turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Attend our Ask the Experts event about Deciphering Your Tax Forms on Feb 19! >> RSVP NOW!
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

ireff
New Member

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

A transfer on Death account that has appreciated stocks, once we sell them to close out the account, where or who pays the taxes on the gains etc?  Does the account pay the taxes prior to sending out to the TOD beneficiaries??

Thanks

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Best answer

Accepted Solutions

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

The Estate can do a couple different things.

Transfer the assets directly to the heirs,

or Sell the assets while held by Estate.

Either way, the Estate or the heirs get a stepped-up basis which is value at the date of death.  So there will be minimal gain or loss if sold quickly. 

So to answer your question, who pays the tax is the one that sells the stock, the Estate or the heirs. I have seen it both ways, however generally most sell all or most of the assets and distribute cash to the heirs, as this makes it easier.

Then the Estate file a 1041 Estate for income after the date of death. 

https://turbotax.intuit.com/small-business-taxes/

Now one last thing if this a Retirement Account, it is all ordinary income when distributed versus a taxable brokerage account. A 1099R would be issued if a retirement account. 

View solution in original post

5 Replies

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

The Estate can do a couple different things.

Transfer the assets directly to the heirs,

or Sell the assets while held by Estate.

Either way, the Estate or the heirs get a stepped-up basis which is value at the date of death.  So there will be minimal gain or loss if sold quickly. 

So to answer your question, who pays the tax is the one that sells the stock, the Estate or the heirs. I have seen it both ways, however generally most sell all or most of the assets and distribute cash to the heirs, as this makes it easier.

Then the Estate file a 1041 Estate for income after the date of death. 

https://turbotax.intuit.com/small-business-taxes/

Now one last thing if this a Retirement Account, it is all ordinary income when distributed versus a taxable brokerage account. A 1099R would be issued if a retirement account. 

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

A transfer on death account does not go through the Estate. It is now yours (or whoever is named). You have a stepped up basis, as pointed out.

There is no reason to sell any stock unless you think the market will go down now, after eight up years.

The executor is responsible for any Estate, or Inheritance tax and will have to claw back money from you if the there is any tax due and there does not remain enough in the estate to pay it.

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

Agree and overlooked the transfer on death.  So the heirs own it, and do get the stepped up basis.
gtibollo
New Member

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

I am the executor for the estate of my friend.  The will says that she "leaves everything to me."  Her estate is only the house, its furniture, and $3,000.00 in checking.  Her savings account ($60,000) at the local bank and her one stock market account ($2,000,000) are already registered as TOD to one local charity.  Yes, two million to one charity.   My lawyer said that the TOD accounts are outside of the will and I can't even get an executor fee on it.  She died in January of 2020.  I have the responsibility to file her 2019 income tax.  In 2019, her stocks made over $150,000 in profit.  I'm assuming that she owes money to the state and the feds for income tax on the 2019 investment gains.  Does the charity (beneficiary) have to pay the 2019 income tax on her TOD investments or does it come out of what I earn from selling the house and furniture?  Is there anything I should be doing while I am waiting for the probate surrogate court to officially appoint me the executor?

Thank you so much,

DMarkM1
Employee Tax Expert

My mother passed 1/6/2018 Her brokerage account is a Transfer on Death. Is it included in the estate? if we sell the assets who is responsible for the taxes on gains?

The charity will get a stepped up basis on the stocks and when the charity sells the stock they will get a 1099-B to report any gains or losses on those sales.  If the stocks are paying dividends the charity will get a 1099-DIV to report those dividends.  

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question