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I actually have a Tax question. Federal Income Tax, State.

I actually have a...

I actually have a Tax question.

Accountant's Assistant: What state are you in? It matters because laws vary by location.

Federal Income Tax

Accountant's Assistant: Has anything been filed or reported?

Washington State. Yes, I have filed.

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

I am wondering about tax liability on a small inheritance from my mother.

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Customer reply replied 1 year ago
My 3 siblings and I each received an equal share of about $90,000 in savings and investments when my mother passed away last year. I treated this as regular income on my tax return. Was this correct? Do I owe federal income tax on inherited money?
Answered in 7 minutes by:
4/19/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,258
Experience: Taxes, Immigration, Labor Relations
Verified

That is not correct.

Inheritance SPECIFICALLY excluded from gross income for income tax purposes.
You do not need to report the value of your inheritance on your individual tax return.

However - it is possible that you receive taxable income AFTER assets are inherited.
That is classified as income in respect of the decedent IRD.

For instance - if you take distribution from inherited retirement account - that is taxable.

Let me know if you need any help.

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Customer reply replied 1 year ago
Ahh yes, the money was from retirement accounts and annuities that my mother had.

Then - yes - distributions are taxable.

But that what you requested AFTER your mother passed away - and such distributions are taxed the same way as if they were made to your mother were she alive.

I bet you received reporting forms 1099R for that?
Generally we may spread distributions from inherited retirement accounts over several years.

But you may take a lump sum distribution as you did.

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Customer reply replied 1 year ago
we took lump sums and yes I got 1099Rs. My wife believes with all her heart and soul that we should not have paid taxes on this money because it was "inheritance." Your explanation clears it up. Thanks. I won't say "told you so" to my dear spouse though​.

See here

https://www.irs.gov/publications/p559/ar02.html#en_US_2016_publink100099580

Income in respect of a decedent must be included in the income of one of the following.

  • The decedent's estate, if the estate receives it.

  • The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it.

  • Any person to whom the estate properly distributes the right to receive it.

There are some examples . Let your wife to make her own conclusion.

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Customer reply replied 1 year ago
I will do that.

I appreciate if you take a moment to rate the answer.
Experts are ONLY credited when answers are rated positively.
If you still have any doubts, need clarification - please be sure to ask.
I am here to help you with all Social Security / Tax related issues.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,258
Experience: Taxes, Immigration, Labor Relations
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