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Does inheritance of IRAs as a beneficiary into Mutual Bonds get taxed on federal income tax and state income tax in CA? Class A

Vista, CA |

I read exemptions to inheritance taxes are applied separately to each heir, would it be taxed and treated as income for beneficiary and are there exemptions for federal and CA in liquidating the Mutual Bonds from the estate to hier for a small estate under $45k in mutual bonds?

Attorney Answers 3

  1. Sorry, but I cant follow your question. The money in IRA is what is call IRD - income in respect of decedent. These assets do not get a step up in basis on death and are taxed as ordinary income to the extent of withdrawals from the account.
    Please rethink your question and set it out more clearly

    The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.

  2. I agree with Mr. Shultz. It is not clear what you are asking. You mention three different sets of taxes and it is not clear what you are really concerned about. Estate tax and income tax are completely separate and you can have no liability for estate tax, but not be able to escape income tax. IRAs are almost always subject to income tax, unless they are Roth IRAs. This is because IRAs provide for a great deal of tax deferment, during the decedent's lifetime. The government wants to be paid its tax, at some point, however.

    James Frederick

    ***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!

  3. You really should see a tax specialist on this. Your question is somewhat confusing, though. You are taxed on the value of your inheritance that you have received and not on the size of the estate that was distributed. State taxes are different than federal taxes.

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