Q: I'd like to give stock in my will -- how would that get taxed?
A: When an individual passes their property receives a step-up in basis to the current Fair Market Value either on the date of death or what's call the alternative valuation date. There are reasons to pick either I won't go into that right now.
What is basis? It's what you paid for the stock. So you buy 1 share of Acme at $40. If you sell it at $90 you pay tax on the gross revenue less basis 90 - 40 = $50
If you own the stock at death the basis "steps up" from $40 to $90 (FMV on date of death or alternative valuation date).
If when you pass the value of your estate is over the lifetime exemption (The amount you can give away without paying tax during your life and at death), currently $11.82 MM per person, you would pay estate taxes on the entire estate. If you're below that amount no estate tax is due.
Colorado does not have an estate tax.
No income tax would be due on the stock until the heirs (or the estate) sold the shares and they would pay tax on the net difference between the stepped up basis and the sale price. The nature of the income tax would be long-term capital gain regardless of holding period.
If there is a dividend it would be ordinary income to the estate if it was declared prior to distribution and OI to the heir after distribution.
That should cover all the different places the stock would be taxed.
Linda Simmons Campbell agrees with this answer
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.