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Paying Tax On Inheritance

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM #LAW 651

By Ilyce R. Glink and Samuel J. Tamkin

Summary: A reader has inherited a CD and stock from their mother. They have no taxable income and are wondering if they need to pay tax on this inheritance. Sam and Ilyce believe that the reader will have no tax liability.

Q: My mother passed away last year and she left me a certificate of deposit that I cashed in.
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My only income is from Social Security and from the Veterans Administration. I have not had to pay income tax as my income is not taxable.

Will I owe income tax on the money from the certificate of deposit and cash from the stock that my mother left me.

A: If the certificate of deposit and the bank stock were in you mother’s name and you inherited these items, it is unlikely that you would owe any money for federal income tax purposes. Any money that would have been owed would have been paid by your mother’s estate.

When it comes to stocks and other assets that have appreciated over time, you inherit these assets at the value they had at the time of your mother’s death. Unless one of these accounts was of a type that had designated you as a beneficiary and are taxable to you directly, you should not have to pay any tax on the amounts you received.

Frequently, the bank or institution that held the funds can assist you in determining whether you will have to pay a tax or not. Sometimes, before they distribute the money, they will ask whether you want any of the money withheld for income tax purposes. When they do ask, it’s usually because the money will be taxable to you.

For more information, you should talk to an accountant or your tax preparer.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




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