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Earlier this year I inherited $175000 from an uncle. I have been told that there was a loss in value from the time my uncle passed away until the estate was settled and that I can deduct this loss from taxes. My portion of that loss is about $31,000. I was wondering if I could convert some IRA's to Roth IRAs and then apply my loss to taxes that I have to pay on the conversion.
it is value at time of death is what it is based on . when it is settled is irrelevant .
so that is cost basis . only if you sell , and have a loss , then like any loss you can take the loss . but you can only use the loss against other gains . you are limited to 3000 against regular income and then it gets carried over
it is value at time of death is what it is based on . when it is settled is irrelevant .
so that is cost basis . only if you sell , and have a loss , then like any loss you can take the loss . but you can only use the loss against other gains . you are limited to 3000 against regular income and then it gets carried over
I'm in exactly this situation. Respectfully, a slight rephrase:
The cost basis for the inherited asset is based on the value on the date of death, not the date you inherited it on. In order to be distributed to the heirs, the asset first has to be re-named (taken out of the name of the deceased, then into the name of the estate). Then, it gets transferred, divided, or liquidated in some way so it can be distributed to the heirs. That's what triggers the need to know the cost basis.
If there ends up being a loss in value between the date of death and the date you actually acquired it on, you can use that loss to offset capital gains generated by other assets. If you don't have any capital gains, you can claim it as a capital loss.
Here's the catch. You can only apply $3000 of that loss in any single tax year. The remainder gets carried over for the following tax year. Then in that following year you can apply another $3000 of the loss and so forth until the loss has been "used up". Roughly speaking, at $3000 per year, that $31,000 will take 11 years to use up.
Last edited by Parnassia; 11-05-2018 at 01:58 PM..
If the executor chooses to value the estate's assets on the "alternate valuation date" for estate tax purposes, your basis will be the value of the shares on that date. The alternate valuation date is either: (1) six months after the date of death or (2) if earlier, the date the shares were distributed to you, the heir.
Why would anyone choose the alternate date? Because it reduces the estate tax hit if the decedent's portfolio declines in value within six months after his demise. However, if the estate doesn't owe any federal estate tax, the alternate valuation-date rule is not available.
i don't see anything on being able to take a loss without actually selling that stock .
Never hear of taking this loss. The value of the inherited stock is the value on the date of death or 6 months latter if the executor of the estate files the election with the IRS.
Now if the OP received 175,000 as of the date of death and the alternate valuation date (6 months latter) is not elected and the OP sells the asset for say 100,000 the OP has a 75,000 deduction. This would probably be a long term deduction as the holding period would date back to the original purchase date. The whole 75,000 can be taken on a single return if the OP has 75,000 in capital gains. If not the OP can only take the 3,000 mentioned above.
I wasn't very clear. The assets were sold before executor turned them over to me. My question is can I convert IRA to Roth IRA and not have to pay taxes because of loss.
no , you can only apply up to 3000 against regular income . everything else CAN ONLY BE APPLIED AGAINST CAPITAL GAINS. you carry over to next year any part you can't use
Schedule D Capital Gain & Loss will direct how you can apply the inherited asset loss and carryover.
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