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Hello,Cash is not and insurance payments are not but it depends on how the money is paid and if it comes from an account that would have been taxable to the deceased.Was the money from a retirement account (401k or IRA)?
An inheritance is not subject to income tax, but, certain items such as a pension, annuity, retirement, or IRA are “pre-tax,” so that even though your inheriting them does not cause them to be taxed, your distributions from them will result in income taxation. You would receive a 1099 from the plan administrator indicating how much, part or all, is subject to income tax.
Thank you for that information.
While the trust isrequired to file a tax return , the income and corresponding tax from this type of trust is passed through to the beneficiary. A K-1 income tax reporting form is generated by the original trust, sent to the IRS by the trust, and given to the beneficiary for filing with their taxes.
So yes, you would be taxed on the taxable income generated in the trust and passed to you.
If the trust fund pays you an income it's taxable. You pay tax as if you'd earned the money yourself. For example, if the trust pays you income from selling capital assets, you pay capital gains tax.
The K1 issued would report any income and it's type.