Inheritance question about capital gains-

[Neilk]

Hello,

I should probably ask a tax attorney or accountant about this, but figured someone on the board could probably steer me in the right direction.

My father passed away in July and we are in the process of dealing with his estate. He was a resident of France and not a US citizen, so US estate laws don't apply to his holdings. His estate has to pay French taxes, so my question is, as we start to sell stocks/assets from his account to pay French taxes, at what point does what we sell become a capital gain for us that we have to report to the IRS?

I know that when stocks are sold the cost basis is stepped up to the date of death, but if we sell any stock to cover his French obligations and there is a paper profit, is that a capital gain for us?
I guess my ultimate question is at what point is anything we do taxable in the US, or at what point are the assets truly ours?

thanks,
Neil

[ossiblue]

I'm no tax attorney so this is just my opinion based on some basic research and your post information.

According to your post, your father was not a US citizen nor US resident and his estate is not subject to US federal or state estate tax. Assuming you are correct, then selling the stock and realizing a capital gain only increases the value of the estate, not you, and will be subject to French estate laws.

Once the estate tax is settled, the assets will be dispersed to the beneficiaries, you for example. There is no federal inheritance tax (only six states have a state inheritance tax) so, since you live in Texas, you would not be taxed on the assets you receive from your father's estate.

Again, my opinion based on your information and a general understanding of the situation. Best to check with a professional.

[stomachmonkey]

Originally Posted by ossiblue

I'm no tax attorney so this is just my opinion based on some basic research and your post information.

According to your post, your father was not a US citizen nor US resident and his estate is not subject to US federal or state estate tax. Assuming you are correct, then selling the stock and realizing a capital gain only increases the value of the estate, not you, and will be subject to French estate laws.

Once the estate tax is settled, the assets will be dispersed to the beneficiaries, you for example. There is no federal inheritance tax (only six states have a state inheritance tax) so, since you live in Texas, you would not be taxed on the assets you receive from your father's estate.

Again, my opinion based on your information and a general understanding of the situation. Best to check with a professional.

My thoughts as well.

But what I would question depends on the size of the estate.

Does the total fall under the tax free IRS threshold?

Do the French care who pays the obligations? Must it be the decedents estate or can anyone pay?

How does who pays impact French taxes and the ultimate value of the remaining estate once obligations are paid?

In a nutshell I think your bigger concern is ultimately French tax code.

[ossiblue]

Originally Posted by stomachmonkey

My thoughts as well.

But what I would question depends on the size of the estate.

Does the total fall under the tax free IRS threshold?

Do the French care who pays the obligations? Must it be the decedents estate or can anyone pay?

How does who pays impact French taxes and the ultimate value of the remaining estate once obligations are paid?

In a nutshell I think your bigger concern is ultimately French tax code.

Again, my understanding only.

The size of the estate does not matter, except for French tax purposes, and IRS regulations are not involved as the estate is from a French citizen/French resident.

There is no federal inheritance tax, so there is no tax free IRS threshold.

There is a lot of mixing of terms when looking of information about this issue. Many sites use the terms "inheritance tax" and "estate tax" interchangeably, but they are distinctly different. Reading articles about inheritance tax limits always winds up being about estate tax restrictions unless it specifically deals with individual state inheritance laws.

Bottom line, estate taxes are assessed on the value of a deceased's assets and are the responsibility of the estate to pay. Estates are subject to federal and state taxation. Inheritance taxes are assessed on assets received from a deceased's estate, are the responsibility of the beneficiary to pay and they apply in only (now) eight states in the US. No federal tax on assets received by an individual from the estate of a deceased.

[porsche4life]

You need to find an attorney who understands French, and US tax laws. There has to be one out there.

[ossiblue]

Originally Posted by porsche4life

you need to find an attorney who understands french, and us tax laws. There has to be one out there.

+1

[nota]

get the funds to the swiss banks
if you can
then LOL at the frogs taxes

a buddy's dad was a swede who died in Portugal
my buddy was a USA citizen/resident
all three nations wanted 50% tax on ten million = 150% of the estate total value
lucky for him the funds were in a swiss bank = no tax there and beyond the reach of the other 3 nations
his accountants rigged a ''generation skipping trust fund''
that saved the principal funds and only required tax on the interest imported as regular income
to the IRS or capital gains tax on stock sales [if not reinvested] if imported

no idea if the laws have changed to limit that now
or if the frogs can get you in the USA now

[speeder]

Dottore probably would have known all about this stuff. We've lost a lot of brain-power around here in the least few years...

Talk to an expert.

[Neilk]

Originally Posted by nota

get the funds to the swiss banks
if you can then LOL at the frogs taxes...

That was his plan until some data from one of the banks got leaked, so he decided to get ahead of the issue rather and risk it. I think in the end, the stress of dealing with all that contributed to his illness.

Due to all that, we are all set with French lawyers. I was just wondering about any hypothetical capital gain on stocks sold to cover his estate's fees and penalties, would we have to pay those gains or his estate? I'll reach out to the French lawyer, but was wondering from a US perspective.

I miss Dottore too. He was a truly fascinating man.