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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 15587
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My father passed away in June and I am about to receive @ 70K

Resolved Question:

My father passed away in June and I am about to receive @ 70K from an irrevocable trust. Will I have to pay federal tax on this amount? State tax (RI)? There was an annuity in the trust that will probably issue a 1099. Will i pay taxes on this?
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

How are you today?

MyVirtualCPA :

I'm sorry to hear about your loss.

MyVirtualCPA :

When you receive funds from an irrevocable trust, it is considered income to you and is taxed at your ordinary tax rate

MyVirtualCPA :

In terms of the annuity, the trust will handle the receipt of the 1099 and any income tax on the amount that is not passed through to beneficiaries

Customer:

My research indicated that it was not considered income (federal ) therefore not taxable.

MyVirtualCPA :

What is not considered income?

MyVirtualCPA :

The distribution from the irrevocable trust?

Customer:

yes

MyVirtualCPA :

http://wiki.fool.com/Tax_Implications_From_a_Distribution_For_An_Irrevocable_Trust_to_a_Beneficiary

MyVirtualCPA :

There's an easy to read article on the topic.

MyVirtualCPA :

Distributions from a revocable trust are not taxable to the recipient

MyVirtualCPA :

but an irrevocable trust distribution is taxable

MyVirtualCPA :

Do you have further questions?

Customer:

I thought this whole thing was set up so we wouldnt have to pay taxes. Silly me. Thanks for the link. It was much earier to understand than the ones Ive been looking at.

Customer:

Thank you!

MyVirtualCPA :

You can certainly take a copy of your trust document to a local professional, and see what they say about the structure of the trust.

MyVirtualCPA :

Because we can only speak in generalities

Customer:

ok. thanks!

MyVirtualCPA :

You're welcome

MyVirtualCPA :

Once satisfied with the answer, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

Will do.

MyVirtualCPA :

Thanks - you can try again

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 15587
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 5 other Tax Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thanks, Leslie for your positive rating. Please come back and visit MyVirtualCPA any time you need a question answered. It was a pleasure working with you today.

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Megan C
Megan C
Tax Professional
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Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level