Income Tax question

[velocity]

Under the current laws as I understand, if you inherit say $50,000 you would not pay any income/inheritance tax. Am I right on this.

TIA

[A HERETIC I AM]

1. Try the I.R.S.'s website...

www.IRS.gov

use the search feature. I have found it to be pretty straightforward and most of the publications are available on .pdf format. If you don't have Adobe Acrobat, you can download it there also.

I hope that helps a little. Better to get the answer straight from the source. There is probably a Tax Accountant here on DU that can answer you directly but i thought the link might be of some help.

[velocity]

2. Thanks

I tried and think I got an answer BUT this is the IRS :)

[jmowreader]

3. Yes, the inheritance tax kicks in way, way above that

It's in the seven figure range. Anything below that is tax-free.

If you inherit fifty grand, put half of it in the bank, invest a quarter of it (at least), spend some on yourself, buy ten dollars worth of Powerball tickets (the weird investment: you will probably lose, but if you win you can be set for life if you're not stupid with money) and you'll be good to go.

What to invest in? I'd put half of it in savings bonds, a quarter in something minimally risky and a quarter in something moderately risky. You don't have enough cash to do anything really risky like commodities futures or short-selling.

[happyslug]

4. It is NOT income:

As a general rule inherited property is NOT INCOME and thus no income tax is due on it. Your "basis" for it is the cost paid for it OR its value at the time your inherit it (Thus if you inherit a house your grandparents paid $10,000 for and at the time you inherit it the house is worth $50,000, your basis is $50,000 not $10,000).

Now, the amount inherited may to subject to a State Inheritance tax (and maybe Federal Inheritance tax but Federal Inheritance Tax only start at),

See 26 CFR Sec. 1.1014-1 For details:

Section 1.1014-1
(a) General rule. The purpose of section 1014 is, in general, to
provide a basis for property acquired from a decedent which is equal to
the value placed upon such property for purposes of the Federal estate
tax.

Section 1.1014-1 cite:
http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/cfr_2003/aprqtr/26cfr1.1014-1.htm

[happyslug]

5. And exempt from FEDERAL Estate Tax

Under 26 USC § 2010, the exemption from Federal Estate Tax is as follows:
1998 $625,000
1999 $650,000
2000 and 2001 $675,000
2002 and 2003 $700,000
2004 $850,000
2005 $950,000
2006 or thereafter $1,000,000.


For more information see:
http://www4.law.cornell.edu/uscode/26/2010.html


Please note the $50,000 may still taxable under STATE inheritance and estate taxes.

[banana republican]

7. Watch out for state taxes

In Washington State, there is a serious disconnect between the state taxes and the federal taxes due to the changes in the exemption amounts. any estate that is over approx $675K is at risk.

Currently there is a class action lawsuit pending. You *must* take specific actions inorder to preserve your rights in the class action.

You might think about a phone call to a CPA or an attorney.

[amazona]

6. yes absolutely right

And congratulations.

[Jeff in Cincinnati]

8. The answer to every Tax Question...

It Depends!

It depends on what you inherited, from whom you received it, and what you've done with it since you inherited it.

Most inheritances are not taxable (unless they're freaking huge -- like six figures of better). But IRA's and other deferred annuities from which you received payments are generally taxable in same manner as though the withdrawals had been made by the decedent. Unless you are the spouse of the decedent, these can't be simply rolled over into an IRA in your own name. Inherited property that has appreciated in value could be partially taxable at the time of sale.

Check with your attorney or tax professional.