[blueeyes81559]

My sister inherited half of our dad union pension. He died in WI. April, 2008. Her share is 1,411.00 per month for 30 months. My sister lives in California, what would be the state, federal tax, death or pick up tax or any other taxes that she would have to pay? My dad final tax return was done in WI, by a tax lawyer in WI in 2008, it is complete and done. Dose the money my sister inherited put her and her husband in a higher tax bracket?

[ebaines]

When you inherit a pension the payments are almost always treated as ordinary income, and so is taxable (just as it would have been to ithe decedent if he had lived). So while there is no need to worry about estate or inheritance taxes, she does need to be aware that she will receive a 1099-R form from the pension plan administrator each January detailing the amount of income she needs to report for the previous calendar year. She will incliude this amount in both her federal and CA state income tax returns. Whether this puts her in a higher tax bracket is impossible to say - that depends on factors such as her other income, deductions, credits, filing status, etc. Depending on her adjusted gross income, this exta $15K in annual income may cause her to bump up against one ofr more of the "phase outs" for certain credits or deductions.