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Subject:  Re: Tax On Inheritance Date:  2/12/2006  11:57 AM
Author:  irasmilo Number:  83847 of 124777

I guess that this is just another fluke in the US tax code. For inheritance of stocks or real estate, the heir gets a stepped-up tax basis and pays no taxes, but this apparently doesn't apply to annuities.

Not a fluke. An intentional part of the code. Stocks or real estate are assets and as such receive a step-up in value. The income (dividends, rents) from stocks and real estate are still taxable to the heir. An annuity is an income stream blended with some return of capital. It does not get a step-up in value, just as IRAs and pension plans don't either.


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