Year End Tax Tips 2008 Q&A - Gifts
Tax Tips Q&A
Read Kevin McCormally's answers to tax questions submitted by NBR's viewers.
Click on a tax topic to explore related questions and answers.
This feature is intended to provide general information and education and should not be considered as investment or tax advice. Each individual should consult his or her own tax, financial, or investment advisor.
Gifts, Estates, & Inheritances
QUESTION: Calculating Tax Due On Inherited Shares
1984 my father left 800 shares of Gallaher group plc,
on 6-4-o7 recived check $72,598.84.That closed account, how much tax should
i pay?
-- James O'Sullivan, Boca Raton, FL
ANSWER:
Sorry, but I don't know. If your father left the shares
to you after his death, then your "tax basis" in the shares was "stepped
up" to the share's value on the date of his death. You need to determine
what that was (a site like Bigcharts http://bigcharts.marketwatch.com/historical/
might help) and subtract the basis from the amount your received on the
sale. That's your long term capital gain, taxed at 15%. Sorry I can't
be of more help.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Taxes Due On Inherited Real Estate
After a brothers death, we received a small parcel of land in Southern Illinois in the year 2000. It sold in 2008 for approximately $20,000. The entire estate was less than 100,000. Are federal income taxes owed on the $20,000? Thanks Anne
-- Anne, Spokane, WA
ANSWER:
Not on all of it. When you inherit property (whether it's stocks or land or some other kind of asset) your "tax basis" becomes the property's value on the day the previous owner died. What you need is an estimate of the parcel's value at the time your brother died. A local real estate agent should be able to help. Subtract that 2000 value from what you got when you sold it to determine if you have a gain or a loss. If the value of the land has declined, you could actually wind up with a money-saving tax loss....along with the cash you got from the sale. You'll report the sale of the land on a Schedule D.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Buying Stock For Grandchildren
I regularly contribute to stock for my grandchildren
on their birthdays and at Christmas--Avon, Coca-Cola, RPM. Should I go
ahead with my modest contributions for this Christmas?
-- Sandra Rooney, Green Valley, AZ
ANSWER:
If you can afford to, I would certainly recommend it. Despite how scary this volatile market is, you know you can buy at bargain basement prices compared with a year ago. History tells us that over the long-term that your grandchildren have to invest, today will likely be looked back upon as a great time to buy. That doesn't mean the downdraft is over -- tomorrow may be an even better time to buy -- but over the long-term you can count on a market recovery.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Donating RMD Directly To Charity
A couple of years ago an individual was allowed to make
a charitable donation of his IRA distribution. Does it still apply this
year.? If so, does the distribution have to be made directly from the
bank (or financial institution) to the charity? I would appreciate your
reply. Thank you.
-- Lora
ANSWER:
Yes, the right for taxpayers at least age 70 1/2 to contribute IRA distributions DIRECTLY to charity was reinstated for 2008 and 2009. (It had expired at the end of 2007.)
You can contribute up to $100,000 this way, even if that is more than your required minimum distribution for the year.
And, yes, the money must go directly to the charity. If you take a distribution and then donate the money to charity, you have to report the distribution as taxable income. Yes, you'd get a tax deduction for the contribution, but you're better off never including the payout in your income.
Some taxpayers have the IRA write the check to the charity
but, rather than having the IRA custodian send the check to the charity,
the donor send the check with a personal letter. The key is that the check
be made out to the charity, not to the individual.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Is the QCD Still In Effect?
The QCD "Qualified Charitable Distribution" was originally for two years. Where an amount could be withdrawn from a 401 account tax free and given to a charity, without a taxable decution of course. Is that feature no longer available? Thanks
-- John Walters, Lenexa, KS
ANSWER:
The provision to allow IRA owners age 70 1/2 and older to make direct contributions to charity (with the contribution not showing up in their taxable income) was extended to cover 2008 and 2009.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
