Ask Terry Questions Taxes on stock at death?

Taxes on stock at death?

By Terry Savage on March 21, 2024 | Wild Card

This is a dumb question. I was listening to the Williams show on Wednesday. You said stock prices are valued at a person’s death. Does that apply for stocks in an IRA? What is the difference between stock held in a brokerage account and a IRA.

Terry Says

You didn’t listen closely enough!
Stocks and mutual funds purchased in a qualified retirement account like a traditional IRA are ALL taxed as ordinary income when the money is withdrawn. Your investment gains do not get any special tax treatment.

BUT, if you own stocks or funds OUTSIDE a retirement account, you MUST keep your cost basis. If you hold them longer than one year, you get preferential capital gains tax treatment at a much lower rate.

THE ONE EXCEPTION: Under current estate law, if you die owning the stock, (and presuming your estate is under about $14 million!), then there is no estate tax and no tax on the gains.
Your beneficiaries (named in your will or revocable living trust) inherit the stock, pay no taxes, and THEIR new “cost basis” is the value of the stock or funds on the date of your death! So when they sell, the tax basis is much higher!!



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