If you inherit stocks & then sell them 2 months later, do you pay taxes on the whole amount you recieved?

Answer 1

What Boston said was true. You do NOT have to pay tax on the whole amount you received. The same thing happened to us because my father-in-law died in 2006 and part of the inheritance were stocks that were distributed and that we liquidated. I actually called an IRS agent to find out exactly what to do since we received a 1099 that showed the total amount of the stocks we sold, and I definitely did not want to be taxed on that additional income since it was indeed an inheritance! What we had to do was fill out Schedule D and in the second column where it says "date aquired" you put the word "inherited". You only have to pay taxes on the amount of the GAIN (if there was any) from the day the person died until the day that you sold them. In our case there was a LOSS so we did not have to pay any tax on our stocks and you actually get to deduct the loss on your return.

Hope that helps! It is confusing since inheritances are not suppose to be taxed, but selling stocks that were inherited are in a different class. But at least you only have to pay taxes on the stepped up basis (DOD) until the day you sold them which makes it really nice for the recipient of the inheritance.

Answer 2

You can go to Yahoo finance, enter the symbol for a stock you sold,, then look the the left side of page and find "historical quotes',, using this you can find out the stock price on the day you inherited the stock,, this would be your basis or cost in the stock to enter on Schedule D tax form.

As stated before,, if you inherited a traditional IRA (not a Roth IRA) you wold pay tax on the entire amount because it was funded with pre tax dollars,, someone has to pay tax on that money eventually.

Answer 3

No. When you inherit stocks you receive the stepped up basis on the date of the decedent's death. You pay tax on the difference between that basis and the amount you sell the stocks for.

Exception: If the stocks were held in an IRA by the decedent, the proceeds are taxed as ordinary income to you when you sell them. This is because when they were purchased, a deduction was taken for their cost. You would not pay the 10% penalty tax, however.

Answer 4

If you received a large inheritance, I would speak a financial advisor before doing anything. Some banks will give a free financial advice session if you have an account with them.