Liquidating inherited stocks receiving cash

When you trade stocks, the goal is to buy low and sell high.So if you have some stocks with sizable gains you might want to cash them in and book your losses.If you sell at a lost, you can claim a loss on your taxes.

There are many important issues when it comes to inherited stock, especially the step-up in basis rules.

Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose.

For more information about the tax on unearned income of children and the parents' election, see chapter 31. Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income.

However, some amounts you receive that are called dividends are actually interest income. Part of a child's 2016 unearned income may be taxed at the parent's tax rate.

If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return.

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