Parent died in 2012 but apparently was due a refund of $3,000 in local taxes at some point prior to 2012. Parent died in PA (the Estate was settled in 2015). I am one of 3 children and I obtained the unclaimed amount which I will distribute to my siblings. What are the tax consequences for ending up with $1,000.
@kyra8fox If that $1000 included an interest compoment, the interest is taxable income to you.
Otherwise I wouldn't worry about it; it is too many years back for the IRS to cause any sort of ruckus. They have better things to do.
If your parent used itemized deductions to deduct their state tax refund from their federal income tax in the year they paid the tax, then the refund would be added back to their federal income in the year they received the refund. That would make this "income in respect of a decedent" to you and your siblings. (But note, it would never have been taxable income on the PA state return no matter what.)
But the problem, of course, is that you don't know which tax return this applies to, whether your parent used standard or itemized deduction, and whether the refund would have been a taxable add-back, and not even the IRS keeps records more than 10 years. So I agree that you should just ignore this on your tax returns.
In other words, if it would have been taxable to your parent, it is taxable to you, but that is impossible to figure out at this point.
And, FWIW, Pennsylvania does not pay interest on unclaimed property.