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Old 03-04-2011, 04:25 PM   #1
disneyfanforever
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Tax question- Do you have to report an inheritance of less than $10,000?

My grandma passed away this last year, and I am preparing my uncle's tax return. She has a CD that was divided among her 3 children and each child received around $7000. A checking account was also divided and each child got around $2000. Total was less than $10,000 per child. There is a house but nothing has been done with that although uncle is currently living there (but it is in all 3 names). Do we need to report any of this money on taxes?

Thanks in advance for your help!
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Old 03-04-2011, 04:28 PM   #2
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No.

ETA you will need to report any interest earned on the CD between the date of her death and it's distribution.
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Old 03-04-2011, 04:48 PM   #3
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The CD was not distributed until it matured about 4 months after my grandma died. The interest income on the CD is being filed on my grandma's tax return. Is that correct?
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Old 03-04-2011, 04:49 PM   #4
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Except there are some states which tax an inheritance.
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Old 03-04-2011, 04:53 PM   #5
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Quote:
Originally Posted by disneyfanforever View Post
The CD was not distributed until it matured about 4 months after my grandma died. The interest income on the CD is being filed on my grandma's tax return. Is that correct?
It would be the tax return for your Grandma's estate. This would be a 1041 with a different tax ID number than your Grandma's SSN. Only those things that occurred up until her date of death would go on her final 1040.

Other scenarios possible, but would need more information.
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Old 03-04-2011, 05:30 PM   #6
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I believe that the interest up until her death date would be on her tax return. If the CD was POD then it would automatically transfer to the new 'owners' when she died. The tax on the interest from her death date to the day collected would be the responsibility of the new 'owners.'
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Old 03-04-2011, 07:20 PM   #7
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Get an appraisal done on the house now if you haven't yet. The house should be appraised for the value on the date of death. When sold that will be the the new cost basis. If the house is sold for more than the appraised value (new cost basis) the taxable amount will be the selling price less expenses (such as commissions, etc)minus appraised price.
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Old 03-04-2011, 08:30 PM   #8
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Normally nothing that is part of an inheritance is reported on a Federal Income Tax Return. The only exception is from money that was in a tax-deferred retirement account.

Once the inherited property is in the hands of the beneficiary, any income related to that property after the date of distribution would be taxable.

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Old 03-04-2011, 08:53 PM   #9
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Do you have to report money left over from an insurance policy?
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Old 03-04-2011, 09:10 PM   #10
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Quote:
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Do you have to report money left over from an insurance policy?
Usually no. There are some circumstances where you do but you would have been told that by the insurance company, most likely, when the claim was made.
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Old 03-04-2011, 10:19 PM   #11
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Except there are some states which tax an inheritance.
PA we had to list my mil on a line on tax form. It was a lot less then $10,000.
Not sure if the PA increase has gone up, but that was 25% when I was talking with attorney recently.
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