inheritance. If the 'gift' is not cash, it may generate income or gains that are taxable later.

Answer 3

The brief answer is that it depends on what form the $50,000 is in when the giver held it. If it was cash in a coffee and the giver paid income tax on it when they received it can and you keep it in the coffee can there is no tax liability for the recipient. If it was in the some form of pretax money for which the giver had not paid or had deferred the income tax the recipient has some liability. Also if the gift had been $40,000 on the date of death of the giver but grew to $50,000 by the time it was distributed the receiver would have tax liability for the $10,000 in growth.

Answer 4

Yes, this can happen. It's happening to someone I know right now.

His mother died and left him about $30,000. He recieved the check in full, but taxes were never taken from the lump sum. The company that handled this (Merrill Lynch) never said anything about taxes. He thought it was a done deal after he got the $30,000 check.

A couple of years later, the IRS contacted him and he was accused of some type of "tax evasion". So now he's having to make monthly payments to the IRS to make up for the taxes that were never paid on the check.

Either you will have to pay the total tax amount up front or make monthly payments. Otherwise they will take other drastic measures like seizing your paycheck, freezing your checking/savings accounts, or put a lien on your house, car, or anything else you own.

And yes, it's all legal. (Unfortunately.)

Answer 5

Any distribution from an estate has already had any taxes required taken from it and paid. You cannot be taxed on it down the road. If you invest it and make money then you will owe taxes on money you make therefrom; but the principal is yours free and clear.