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cost basis of inherited bond

 
 
sandybeth
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      05-04-2008, 03:27 PM
Mother in law passed away last December. We inherited a bond from
her. This bond was called recently at the purchase price of 100 each
unit ($3000). When we inherited the bond it was down to 91 for each
unit (on the day she passed). Do we owe taxes on the difference
gained (9 per share) or just on the dividends we earned for the first
quarter of this year? I do know that the cost basis of stocks is
based on the day you inherited them, but not sure about the bonds.
SandyBeth

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joetaxpayer
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      05-04-2008, 04:42 PM
sandybeth wrote:

> Mother in law passed away last December. We inherited a bond from
> her. This bond was called recently at the purchase price of 100 each
> unit ($3000). When we inherited the bond it was down to 91 for each
> unit (on the day she passed). Do we owe taxes on the difference
> gained (9 per share) or just on the dividends we earned for the first
> quarter of this year? I do know that the cost basis of stocks is
> based on the day you inherited them, but not sure about the bonds.
> SandyBeth


You are allowed to value the estate date of death or 6 months later.
Entire estate, you cannot pick and choose. Usually, later is better,
unless of course, stock tanked during that time.

Joe
www.blog.joetaxpayer.com

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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DF2
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      05-04-2008, 06:27 PM
In misc.taxes.moderated, joetaxpayer wrote:

>sandybeth wrote:
>
>> Mother in law passed away last December. We inherited a bond from
>> her. This bond was called recently at the purchase price of 100 each
>> unit ($3000). When we inherited the bond it was down to 91 for each
>> unit (on the day she passed). Do we owe taxes on the difference
>> gained (9 per share) or just on the dividends we earned for the first
>> quarter of this year? I do know that the cost basis of stocks is
>> based on the day you inherited them, but not sure about the bonds.
>> SandyBeth

>
>You are allowed to value the estate date of death or 6 months later.
>Entire estate, you cannot pick and choose. Usually, later is better,
>unless of course, stock tanked during that time.


I think that the "Alternative Valuation Date" can only be used to
decrease the estate value (and therefore basis) rather than increase
the estate value. Also, if the value of the estate is below that
where there would be an estate tax, it is not an available option.


http://www.mckenzielaw.com/estate2.htm states
================================================== ==
Executor may elect to value assets included in the decedent's estate
at the alternate valuation date. Section 2032.

a. If property is not distributed or sold within six months, the
property may be valued at a date 6 months after the date of
decedent's death;

b. If property sold or distributed within 6 months of date of death,
property is valued on date of sale or distribution.

c. Election cannot be made unless both the value of gross taxable
estate and federal estate tax due are reduced by the use of the
alternate valuation date (to avoid step-up in basis where no
transfer tax assessed currently, i.e. taxable estate under
$675,000).

d. Any interest whose value is affected by mere lapse in time is
included in estate at value on alternative valuation date with
adjustment for change in value not due to mere lapse of time.
================================================== ===========

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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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