Are securities as part of an inheritance taxable?

Question

The amount was about $90,000 in 2004. It made up about 80% of the yearly income for that year.

They were held in a trust for someone who died. It was then divided three ways among beneficiaries.

They were held in a trust for someone who died. They were then divided three ways among the beneficiaries and cashed out.

Answer 1

All securities have a basis. When you sell the security, you will either have a gain or loss depending on your selling price versus the basis. The fiduciary handling the estate/trust will provide you with the basis. If they don't, they are doing a lousy job. You don't pay tax merely because you inherited something. There is no U.S. Federal Inheritance tax, only estate tax. The estate is responsible for paying the tax, not you.

However, if you inherited deferred income (in a Traditional IRA or 401(k) or something similar), then you will be required to withdrawal the amount within 5 years. Any amount you withdraw (above and beyond any basis in the account) is taxable. Unlike stock held outside an IRA, the stock inside the IRA does NOT get a stepped up basis. To inherit an IRA, you must be a beneficiary of the IRA. If an IRA has no beneficiary, it goes to the estate and the estate "takes it out" and pays taxes (unless the estate is closed within the first year).

Hope this helps :)

Answer 2

You have not give enough information to give a precise answer. You would need to know the fair market value of the stock on the date of death of the person from whom you inherited the stock. There could be issues regarding how these stocks were held. If the stocks were held in a trust and they earned dividends you should have received a K-1 for those amounts and they would be taxable income. Any interest or other gains that may have occurred after the date of death would be taxable. Other circumstances could cause the stock to have taxable income but I would just be speculating.

Answer 3

Not for income tax until you sell the security. Your gain or loss is measured using the sale price less the value used for the estate valuation.
The value could be taxable in your state if your state has an inheritance tax. The p/r of the estate would have told you if this tax applied.

Answer 4

a real inheritance could have been processed by way of a probate or courtroom administration of a few type, and as such, an inheritance or belongings tax return could have been filed, with any tax paid interior the process the valuables. Now, once you sell the valuables, in case you made a income, there will be a "features" tax, yet to allow you know the reality, I doubt your "broking" documents something with the IRS.