Inheritance

[Duane Anderson]

I have a wife (2nd marriage for deceased) who inherited approximately $75,000 from her husband in property and cash. Two sons from first married received approximately $37,500 each in property and cash. Is this inheritance taxable to the sons? My understanding is that an IRS Form 709 is not required since it is an inheritance and not a gift (during lifetime) Have I blown a fuse ? IRS website is of little help, that I could find....Thanks,,,Duane Anderson

[BOB W]

Inherited property and cash is not taxable.

[Maribeth]

And if a 709 was required, it would be filed by the donor and not the donee.

[Roberts]

By the time the money is paid to those who have inherited it, any tax has been paid that is required to be paid.

[Jiggers]

Depends if the cash is taxable or not. I had a client that received a distribution from her husband's estate. I told her it was non-taxable and filed her return. Just before April 15th of that year she received a K-1 from the estate showing the cash as taxable. I questioned this and was told that it was the income from the estate, not the corpus, that was being distributed so that the estate didn't have to pay taxes.

Her husband's son, her step-son, was the executor.

Cost me a client when I had to amend and she owed.

I now no longer give that blanket answer until I get more information from the executor of the estate.

[ATSMAN]

If there is a decedent's estate or trust in play you can not answer that question without looking at all the facts.

I just informed a potential client to inform her siblings to hold up filing their returns because a K1 may need to be issued. The trust may specify that taxes will be paid by beneficiaries and not by the trust.

[DaveinTexas]

Good points

by Jiggers and ATSMAN. I've learned fairly quickly not to assume "cash" is not taxable to the beneficiary. Good to see you posting Jiggers, it's been a while (or maybe I've been under a rock!!).

Also, "inherited property" may not be taxable to the beneficiary upon inheritance but it will produce a reportable event one day (gain or loss upon disposition). The Tax Book has an excellent section on the basis of inherited vs gifted property; I can't recall which page but I think it's in the Investment Section (blue pages if I recall; section 6 maybe?).

Last piece of advice, NEVER visit the IRS website for tax advice. It is good for 2 things, 1) E Services and 2) Where to file addresses. That's it really; oh, and the IRM is handy too. That site is the biggest pile of garbage I've ever seen. Can't they figure out a way to improve the search feature on that site? Ridiculous! You could search for hours and not find what you need.

[S T]

Well IRS not so good for E-services these days, since we are no longer allowed processing of the POA online - and have to fax/mail and wait - Whose bright idea was behind that choice.

And I agree with some of the "search features" on IRS site as well -
could certainly use some improvement!

Sandy