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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121268  
Subject: Re: Tax on Inheritance Date: 6/26/2007 12:05 PM
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Bill M:The will is currently in probate; he anticipates settlement by probably early next year. The dividends amount to about $1000 a month,which he understands is accruing to him. He has been advised to consult a tax professional with regard to his probable tax liability, which he is in the process of doing. I think he will owe taxes on the dividends for this year, even though he will probably not receive them until next year.

Maybe, maybe not. It depends on the estate's tax year. If the estate only has one year of existence, and it ends in 2008, the dividends will be taxable upon final distribution. If the estate has a tax year ending in 2007, the income of the estate for 2007 will be taxed to the estate on its own return, unless actual or required distributions make the income taxable to the beneficiary/ies.

His major concern is the taxes on the value of the stock. I'm sure a bequest of this kind falls under different rules than a family inheritance. Would appreciate any information anyone may have.

If there is a federal estate tax, it will be payable by the estate, before the probate process is completed, generally. You didn't indicate how big the total estate is, or what your son's share is. For deaths this year, the exempt amount is $2,000,000. And it doesn't matter what an heir's relationship is to the deceased.

Now if your state has an inheritance tax, it may kick in at a lower amount, and the relationship may matter, too. But again, the taxes would be handled during the probate process. (Which is one big reason they have probate.)

He would do will to address these questions to the attorney handling the estate, to determine the timing questions.

Bill A.
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