You have helped me in the past, and I hope you can help me now. Earlier this year my grandfather died and I came to inherit. The legacy is divided into two parts:
I am a little confused about the tax consequences of my inheritance. My first question concerns the IRA. I know the rules have changed a few years ago; therefore, I would like to know what my options are. I was thinking of taking some money, about $ 85,000 and using it to pay off my mortgage. Do you think that is a good idea?
As for Ford’s stock, I plan to sell the property as soon as I get it. Will I have to pay taxes on sales?
Thank you, Ted
You are right that tax laws have recently changed with regard to acquiring an IRA. In 2019, the Safe Harbor Act was passed, which affected tax laws regarding inherited IRAs. Under this new law, you are generally required to delete an IRA account within 10 years. This eliminated the need for at least one annual allocation. As long as the IRA is abolished within 10 years, any allocation can be taken at any time.
When the allocation is made from a traditional IRA, the beneficiary is taxed on that amount as ordinary money. So, if you were to close the IRA and take out a lot of money, you would be taxed at $ 85,000. This can result in you putting yourself in a higher tax pocket and may be disqualified for certain deficits and loans due to higher income. Therefore, in most cases, I would not recommend taking the total amount in one year.
I generally recommend providing grants according to your tax status. In other words, just take enough each year to keep you in the same tax bucket.
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As with any tax law, there are exceptions. The main exception applies to the following beneficiaries: spouse of the IRA owner, a person less than 10 years older than the owner of the IRA, the minor child of the IRA owner, the disabled and chronically ill. These heirs can comply with the 10-year law or take advantage of the lifetime distribution laws that were in force before the Secure Act. Unfortunately, in the present case, legal exceptions do not apply.
With regard to the sale of Ford’s stock, you will be able to pay taxes. Your stock price is the fair value in the stock market from the date of death. So, if you sell the stock for $ 14 a share and the date of death the value was $ 13 a share, then you will pay tax on the $ 1 share. The sale of goods is subject to income tax and any cash gain or even loss due to the sale of inherited property, is considered long-term. Therefore, you will be taxed at a good rate of long-term profit.
It is important to remember that when you receive a non-IRA property as an inheritance, there is no tax on the value you inherited. Your only tax return is when you sell stock.
If you own an IRA, it is important to develop a distribution plan. This will result in lower taxes, and in my opinion, the money you save looks better in your wallet than anywhere else.
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