Tax law question for POD CD

February 24, 2009 6:11 PM

Tax-filter and estate-filter. I live in Ohio. The deceased lived in Ohio and gave me a certificate of deposit upon her death using a payable on death designation during 2008. I then cashed it out and placed this money in a checking account. I am not otherwise involved with the estate in any way. I have usually used "free-file" to do my taxes.

Two-part question: a) does this money count towards adjusted gross income? and if so...um... how? (I know so little about it I'm not sure what I'm asking) b) assuming my AGI is still under the $56k limit for free-file, is there any other reason why I cannot or should not do my taxes in that matter since I inherited this CD?

(Hopefully this wasn't asked before but I couldn't find it. Also, irs.gov search sucks a long one.) Thank you!!

posted by RobotHeart to work & money (6 comments total)

Generally, gifts are taxable to the giver, not the recipient. I don't know what the consequences would be if the giver failed to pay taxes owed, though if the amount is small it is very unlikely anyone will notice or care. (This is not legal advice; consult competent counsel.)
posted by raf at 6:48 PM on February 24

26 U.S.C. 102(a): General rule: Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.

Any interest you earned on said money would count as income (see 26 U.S.C. 102(b)), but the inheritance itself is not taxed.
posted by valkyryn at 6:48 PM on February 24

Followup: It was a CD that matured once a week but at a pretty low rate, and it sat in the CD for about 6 weeks still under the decedent's name after her death. It was only in my name for a week before it was then flipped to my checking. Therefore, the interest is a pretty small consideration.

I would assume I would still have to say... something to the government about it though. I am so, so green. I've only had to do taxes for I think 4 years. Is there anyone out there who is used to using free-file, or who teaches others to use it, who would know if the system is complex enough to file a 1040 that is not the EZ form?
posted by RobotHeart at 7:20 PM on February 24

I am not familiar with the method used in "free-file."

But TaxCut or TurboTax would likely handle the question easily since it uses a question/prompt method of your information. But they are not free.
posted by JayRwv at 8:02 PM on February 24

Estate taxes, if any, are paid by the deceased. If you haven't received a 1099-INT indicating interest from anyone, then there is no interest to report. Just put the money in your checking account and forget about it as far as taxes are concerned.
posted by JackFlash at 10:09 PM on February 24

Do not worry about it. As others have said, estate taxes are owed by the estate, and gift taxes are owed by the giver. Unless you are the executor, it's not your concern. As far as the interest, if the CD was held by a U.S. bank, they will send you a 1099 if it is an amount the IRS would care about.

If you want to find information on irs.gov, a general search is generally not the best way to do it. Instead, you should go to their publications page, which lists all of their explanatory publications. The information you need is in Pub 950, Introduction to Estate and Gift Taxes. General information is Pub 17, Your Federal Income Tax.
posted by grouse at 7:11 AM on February 25