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inherited savings bonds, who pays tax on the interest? **UPDATE**
Posted on 7/11/12 at 4:26 pm
Posted on 7/11/12 at 4:26 pm
the legatee, the succession, or do they go on the final personal return?
bonds are fully matured
UPDATE BELOW
bonds are fully matured
UPDATE BELOW
This post was edited on 9/17/12 at 7:36 pm
3
Posted on 7/12/12 at 12:01 pm to Tigerpaw123
The bonds will transfer through probate to the legatee. When the bonds are cashed in, the 1099 will be issued in the name of the legatee and the interest (which will be paid to the legatee) should be reported on the legatee's return for the year he/she cashes them.
I'll be happy to take that burden of paying the taxes...just sign the bonds over to me and the legatee won't have the burden! ;)
I'll be happy to take that burden of paying the taxes...just sign the bonds over to me and the legatee won't have the burden! ;)
Posted on 7/13/12 at 5:18 am to frb1951
quote:
The bonds will transfer through probate to the legatee. When the bonds are cashed in, the 1099 will be issued in the name of the legatee and the interest (which will be paid to the legatee) should be reported on the legatee's return for the year he/she cashes them.
I'll be happy to take that burden of paying the taxes...just sign the bonds over to me and the legatee won't have the burden! ;)
This. My oldman was one to buy those dam things every month for well over 50 years. He had a big arse box full of them.
Posted on 7/13/12 at 10:59 am to Tigerpaw123
quote:
bonds are fully matured
Check further into the situation. The taxes owed on bonds are due in the year they mature, ie might need to file amended tax returns for the original owner or take care of it through a 1041.
Posted on 7/13/12 at 12:54 pm to tirebiter
quote:
The taxes owed on bonds are due in the year they mature,
I have read this elsewhere as well, but most places I read say they are taxed the year they are cashed????
Also I have read that the executor of the estate has the choice of filing the interest on the deceased final return or having the legatees file it on their personal return for that year that they cash them in???
Posted on 7/14/12 at 2:36 am to Tigerpaw123
quote:
I have read this elsewhere as well, but most places I read say they are taxed the year they are cashed????
If some bonds matured in 2010 the taxes owed would be for tax year 2010, the taxes owed can't be magically pushed to 2012. The executor needs to examine the bonds and determine when each series matured. The beneficiaries wouldn't have owned or had access to the bonds at that point which would lead to an amended return if the interests had not been claimed. That's just an example, but someone needs to get on the ball, especially if you are discussing multi-year issuances that matured years ago.
Posted on 7/14/12 at 9:09 am to tirebiter
Thank you, after a lot of research last night, I agree with you, the IRS plainly states that the interest is taxable the year they are redeemed, or the year they fully matured, whichever comes first. This is not the way it has been discussed so far within the succession. We are talking about $50K worth of interest, so it is significant. All of the bonds have fully matured, some as recent as last year and the rest spread out over the previous 10-15 years.
So the bonds that have matured in the last 3 years I feel we can force the succession to do amended tax returns for, but what about the ones that matured earlier than 3 years ago?
So the bonds that have matured in the last 3 years I feel we can force the succession to do amended tax returns for, but what about the ones that matured earlier than 3 years ago?
Posted on 7/15/12 at 6:16 pm to Tigerpaw123
quote:
So the bonds that have matured in the last 3 years I feel we can force the succession to do amended tax returns for, but what about the ones that matured earlier than 3 years ago?
Speak with a CPA that has experience with the matter. Having no idea what the decedent's income was, then layering in additional interest from maturation of bonds annually, + penalties could add up. An estate attorney experienced with settling estates with significant financial assets might be of help, but many don't encounter savings or I-bonds as assets. A blind call to the IRS could be of help to, in a what if capacity and no need to give names, etc.
Posted on 7/15/12 at 9:18 pm to tirebiter
Thanks, finding someone that knows what they are talking about with savings bonds is tough, any suggestions in the BR area?
Posted on 7/16/12 at 7:41 pm to Tigerpaw123
No idea. I would call Treasury Direct and the IRS and ask what is the normal course of action for what you are faced with, just have some sample maturity dates and values when you call them and remain anonymous. You will have to interact with the Treasury/Treasury Direct as a bank is not going to get involved to cash them due to the aggregate value of the bonds and outstanding tax implications.
Posted on 7/17/12 at 11:05 am to Tigerpaw123
Keep the board posted on your findings please. I am in the same situation, but substantially less than 50k, we have like 8k worth found so far. TIA
Posted on 9/17/12 at 7:39 pm to Tigerpaw123
Thanx Tirebiter, I looked into your information, and even after asking several "experts" that told me incorrectly, the IRS through publication 550 simply states that the interest is to be paid when redeemed, or when reach final maturity , whichever comes first, I brought this to the attention of the executor and he said he would look into it, well after a few months, he got back to me and the estate will bear the expense of taxes, through amended tax returns
Thanks a lot
Thanks a lot
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