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Subject Author Date
How To Report Inheritance Stuart A. Bronstein 03-09-2008
Posted by jmail7 on March 12, 2008, 9:57 pm
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> That's part of the question.  My guess is that the taxable income
> will be small, if there's any at all, due to stepped up basis.  But
> the decedent was a US citizen and resident, and his assets were all
> located in the US.  So my guess is that, as far as his wife is
> concerned it would be considered US source income.  

Capital gains of non-citizen non-residents are generally sourced based
on the residence of the seller. Code § 865(a). If the mother is a
nonresident alien and she sold stock of a U.S. company, it would not
be U.S. source income. Because it is not U.S. source income, no 30%
tax would be required to be withheld. If tax were required to be
withheld, then the daughter would likely be a withholding agent and
she should have withheld.

I believe that there are exceptions to sending 1099s to nonresident
aliens.

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Posted by D. Stussy on March 13, 2008, 3:12 am
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> > That's part of the question. My guess is that the taxable income
> > will be small, if there's any at all, due to stepped up basis. But
> > the decedent was a US citizen and resident, and his assets were all
> > located in the US. So my guess is that, as far as his wife is
> > concerned it would be considered US source income.
>
> Capital gains of non-citizen non-residents are generally sourced based
> on the residence of the seller. Code § 865(a). If the mother is a
> nonresident alien and she sold stock of a U.S. company, it would not
> be U.S. source income. Because it is not U.S. source income, no 30%
> tax would be required to be withheld. If tax were required to be
> withheld, then the daughter would likely be a withholding agent and
> she should have withheld.
>
> I believe that there are exceptions to sending 1099s to nonresident
> aliens.

But that answer assumes that the stock was sold by the two individuals as
individuals after it was distributed from the estate. However, upon
re-reading, the initial question sounds as if the estate sold the stock and
distributed the proceeds.

What we need to find out is what did the broker have on the account title.
Just because the 1099-B was in the names of the two individuals doesn't mean
that the account wasn't in the name of the deceased or his estate when
actually sold.

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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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Posted by Stuart Bronstein on March 13, 2008, 11:48 am
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>> > That's part of the question. My guess is that the taxable
>> > income will be small, if there's any at all, due to stepped up
>> > basis. But the decedent was a US citizen and resident, and his
>> > assets were all located in the US. So my guess is that, as far
>> > as his wife is concerned it would be considered US source
>> > income.
>>
>> Capital gains of non-citizen non-residents are generally sourced
>> based on the residence of the seller. Code § 865(a). If the
>> mother is a nonresident alien and she sold stock of a U.S.
>> company, it would not be U.S. source income. Because it is not
>> U.S. source income, no 30% tax would be required to be withheld.
>> If tax were required to be withheld, then the daughter would
>> likely be a withholding agent and she should have withheld.

Thanks, that's interesting information.

> But that answer assumes that the stock was sold by the two
> individuals as individuals after it was distributed from the
> estate. However, upon re-reading, the initial question sounds as
> if the estate sold the stock and distributed the proceeds.

In essence that's correct. It was all done in the process of dealing
with the estate, though no formal probate was required.

> What we need to find out is what did the broker have on the
> account title. Just because the 1099-B was in the names of the two
> individuals doesn't mean that the account wasn't in the name of
> the deceased or his estate when actually sold.

The stock was in the name of the father only, and put into the names
of the mother and daughter based on the daughter's sending them a
death certificate and declaration as to who the legal heirs were.
After changing the names, the stock was sold and the proceeds sent.

Stu

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by D. Stussy on March 12, 2008, 5:48 pm
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> wrote:
> > I was just asked a question and, since I don't do returns, I don't have
> > an adequate response.
> >
> > Mother and daughter inherited stock on the death of the father. Mother
> > is non-citizen, non-resident. When the stock was cashed, the broker
> > sent a 1099-B in the name of the mother and daughter.
> >
> > Daughter sent mother's half of the proceeds to her. Does the daughter
> > need to report this any way when she does her taxes?
> >
> > Thanks for your insights.
> >
> > Stu
>
> Whoever's soc sec # is on the 1099B should report 100% of the proceeds
>
> Then back out the 50% held as nominee

Technically, a nominee 1099-B should also be prepared. The mother will need
an ITIN if she doesn't have an SSN.

The broker probably assigned 100% of it to the daughter because it realized
it screwed up and didn't withhold the 30% it should have for income to a
foreign person.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Stuart Bronstein on March 13, 2008, 11:52 am
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>> Whoever's soc sec # is on the 1099B should report 100% of the
>> proceeds
>>
>> Then back out the 50% held as nominee
>
> Technically, a nominee 1099-B should also be prepared. The mother
> will need an ITIN if she doesn't have an SSN.

Do you mean a 10-99-B is prepared by the nominee to show how the funds
were actually distributed? That sounds like a better approach than
just attaching a note to the Schedule D.

> The broker probably assigned 100% of it to the daughter because it
> realized it screwed up and didn't withhold the 30% it should have
> for income to a foreign person.

They may not have known. The mother had a green card (and SS#) but
hasn't been to the US in years, so probably lost whatever rights (and
obligations) she had under it. She gave daughter her power of attorney
to deal with her share of the estate.

Stu

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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