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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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inheritance taxes

Customer Question

I receive an inheritance fund of $8 million from a relative in Nigeria. I had paid my tax to the Nigerian government. Do I have to pay taxes here? If so, how much? I live in AZ.
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

Neither the U.S. nor AZ has an inheritance tax. Thus, any inheritance you receive as a beneficiary is tax-free to you (assuming relevant estate taxes have been paid). In limited instances the U.S. and/or foreign governments may attach beneficiary inheritances where the estates were subject to estate tax and failed to pay them prior to distribution to the heirs. However, should you ever inherit a tax-deferred account such as a 401(k) or pension account, any distributions you take would be subject to income tax the same as if the decedent owner took a distribution.


However, I strongly caution you to disregard the email or notice you have received regarding a potential inheritance from Africa. African and particularly Nigerian "inheritance" scams are infamous right now. On this board alone I have seen at least eight people asking what the tax consequences were to receiving an inheritance from a "long-lost" relative in Africa/Nigeria. Do no fall for it.


See the following link as an example:


http://www.crimes-of-persuasion.com/Nigerian/inheritance.htm

Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 3 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: Thanks. I had a relative who worked there & died of a car accident & I am receiving the inheritance--8 million. I had $6000 deducted from the inheritance fund to pay the Nigerian government taxes of which I have the receipt. I was wondering if I have to pay any taxes on my inheritance money to the US or AZ government.
Expert:  Christopher Phelps replied 11 years ago.

As I said above, you will not owe any form of Federal or AZ tax strictly because you received an inheritance. Although you will owe income tax on any earnings such as interest the inheritance generates after its invested.


Whatever you do, do not send money or give access to your bank account to whomever is telling you you have an inheritance coming. That is how the scam works. You do not have to pay money to receive an inheritance. If you are absolutley going through with this, i would set up a bank account with $5 in it and give the "authorities" the wire instructions to put the money in the account. When they come back and say they need to charge you a fee or some other excuse, you will know its a scam. Please go look at the link I gave you above.

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