taxes, cds, and inheritance

[CountZero]

Ok, my grandmother just passed away not even a week ago. Somewhat unexpectedly she has left me a $5k CD. In addition I will be getting some portion of hte proceeds from selling any antiques not wanted by family folks. Anyways my question is do I pay taxes on the CD? on the inheritance from the selling of antiques?

I'm pretty broke so the money will help immensely, but I dont' want to pay off a bunch of credit debt only to get screwed with an extra $1k in taxes next april. Anyone know?

 

[Orsorum]

Insert mandatory "The rich only become rich because they pass money down; you shouldn't be allowed to give money to your descendents, it's wrong and you're exploiting the working class."

That being said, I'm sorry for your loss. Good luck getting everything figured out.

 

[CountZero]

Anybody know?

As far as the rich becoming richer my grandparents were anything but rich. Both from England, my grandfather an artillery man and then MP in WWII and my grandmother a nurse during WWII. After moving over here my grandmother worked an retired from kmart and my grandfather worked as a waiter at higher end restaurants. So they were anything but rich. And the only reason she has antiques is because she was old, the stuff she kept from when she was younger are antiques now. Of course I know you were being facetious but just covering my bases.

 

When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

 

[DigDug]

No. Estate and gift taxes exist, but there is a unified credit applied to them. Currently the credit is about $1million dollars. So unless your estate and gift taxes exceed that amount, you are fine. 🙂

 

[DaveSimmons]

Last I checked, but I'm not CPA 🙂

No taxes due by you, gifts/inheritance up to $11K don't even need to be reported. Over $11K you have up fill out forms but pay no tax up to I think $1 million.

 

[jadinolf]

Originally posted by: SampSon
When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

Where did you get this from?

 

[EagleKeeper]

You will need to get/record a current value of the CD and anything else you inherit.

Increased value from that point (basis) becomes taxable when disposed of.

As long as you do not "get rid ot the item" there is not immediate tax due.

 

Originally posted by: jadinolf

Originally posted by: SampSon
When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

Where did you get this from?

Guessing. Last time I cashed in a bunch of bonds and cd's I got a 1099.

 

[jadinolf]

Originally posted by: SampSon

Originally posted by: jadinolf

Originally posted by: SampSon
When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

Where did you get this from?

Guessing. Last time I cashed in a bunch of bonds and cd's I got a 1099.

Yes, but this is an inheritance. My wife died 16 years ago and I was the beneficiary od her IRSs, Keoghs, CDs, Life Insurance, etc.

There were no taxes involved.

 

Originally posted by: jadinolf

Originally posted by: SampSon

Originally posted by: jadinolf

Originally posted by: SampSon
When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

Where did you get this from?

Guessing. Last time I cashed in a bunch of bonds and cd's I got a 1099.

Yes, but this is an inheritance. My wife died 16 years ago and I was the beneficiary od her IRSs, Keoghs, CDs, Life Insurance, etc.

There were no taxes involved.

Oh, well, not for the inheritance.
When he turns thoes CDs into cash, he should get taxed on them.

 

[jadinolf]

Originally posted by: SampSon

Originally posted by: jadinolf

Originally posted by: SampSon
When you cash it in it will be recorded as income. They should give you a receipt and next year you will get a 1099 form in the mail to file with your taxes.

Where did you get this from?

Guessing. Last time I cashed in a bunch of bonds and cd's I got a 1099.

Yes, but this is an inheritance.

My wife died 16 years ago and I was the beneficiary of her IRAs, Keogh, CDs, Life Insurance, etc and there were no taxes involved.

 

[CountZero]

Hm, so I pay no taxes for inheriting the CD but if I cash it then I might have to pay taxes on that?

Thanks for the help so far. Gotta figure out which CCs to pay off next.

 

[DigDug]

yes, testamentary gifts are "stepped-up" to the market value. However, cashing it out WILL count as income, because the INCOME from a testamentary gift is not considered the gift. Income tax on that.

 

[DaveSimmons]

Originally posted by: CountZero
Hm, so I pay no taxes for inheriting the CD but if I cash it then I might have to pay taxes on that?

Thanks for the help so far. Gotta figure out which CCs to pay off next.

What you'd pay taxes on is only the increase in value since the time it was given to you, so if it was worth $10,000 when given and is now $10,123 when you cash out, you owe tax on $123.

Since most CD rates are under 2% a year right now, the increase in value won't be much.

Edit: More precisely, the only income will be the net between basis and current value, which will actually be reported by the bank as interest income regardless of whether you cash out the CD. So when the CD is cashed out you'll owe nothing on the change in value itself, just on the interest income that caused the change in value. The $123 above will appear on a 1099-INT form from the bank regardless of whether you cash the CD.