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-   -   Inheritance considered income (https://www.askmehelpdesk.com/showthread.php?t=177578)

  • Jan 28, 2008, 08:57 AM
    k37814
    Inheritance considered income
    My husband received inheritance in the form of money (no real property). Does this money have to be reported on our tax return? Was less than $100,000.
  • Jan 28, 2008, 09:00 AM
    ScottGem
    It depends. The estate pays the inheritance taxes. However, there may be taxes due on any gains in the investments between when the testator died and the funds were distributed. The estate should have filed a tax return that would indicate that and your husband would have received a statement of income from the estate.
  • Jan 28, 2008, 02:13 PM
    AtlantaTaxExpert
    Scott:

    If the estate sells ANY asset in order to distribute money rather than the asset itself, the ESTATE pays any capital gains by filing Schedule D with a fiduciary return (Form 1041).

    While the heirs may requst a copy of that fiduciary return, it in no way affects their tax return. They get the distribution completely and totally tax-free UNLESS the executor screws up and fails to pay the required estate taxes.

    Then (and only then) will the IRS or state go to the heirs for any of the taxes that are due from the estate.
  • Jan 29, 2008, 10:52 AM
    MukatA
    Any thing (money and property) you receive as gift or inheritance, you (the receiver) don't pay any federal tax. Exception: If you inherit a traditional IRA, you are called a beneficiary. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.
    For any State tax liability check at your State's web site. For most of the States there is no tax.
    If you received the inheritance from foreign sources, then you may need to file the form 3520.
  • Jan 30, 2008, 10:28 AM
    AtlantaTaxExpert
    I forgot about the traditonal IRA exception. But, other than that and the possibility of the executor NOT paying estate or inheirtance taxes, inheritances are normally FREE of income taxes.

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