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Old 02-28-2014, 11:58 AM
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inheriting stock

My father is in the final stages of life, with death imminent. He has a portfolio of about $2m. There are 4 children, six grandchildren. Each grandchild gets a straight bequest of $30k, the remainder is split among the four children. Almost all of the portfolio is in (highly) appreciated stock.

Three of the four children have brokerage accounts, the fourth does not, and asks [insists] that the inheritance be sent "in money" rather than stock when the time comes. I understand that inheriting "stock" will preclude taxes on appreciated gains. If I sweep the stock into the various brokerage accounts, no tax. What happens if I sell the fourth share and convert it "to money"? Will it then be taxed and will she receive less?

Thanks.



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Old 02-28-2014, 05:09 PM
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Originally Posted by miffedone View Post

#1;Three of the four children have brokerage accounts, the fourth does not, and asks [insists] that the inheritance be sent "in money" rather than stock when the time comes. I understand that inheriting "stock" will preclude taxes on appreciated gains. If I sweep the stock into the various brokerage accounts, no tax.


#2;What happens if I sell the fourth share and convert it "to money"?


#3;Will it then be taxed and will she receive less?

Thanks.
#1;I guess in general yes; the beneficiary may owe capital gains taxes when he/she sells the stock later. Any stock in the deceased's estate is valued at the FMVon the day the person died. When the beneficiary receives the stock distribution, he/she owes no taxes. However, if he/she decides to sell the stock, he/she owes capital gains tax on the selling price of the stock minus the cost basis and any broker's fees incurred by selling.


#2;A person owes capital gains tax every time he/she turns a profit on a capital good, such as stock.The IRS taxes the selling price minus cost basis. If the deceased held the stock for more than a year, the stock qualifies for LTCG rates, which are 15 percent for TPs whose marginal tax rate is higher than 15%. If a descendant sells the stock at the same price or less than the estate valued the stock, she owes no taxes. If he/she sells it for a price higher than the estate value, he/she owes taxes on anything above the market value at the deceased's death.

#3;as mentioned above



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