I am currently co-owner with mom on 4 CDs. When my mom dies do I have to pay any form of taxes on the CDs? Who pays the taxes

CDs are debt instruments in which the issuer (usually the bank) borrows money from the investor for a certain amount of time, and pays interest. Unless the CDs are being held in an IRA or some other tax-favored account currently, the interest they generate is taxable in the year accrued. I'm not a tax attorney; but I am pretty sure that tax is due on the accrued interest even on zero coupon CDs.

My point is that the registered holder(s) of the CDs will be responsible for the tax on a year by year basis. There is not likely to be any sort of capital gain associated with the CDs unless for some reason these particular CDs are traded on an exchange and they gained in value before you sell them. Even then, there would probabaly be some sort of step-up in basis upon your mother's passing on her share of the CDs.

That being said, standard joint tenancy rules will apply. If your account (or the individual CDs) are titled as Joint Tenants With Right of Survivorship, then you will automatically own your mother's share if she predeceases you. If the ownership is Joint Tenancy, then her share will become part of her estate and pass accordingly. Thus, you may or may not ever have to be concerned with the taxation of her share of the investment.

Dennis Phillips, Esq.
www.inawreck.com. Negligence is no "accident" (TM)
Member: Million Dollar Advocates Forum, Mensa, Florida Bar, American Association for Justice, Florida Justice Association, Palm Beach County Justice Association, Broward County Justice Association

I assume when you say co-owner you mean that you are joint tenants and that you will be the sole owner of the CD's by operation of law when your mom dies. Any interest that your mom accrues for the year up to the point she dies is her income to pick up on her final Form 1040. If her estate is taxable, that is, it exceeds the amount of the life time exclusion, she may owe estate taxes which the estate will have to pay.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this posting provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this posting cannot be used to eliminate penalties with the IRS or any other governmental agency.