Skip -

That's a little too in-depth for me off the top of my head, but an
interesting question. Assuming it is not a hypothetical: the IRS is a
good and ultimately reliable source of information if you can find an
example in the forms and instructions. If not, call them and ask

I tend to think Bread may have it right, e.g. the principal due on the
note is part of the estate, and the interest accrues until the estate
is settled, after which it is income to the daughter.

Here is a guess: for federal income tax purposes, the daughter will
report the income using the Mother's formula pursuant to IRC Section 72
(income in respect of a decedent exception). For federal estate tax
purposes, the estate will include the fair market value of the note.


Gary Brolis
http://www.MechanicsofMoney.com
http://www.MechanicsofMoney.com/blog.php

On 2006-03-07 13:42:04 -0500, "HW \"Skip\" Weldon"
<skip5700removethis[at]hotmail.com> said:

- quote -

Is there any reason to think it wouldn't be taxed just like any other
bond she could have inherited?

There's an outstanding amount of principal, a current value (which
may - very likely doesn't - match the outstanding principal - this
is important for estate tax purposes, if the estate is large enough),
and each payment includes two pieces - a return of principal, which
is untaxed, and interest, which is taxed as income. AFAIK, that is.

"Step-up" is an issue for capital gains and the sale of an
appreciated asset.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

Mom sells investment property and takes a note. Mom dies. Daughter
inherits note with unpaid installments.

How are future installments taxed to daughter?

-HW "Skip" Weldon
Columbia, SC