Are gifts, bequests, or inheritances taxable?

Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rentals, that income is taxable to you. For additional information, refer to Chapter 13 of Publication 17, Your Federal Income Tax. If you inherit an Individual Retirement Arrangement (IRA) or proceeds from a retirement (pension) plan, special rules apply. Refer to Publication 590, Individual Retirement Arrangements (IRAs), or Publication 575, Pensions and Annuities, for further information.

References:

• Publication 17, Your Federal Income Tax
• Publication 575, Pensions and Annuities
• Publication 590, Individual Retirement Arrangements (IRAs)

Is the money received from the sale of inherited property considered taxable income?

To determine if the sale of inherited property is taxable, you must first determine the basis (your cost) of the property. If you sell property for more than your basis, you have a gain on the sale which would be reported on Form 1040, SCHEDULE D, Capital Gains and Losses.

References:

• Publication 551, Basis of Assets
• Tax Topic 703, Basis of assets
• Tax Topic 422, Nontaxable income

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