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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Hi, in 2009, my father passed away and left me an inheiratence

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Hi,

in 2009, my father passed away and left me an inheiratence in the form of cash, REITS, and stock. The distribution occurred over two tax years.

I received the REIT converstion in the form of cash. Along with this distribution the IRS and I were provied a 1099-B, Proceeds from Broker and Barter Exchange Transactions.

I know I do not owe any tax on this $37,500 but I cannot find where it really says this.

I did not report this income because it was an inheiratence. Now the IRS wants to tax me.

I am responding to the IRS with copies of Death Certificates, etc.

But I would like to refer to the proper IRS code section also. Do you know the correct place to go?

Hi and welcome to JustAnswer:

 

The 1099-B means that the transaction was classified as a sale. You should have filed a Schedule D with your original return. To resolve this matter with the IRS, you should prepare a proforma amended return which includes the Schedule D including the transaction. Your basis in this sale is the fair market value of the REIT on your father's date of death.

 

Submit the "amended return" with the notice and a letter and request that the IRS adjust their findings based on this additional information.

MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and 2 other Tax Specialists are ready to help you
Customer: replied 6 years ago.

You have provide me the info I need. thanks.

 

I would like to know where it says this in the tax code. I wanted to reference this. I am proceeding without identifing the exact reference section.

 

Pub. 950 states no taxes for estates under $3.5 Mil. but I cannot locate an exact section.

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Please consider this an assist to Steve (he's probably watching football).

The code section you're looking for is:

26 CFR 1.1014-1 - Basis of property acquired from a decedent.

Read more: http://cfr.vlex.com/vid/1-1014-basis-property-acquired-decedent-19706946#ixzz19pdRdHrr

The fact that the estate is paying no taxes has nothing to do with it. You need to determine the FMV of the asset at the date of your father's death.

So, everything Steve told you is right on the money & this is just a little extra to answer your additional question/comment.

Note; You could have a deductible long term loss if the REITs lost value between the time your Dad died and they were sold. Maybe the IRS owes you money! :]

You don't need to answer these comments; if you do I'll send them to Steve unless it is a Yes or No answer.

Steve #2
Customer: replied 6 years ago.

OK, Again thanks, I am getting the information I need.

 

But one more thing popped up. Since I must go back to when my father died, the REIT generated income that I believe went into the estate because it was not re-invested into the REIT but used by my father as operationg income before he died.

 

So as you may guess, I also recieved some cash in FY 2009. So this cash must be listed on the tax form some where. OK, on form 1040 maybe line 28, Other Income. However, the instructionsfor line 28 say "do not report non-taxavle income such as gifts, insurance proceeds, and bequests. So does it need to be lsited elsewhere? I do not see where I can write that off/deduct it off my gross income. I assume Iam OK here because of the instruction of line 28 on IRS form 1040 does not send me anywhere!


I've forwarded your question to Steve Meyerson.

Hi Customer -

 

You do not report the actual inheritance. If the estate earned income, you should receive a K-1 that reports your allocated portion of the income earned.

 

When you sell assets (like the REIT) or stock you inherited, you will report the gain or loss on the sale. You will also report dividend and interest on securities that are transferred to you as part of your inheritance. Also you will be subject to income tax on all distributions from retirement plans (IRA/401(k)/etc)



Edited by Steven Meyerson, CPA on 1/2/2011 at 3:19 AM EST
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and 2 other Tax Specialists are ready to help you