JTWROS tax free bond fund and co-owner of a checking account with a death

[dkolter]

My father had me as a JTWROS on a tax free bond fund. He passed and I converted the bond fund over to just my name within a month of his death. I then sold the bond fund.  He also had me as the owner of his checking account and money was distributed to me from that account that I was the co-owner. How is are these two situations taxed, if at all?  

[SusanY1 · Accepted solution]

There is no tax on the transfer of the checking account funds to you.  If the account earns any interest, that interest is now income to you only. 

For the bond fund, you will be taxed on any gain.

The amount of the gain will be determined based on the basis of the bond. Depending on your adjusted gross income, your capital gains tax rate could be zero.  

Your basis for the bond will be split in half, assuming you each owned 50% interest in the account before his death.  Half of the basis will be the value of the bond at the date you acquired your initial ownership.  The other half of your basis will be the value of the bond on the date of your father's death.  

For example, if you owned 100 shares of ABC bond and they were worth $10 per share the day they were put in the account and $11 per share the on the date of your father's death your basis would be as follows:

• 50 * $10 = $500
• 50 * $11 = $550                    $500 + $550 =  Total basis of $1,050

Now let's say you sold them for $12 per share, or $1,200. 

This would make your gain $1,200 - $1,050 = $150  

Often the brokerage statement that you will receive at the end of the year after your sale will have some helpful information about the fund's basis (Form 1099B), but it may require some adjustment for your situation.

Please accept my condolences on the loss of your father.  

[dkolter]

Thank you.  The 1099 is vague.  Since I converted over to just my name, they state unknown Transactions for which Basis is not reported to IRS. Report on form 8949 or part 11 based on actual holding period. This is a tax free bond mutual fund.  Shouldn't there be a zero tax obligation?  the 1099 states box 2 is unknown and box 5 is non covered.  the date sold or disposed is 11 days after my fathers death.  the gains for the whole period from 2/6/2012 to 9/19/19 is 870.33.  The initial investment was $5000. and on the date my father passed according to the estate taxes that my attorney filed, the account value was 5822.02.  I am really confused when I try to input the information with the correct codes.  I thought that I might want to just use the 5870.33(proceeds) as the costs basis since it is tax free....Would you be able to help me with this?  any help would be very much appreciated.  Thank you.  

[JulieS]

Even though the bond is tax free, it is possible to have a gain or loss when buying or selling an investment.

The first response you received is correct, but it sounds like you want really specific information about entering this in TurboTax.

1. Use the search box in the upper right corner to search for 1099-B.
2. Click on Jump to 1099-b.
3. Answer the first and second questions Yes.
4. Click on I'll type it in myself in the lower right corner.
5. Enter the name of the Bank or Broker, and click Continue.
6. Answer No, not employee stock, A few sales and No to the third and fourth question. Click Continue.
7. Click Continue again.
8. From the drop at the top, select Bond.
9. For How did you receive this investment? select I inherited it.
10. For What is the sales category? select Box E.
11. For Box 1a, 1c and 1d, use the information on your 1099-B form.
12. Box 1e is $5411.
13. Click Continue, check None of these apply.
14. Click Continue

Box 1e is half of the original $5000 purchase price        $2500

Plus half of the value on date of death $5822.02          +$2911

                                                                                       $5411

I am sorry for your loss and hope that you find this helpful.