Inherited installment obligation.


S

ssd

In pub 537 it says that if you inherit an installment obligation it is
taxed the same as it was for the seller. However; when you inherit
property, the basis of the inherited property is the FMV on the date
you inherit the property. The FMV of an installment obligation will
the sum of the principal plus the gross profit to the decedent. Thus
it seems to me that the gross profit percent, to the beneficiary,
should be zero because of the stepped up basis. What am I missing?
 
Ad

Advertisements

D

D. Stussy

ssd said:
In pub 537 it says that if you inherit an installment obligation it is
taxed the same as it was for the seller. However; when you inherit
property, the basis of the inherited property is the FMV on the date
you inherit the property. The FMV of an installment obligation will
the sum of the principal plus the gross profit to the decedent. Thus
it seems to me that the gross profit percent, to the beneficiary,
should be zero because of the stepped up basis. What am I missing?
You recognize all income after that date.
 
Ad

Advertisements

A

Alan

In pub 537 it says that if you inherit an installment obligation it is
taxed the same as it was for the seller. However; when you inherit
property, the basis of the inherited property is the FMV on the date
you inherit the property. The FMV of an installment obligation will
the sum of the principal plus the gross profit to the decedent. Thus
it seems to me that the gross profit percent, to the beneficiary,
should be zero because of the stepped up basis. What am I missing?
You are missing the exception in the Internal Revenue Code that treats a
disposition of an installment sales contract after death differently
than other dispositions of assets. Heirs must use the same gross profit
ratio used by the decedent on the installment payments.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top