Will I have to pay capital gains tax on an inheiratence that was invested in a mutual fund?

[mymoneyinfo]

My mother-in-law died last year after some conflict with the mutual fund company holding her account the mutual fund company finally recognized her son as the trustee of her account.  If he redeems the fund and distributes the proceeds are the heirs subject to capital gains taxes?

[MikeinSC]

The Mutual Funds would have a recalculated basis on her date of death.  Gain would be paid on any appreciation since that date.  

[PattiF]

No, you will not have to pay capital gains on inherited mutual funds. The FMV going forward will be the price at the date of death.

See page 9, right hand column for information on Inherited Property.

Pub 551 IRS