Tax Law (Questions About Taxes)/taxes

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Question
My mother passed away and had a Living Trust. Do I have to pay State and Fed tax on the house, bank account and annuity she left to me?

Answer
Maria,

Thanks for your question.

There are three types of taxes that may be of concern.

There is a federal estate tax, which would be paid by the estate out of the trust if there were any taxes involved.  Most likely there are none, as there is a lifetime exclusion for federal estates of $5,234,000.

Second is state inheritance or estate taxes.  Whether you owe these depends on your state of residence and the amount involved.  Most states no longer have these and those that do tend to have very generous exemptions for close relatives.

Your third concern is income tax.  Inheritances are not subject to income tax, but a gain on the sale would be taxable.  This would likely concern the house.  Your basis is the fair market value as of date of death.  Any amount above that basis (after deducting costs of sale) would be taxbale income reported on Schedule D as a long term capital gain.

Annuities occupy a special place in the area of income tax, similar in tax treatment to an IRA.  Most likely, this was a tax deferred annuity, meaning that she did not pay tax on the gain in the annuity from her original cost.  Therefore, any gain in the annuity amount would be taxable to you when withdrawn.  The company holding the annuity will issue you a 1099-R when you make withdrawals, indicating the taxable amount.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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