Liquidating inherited stocks receiving cash
But if the stock were valued at 5 a share, the estate must pay tax on 0,000 -- a total of ,500 -- before the shares can be distributed to the beneficiaries.
It's impossible to guess what tax rate might be imposed on estates after 2012.
Inherited stocks are not considered income, so you need not report them on your income tax return.
However, any income derived from those assets -- through dividends or sale of shares -- must be reported.
Although it is to your benefit to receive the highest stepped-up value, it is in the estate's best interest to use the lowest valuation, reducing the pre-distribution tax.
His fields of expertise include business and personal finance, sports, fitness and theater.Deciding the value of an estate determines whether -- and how much -- tax will be paid before the estate is distributed to the heirs.Part of that process also determines whether -- and how much -- capital gains tax will be paid in the future by persons who inherit stocks.Tax laws make it relatively easy to determine your tax basis on inherited stock or mutual fund shares.Put simply, the tax basis is the price of the shares on the valuation date.