Inheritance

[Ombud]

Message deleted by Ombud.

[mwcpa]

no, an inheritance is not taxable income, unless the asset received has "IRD" associated with it....

another words, if the asset would have been taxable upon collection to the person who passed away, then it is income to you... example, an IRA distribution

[Ombud]

Message deleted by Ombud.

[Deleted]

Ombud,

Is this what is called a "pass-through" Trust? If so, you won't pay taxes on the inherited part but if you sell any of the appreciated assets you are likely to pay tax because you are inheriting the asset at the Trust's basis.

As an example, my husband was one of the remaindermen of his grandmother's Trust (his father and uncle were the original beneficiaries). When the grandmother's Trust was created on her death in 1971, the Trustees bought a number of blue chip stocks many of which were still held by the Trust upon my FIL's death in 2001. We've kept most but sold a couple and had to pay both Fed and CA capital gains tax on the capital gain from the purchase back in 1971 (or whenever the shares were bought). With the pass-through Trusts appreciated assets do not get the automatic step up in value that a normal inheritance gets.

In any case make sure that you get good tax advice from a qualified tax professional.

If you are sitting on the fence about selling an asset it's important to understand that both cap gains tax and marginal tax rates are likely to go up in the future. I wouldn't sell an asset just for tax reasons but I would give pause if I was thinking about doing it sometime in the near future.

[mwcpa]

"estate" or "inheritance" taxes are paid by the estate of the person who passed away, not by the beneficiary (rare exceptions).

But, if the "trust" generates income and passes assets to you there may be an income element depending how the trust is written. It can get complex and as I have not read the agreement, it makes sense, as noted by bon above, to meet with a qualified tax professional about things.

If you are the trustee you may also need to seek the counsel of a qualified attorney to review the documents to make sure you are doing what the trust requires.

[Ombud]

Message deleted by Ombud.

[rangerj]

What kind of trust is involved and what are its provisions? The difference CAN be in the basis of the assets inherited as well as the treatment of income, e.g. taxable to the heir, or not. See a tax professional.