Have a Tax Question? Ask a Tax Expert
For income tax purposes inheritance is not taxable income neither in the US nor in California regardless the amount - as a recipient of inheritance you do not need to claim it as income. There is no any amount limit. Please see for reference IRS publication 525 page 30 - http://www.irs.gov/pub/irs-pdf/p525.pdf
In case some of inherited funds are in tax deferred account - 401k, IRA etc - that funds upon distribution will be taxable income for beneficiary.
For estate tax purposes - federal estate taxes might apply to estates with value above $2,000,000 (for 2008) - this tax is paid by the estate - not by heirs. Some other credits and deductions may apply that will reduce taxable amount for estate tax purposes.
There is no inheritance tax in the US. Please be aware that few states do have state inheritance and/or estate tax.