cost basis of inherited bond

Discussion in 'Tax' started by sandybeth, May 4, 2008.

  1. sandybeth

    sandybeth Guest

    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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    sandybeth, May 4, 2008
    #1
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  2. sandybeth

    joetaxpayer Guest

    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

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << ------------------------------------------------------- >>
     
    joetaxpayer, May 4, 2008
    #2
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  3. sandybeth

    DF2 Guest

    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.
    =============================================================

    --
    << ------------------------------------------------------- >>
    << 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. >>
    << ------------------------------------------------------- >>
     
    DF2, May 4, 2008
    #3
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