non-ira mutual fund
I inherited a percentage of some non-ira mutual funds from my grandmother. Within a week of “receiving my shares” I exchanged them within the same company for something with more aggressive growth. Now, I find out that the IRS considers this taxable since I “sold” them. I was just advised (after receiving a 1099-B) that since it is not an IRA, any sale/exchange is taxable. Is there anything I can do to avoid losing 28% of my inheritence?
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Permalink Submitted by Alan Spross on Tue, 2010-03-02 20:19
When did your grandmother pass?
If she passed before 2010, the cost basis for your inherited shares is adjusted to her date of death value. Therefore, you would only be taxed on amounts in excess of that date of death value for the shares. I am sure that any gains would be very small in relation to the value of the shares upon her death. Moreover, any gains that did occur would receive the LT cap gain tax rate. If there were losses, you would get a capital loss.
Any way her total estate could have been over 3.5 million, or she passed this year? That could result in changes to the paragraph above.
Permalink Submitted by Ben Breeze on Wed, 2010-03-03 02:10
She passed August 2009. Total disbusements of estate was less than 500K (that I know of). So if I am understanding your post, I would only pay long term capital gains that incurred in the six days between when my shares were signed over and the exchange?
Permalink Submitted by Ben Breeze on Wed, 2010-03-03 02:14
In rereading your post and my response, it would be taxed on the gains between her date of death and the exchange date?
Permalink Submitted by Alan Spross on Wed, 2010-03-03 02:36
Right. You would pay LT cap gains tax on gains occurring between her date of death and the date you redeemed the shares. The date signed over to you is immaterial. For example, an S&P 500 stock index fund is up around 10% from mid August till now. If you sold shares of a fund up 10% at this time, your LT cap gains would be around 10%. With a top tax rate of 15%, your tax bill would be only around 1.5% of the amount you received. You might also have a taxable loss, if some of the shares declined from the date of death value. You need to make a list of the date of death value for each of these assets. The estate executor may have that, or if not you can look them up on line. Yahoo Finance has historical values available.
Permalink Submitted by Ben Breeze on Wed, 2010-03-03 18:22
Thanks for your help!