Taxes on trust distribution


T

Troubled

I will soon receive a significant amount from a Crummey Trust. The trustee says I have a choice of taking the securities or having them cashed in and taking the cash. She says I will have to pay income tax on the significant realized gain if I take the cash. However she cautions me that no broker is likely to accept some of the securities. I have checked and that is true; none will take "HSBC Bank USA NA Tax Exempt Inc Fund".

So two questions...
1) Is that correct about having to pay taxes on realized gain if I take cash? I thought inheritances were tax free, but maybe a trust is different.
2) I left a voice mail asking if I can have her sell the single nontransferable security and then the other securities transferred, but haven't received a reply. Is there some reason reason that can't be done?
 
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S

Stuart A. Bronstein

Troubled said:
I will soon receive a significant amount from a Crummey Trust.
The trustee says I have a choice of taking the securities or
having them cashed in and taking the cash. She says I will have
to pay income tax on the significant realized gain if I take the
cash. However she cautions me that no broker is likely to
accept some of the securities. I have checked and that is true;
none will take "HSBC Bank USA NA Tax Exempt Inc Fund".
Who is holding the securities now? Why can't they continue to hold
them after you take possession of them?
So two questions...
1) Is that correct about having to pay taxes on realized gain if
I take cash? I thought inheritances were tax free, but maybe a
trust is different.
Technically a Crummey Trust isn't an inheritance. It was a series
of gifts made over time, and you were the owner (for tax purposes)
on each gift from the time it was made. So you get no step-up in
basis based on the death of whoever made the gifts, because the
gifts were made during lifetime rather than at death.
2) I left a voice mail asking if I can have
her sell the single nontransferable security and then the other
securities transferred, but haven't received a reply. Is there
some reason reason that can't be done?
Not that I am aware of. But it's up to the individual stock broker
what they will accept and what they won't. If the current broker
won't take it in an account for you, look around to see if you can
find someone who will.
 
A

Alan

I will soon receive a significant amount from a Crummey Trust. The trustee says I have a choice of taking the securities or having them cashed in and taking the cash. She says I will have to pay income tax on the significant realized gain if I take the cash. However she cautions me that no broker is likely to accept some of the securities. I have checked and that is true; none will take "HSBC Bank USA NA Tax Exempt Inc Fund".

So two questions...
1) Is that correct about having to pay taxes on realized gain if I take cash? I thought inheritances were tax free, but maybe a trust is different.
2) I left a voice mail asking if I can have her sell the single nontransferable security and then the other securities transferred, but haven't received a reply. Is there some reason reason that can't be done?
Over and above what Stuart said.... are you sure about that HSBC fund
name you posted? I was unable to find any HSBC mutual fund by that name.
If it is a money market fund, it does not matter as there won't be a
gain on liquidation.
 
J

John Levine

Over and above what Stuart said.... are you sure about that HSBC fund
name you posted? I was unable to find any HSBC mutual fund by that name.
If it is a money market fund, it does not matter as there won't be a
gain on liquidation.
HSBC has a bunch of proprietary funds they only sell to their
investment clients. (I happen to know about them because I'm one of
their clients.) I think this is an old one that isn't open to new
investors.
 
A

Alan

HSBC has a bunch of proprietary funds they only sell to their
investment clients. (I happen to know about them because I'm one of
their clients.) I think this is an old one that isn't open to new
investors.
....but even proprietary funds are publicly listed. I wouldn't think that
a closed fund would no longer be listed.
 
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T

Troubled

I will soon receive a significant amount from a Crummey Trust. The trustee says I have a choice of taking the securities or having them cashed in and taking the cash. She says I will have to pay income tax on the significant realized gain if I take the cash. However she cautions me that no broker is likely to accept some of the securities. I have checked and that is true; none will take "HSBC Bank USA NA Tax Exempt Inc Fund".



So two questions...

1) Is that correct about having to pay taxes on realized gain if I take cash? I thought inheritances were tax free, but maybe a trust is different.

2) I left a voice mail asking if I can have her sell the single nontransferable security and then the other securities transferred, but haven't received a reply. Is there some reason reason that can't be done?
The trustee finally got back to me. DTAX is something only available to their trust department; it can't be transferred to anyone. Great.
 
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