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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Me and my sister inherited a cd from my deceased mother.I know

Resolved Question:

Me and my sister inherited a cd from my deceased mother.I know you can cash it in at anytime without penalty.My question is do we have to cash it in or can we wait until maturity at 2012. Who will pay the taxes on the 1099 since we file separatly.Should we cash it in asap to avoid problems
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello bluetooth,

 

The ony taxes you will pay on this CD is on the interest that it has earned since your mother first opened it. The money she orginally contributed to open the CD has already been tax paid and will not be taxed again.

 

There is no need to cash it in now if you would rather wait and let it continue drawing interest until it matures in 2012. When you do cash it in, the bank will issue a 1099 form to the person whose name was actually listed as the beneficiary on the CD, and that person will report the interest earned on his or her own tax return.

 

 

Thank you bluetooth

 

 

Customer: replied 4 years ago.
my question is interest has to be reported every year.If you don't report it cause you didn't cash the cd in doesn't the irs know.The confusion is since we are both beneficiaries who will report the interest
Customer: replied 4 years ago.
my question is interest has to be reported every year.If you don't report it cause you didn't cash the cd in doesn't the irs know.The confusion is since we are both beneficiaries who will report the inter
Expert:  Merlo replied 4 years ago.

Hello again bluetooth,

 

Yes, you will need to report the interest earned each year on the CD.

 

Even though you and your sister were both named as beneficiaries, generally the bank will only show one of you as the primary account holder, and that is the name that will be used for tax reporting purposes, and that is the person who will report the interest on their return.

 

This is no different than any other type of investment account. The earnings are only reported under one person's name, even though the account may have multiple owners.

 

The only way around this would be to cash out the current CD, split the proceeds, and then you and your sister each purchase separate CD's in your name only.

 

 

Thank you bluetooth

 

 

Customer: replied 4 years ago.
say we cashed in all the cd's now and she passed away in early jan. are there any tax ramifications that we have to report
Expert:  Merlo replied 4 years ago.

Hello again bluetooth,

 

More than likely there would not be, unless there was any recent interest posted to the account. Interest tha the CD earned prior to your mother's death would be reportable on your mother's final tax return. You and your sister are only responsible for any interest earned from the time of your mother's death up until the time you cash out the CD. Normally CD interest posts every quarter or every 6 months, so if your mother just passed away in the last couple of weeks, it is not likely that any additional interest has been credited to the CD since that time. But you really need to check with the bank to make certain on that point.

 

 

Thank you bluetooth

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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