Tax question?

[marrell1482]

I'm twenty one I've been doing my own taxes since I was fifteen this year is a little different I believe. When my father passed my aunt was the beneficiary on his life insurance. After the estate was finished and what not she split the remainder of the funds between my sister and I. Would I have to claim that as unearned income? Also does it matter if I put all of it in a CD? I have yet to speak with any tax advisor of any sort. I'd rather not if I don't have to. But I was hanging around ingo tonight and figured I'd get some opinions. Thanks all!

 

[Bigtanker]

When dealing with the IRS, check with your tax advisor. An hour or so and $100 will save you so much time and bs if something is wrong. The IRS can really screw your life up if you mess up on your taxes. May not be this year or next, but they WILL show up and the longer it is, the more $ it will cost you.

 

[marrell1482]

Yeah I don't exactly have a tax advisor yet lol. Guess I'll find one

 

[Bigtanker]

Sorry to hear you lost your dad also. My condolences.

 

[marrell1482]

Thank you

 

[spirit390]

I talked with the lady (cpa)that does my taxes a couple of weeks ago and according to her if it is under $12,000 something dollars you can give that to a person as a gift and they get it tax free. Having said that you should always seek help from a pro because even timmy geithner could not get his taxes figured out. And you see where he ended up. Sorry for your loss

 

[bigus_D]

In my experience, the estate should produce a tax document. If I'm not mistaken (which I very well could be) it is a form of 1099. I used turbo tax when I had some inheritance. It took care of it.

That said, I was thinking the inheritance didn't start until a much larger number like half a million. THIS IS NOT TAX ADVICE.

 

[marrell1482]

But I wasn't the one that actually inherited it so I wouldn't think I'd get the form?

 

[hoosierdoc]

http://www.investopedia.com/articles/pf/06/transferlifeinsurance.asp#axzz2J5LEbvA4

Let's end the scam of the death tax. Also, good advice here of transferring ownership of a life insurance policy to the beneficiary at least 3 years before you die to save taxes.

 

[bigus_D]

But I wasn't the one that actually inherited it so I wouldn't think I'd get the form?

Ah... I misunderstood. Yes, the gift tax then.

 

[johnny45]

A gift to you does not represent taxable income to you.

Your aunt wil have no gift or income tax consequences unless the gift exceeded $13K ($14k in 2013).

If the gift exceeded 13K, and she is married, she can split the gift with her husband so that half of the gift is deemed to be to you from him. Under this scenario, the gift woulld have to exceed 26K (or 28K in 2013) before it would create gift tax considerations to your aunt.

If the gift is more than that, then your aunt may still be excluded from gift taxation if she has not used her life time taxable gift exclusion of $5 million.

Regardless of any of these scenarios, the gift is not taxable income to you.

 

[lww]

If the gift exceeded 13K, and she is married, she can split the gift with her husband so that half of the gift is deemed to be to you from him. Under this scenario, the gift woulld have to exceed 26K (or 28K in 2013) before it would create gift tax considerations to your aunt.

Just remember that in this case (splitting a gift) both spouses must file Form 709 regardless of the amount of the gift.

If the gift is more than that, then your aunt may still be excluded from gift taxation if she has not used her life time taxable gift exclusion of $5 million.

Here again Form 709 must be filed even if no gift tax is due because of the lifetime exclusion.

--Bill

 

[johnny45]

Just remember that in this case (splitting a gift) both spouses must file Form 709 regardless of the amount of the gift.

Here again Form 709 must be filed even no gift tax is due to the lifetime exclusion.

--Bill

That is correct and a good point.

Those are matters for the aunt to address. The OP does not taxable income regardless.

 

[lww]

Those are matters for the aunt to address. The OP does not taxable income regardless.

Quite right.

 

[Mr Evilwrench]

Yes, the gift tax is 13K up to 2012, with no taxes. The other would be an inheritance if I read the OP correctly, and would not have a tax implication until you get to a million. Do have a moment or two with a professional, though, a couple of hundred there may save you a pantload of interest and penalties if this isn't right.