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Merlo
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Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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MY TWO SISTERS AND I INHERETED SOME CDS AND REAL ESTATE PROPERTY

Resolved Question:

MY TWO SISTERS AND I INHERETED SOME CDS AND REAL ESTATE PROPERTY UPON MY MOTHERS DEATH WILL LIKE TO KNOW ABOUT FLORIDA TAX AS WELL AS FEDERAL SHOULD
WE PULL OUT CDS WHICH ARE CURRENTLY GETTING 4% INT.
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello Lantz,

There is no inheritance tax at the federal level and there is also no inheritance tax in the state of Florida.

The IRS does impose an estate tax, but that only applies on estates with a total value which exceeds $3.5 million (2009 limit). For deaths occuring in 2008 the limit was $2 million.

If your mother's estate did not exceed the allowed limit, then no tax is due at this time. However, you may have some future tax liabilitiers.

1. The real estate property which you inherited is in itself not taxable to you. However, if you later sell the property, and gain you have would be taxable as a long term capital gain. When you inherited real estate property, you are automatically given a stepped up basis in the property. What that means is that your new basis (cost) will be treated as the fair market value of the property on the day you inherited it. When you later sell the property your gain is figured by taking your selling price less your basis. If you sell the property soon after your mother's death, then your selling price will likely be close to your new basis, so you may have very little gain or no gain at all, in which case no tax would be due. But if you hold on to the property and it appreciates and you then sell it for a profit which exceeds your basis, then you would owe capital gains tax on any gain from the sale.

2. The CD's you have inherited are not taxable, up to the amount your mother contributed to the CD's. Any interest that the CD's have earned would be taxable to you when you cash them in. The interest would be taxed as ordinary income. If the CD's are earning 4%, if you do not need the money right away then it might be wise to leave them sit until maturity, as it is hard to find 4% today on any other safe investment like a CD.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you Lantz.

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