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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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I have a client that inherited a note receivable. Is the interest

Customer Question

I have a client that inherited a note receivable. Is the interest from that note taxable?
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
Yes - that is taxable income.Please be aware that while inheritance itself is not taxable - some income may be classified as income is respect of the decedent (IRD) and as such is taxable.Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent s final income tax return.Income in respect of a decedent realized AFTER the death is taxable the same way as it were taxable decedent.
Expert:  Lev replied 6 months ago.
The administrator of the estate (or the trustee in case there is a trust) usually reports taxable portion on K1 which is used when individual tax return is prepared..So - inheritance itself is NOT taxable and is not taxable when distributed to beneficiaries.However - income realized by the estate or trust AFTER the death is taxable for the estate or trust and taxable for beneficiaries if distributed.Questions?