non qualified annuity taxed to heirs
client passed away and has 3 daughters. the cost basis and value of the contract was 25k but the death benefit is 45k. The total estate was valued at under 300k.
each daughter is entitled to 15k from the annuity.
Will each daughter have to pay State taxes on the full 15k?
or
just their portion of the value above the cost basis?
and
what if money to one of his sisters, would it be the same or since not a sibling its taxed differently?
Thank you.
Douglas
Permalink Submitted by Alan - IRA critic on Thu, 2014-03-27 22:05
State taxable income would the excess of the cost basis. Each daughter receives 15k of which 8,333 is cost basis from investment in the contract, The taxable amount will be 6,667 for each. Same taxation for other beneficiaries as well.