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In 2011 my wife received inheritance of stocks and one IRA.

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As we took money out...
In 2011 my wife received inheritance of stocks and one IRA. As we took money out of the stocks over the next five years should be have reported it to the IRS? We were under assumption that the there was a limit on inheritance before you had to report it. Is that true? We have never been contacted by the IRS but should we file a revised 1040 for the past 5 years?
Submitted: 1 year ago.Category: Tax
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8/22/2016
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
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Hi, my name is Mark. I would be happy to help you with your questions.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

What years did you sell the stock? When your wife inherited the stock she should have received a step up in basis. This means that your wife's basis would be the Fair market value at the time the individual passed away. So depending on how the stocks did once she inherited there may be a small tax impact. Was the account in her name that sold the stock?

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

The sale of these stocks should have been reported on Schedule D of your tax return. Did you wife received a 1099-B for these stock transactions for these years?

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

And these were never reported on your taxes?

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Customer reply replied 1 year ago
No. are we in deep with the IRS?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

Probably not, how much stock did you see each year?

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

Have you received any notices from the IRS?

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Customer reply replied 1 year ago
Over five years we sold about $85,000 worth.
Customer reply replied 1 year ago
no
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

I am surprised that the IRS did not send a notice. The IRS matches the returns to the 1099 information.

This is for 2011 thru 2015? Did you file 2011 and 2012 on time?

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

You would need to find the value of the stocks when your wife inherited them (at the time of the person's death). This would be the cost basis that you would used for the sales.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

Depending on how the stocks did from when you wife inherited them to the time where they were sold will determine if there is any capital gain or losses.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.

Please let me know if you have any questions or need clarification. I am happy to help.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

So if the returns were timely filed for 2011 and 2012 and the unreported capital gain was not more than 25% of your adjusted gross income, the statute of limitation for these years would have expired. This means that you do not have to report the stock sales for these years. For 2013, 2014, and 2015 you would need to report the gains. Depending on your tax bracket the capital gains rate range from 0% to 20%.

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