Selling a card you inherited - Income tax

[Rhotchkiss]

No tax. At death, the basis becomes fair market value. If you then sell it for fair market value, no tax. But make sure you can prove that at death it was worth what you sold it for

[BobC]

Quick answer is no, you wouldn't owe any capital gains tax on selling the inherited card for $50K if its FMV on the day the person who left it to you passed away was also $50K.

As others have already mentioned, when a person passes away, all of the assets they leave to their heirs are valued at their then current FMV as of the decedent's date of death (DOD). And regardless of what the decedent may have originally paid for the items now being left to their heirs (or what some other alternative tax basis they had in those assets may have been), that FMV at the DOD becomes the new "stepped-up" tax basis of the assets in the hands of the heirs, such as yourself. In other words, when you inherited a card that was worth $50K on the day the person that left it to you passed away, your tax basis in that card is now $50K as well, as if you had just purchased the card for $50K yourself. So, if you ever go and sell the card later on, you get to deduct that $50K "stepped-up" tax basis from the sale price you get for it to determine what your capital gain (or loss) on the sale of the card is for federal income tax purposes.

FYI, depending on where you live, there may also be state and local taxes involved, which I'm not even going to try to get into. And also know that it is possible to pick an alternative valuation date to come up with the FMV of an inherited asset, and thus its "stepped-up" tax basis for tax purposes. Not going to get into any particulars regarding what or how to do it, but just know that you can choose a valuation date of up to 6 months after the decedent's date of death. Most people just go with the (DOD) for FMV purposes though.

Also know that the sale of inherited assets by an heir is automatically afforded Long Term Capital Gain/(Loss) treatment, regardless of how long they end up owning the inherited asset before selling it. In other words, you don't have to wait a full year before selling the inherited card to get the LTCG max rate of no more than a 20% federal tax on the profit from the sale of the card.

Now, even though you may not end up with a taxable capital gain from selling the inherited card, you still should be reporting its sale, along with showing the "stepped-up" tax basis you're claiming for it, on your federal income tax return for the year in which you end up selling the card. The real question then becomes how do you prove to the IRS, should they ever come asking questions of you, what your "stepped-up" tax basis in the card is. First thing I would suggest in your case is to check and see if there was someone appointed as the executor or fiduciary of the decedent's estate, and find and ask them if there was any kind of formal or informal appraisal or valuation done to come up with a FMV for the card you inherited. And if so, see if you can get a copy of it for your own tax records, and to support the "stepped-up" tax basis you reported for the card on your income tax return. And if the decedent's estate was large enough that a federal estate tax return actually had to be filed for it, you definitely need to find the executor/fiduciary responsible for filing it, and ask them exactly what the FMV of that card is shown as on the decedent's estate tax return. You want to make 100% certain that you then use the exact same FMV for that card, as shown on the decedent' estate tax return, as the "stepped-up tax basis when you sell and report it on your personal federal income tax return.

And if by chance there was no estate tax return that needed to be filed, and no formal valuation or appraisal was done of the card by the estate executor or fiduciary, you may want to do your own formal/informal valuation or appraisal to be able to document and support how you came up with the FMV of that card you are going to use as its "stepped-up" tax basis for your own income tax purposes. You could try reaching out to someone you may know at an AH/dealer who has experience in the hobby, to see if they'd be willing to give you a written appraisal/valuation of the card in question. Absent that, maybe go online or search AH sites to see if you can find comparable sales of the same card to support the FMV you're using to determine its "stepped-up" basis. And as a sort of last resort if you can't really find any recent comps, or have anyone provide an appraisal/valuation for you, as long as you end up selling the card fairly quickly after inheriting it, you could always just argue to the IRS that not enough time has passed for the card's FMV to have changed from what it was on the date the person you inherited it from passed away. In which case you'd argue that what you ended up selling the card for set its FMV for tax basis purposes as well.

The tax code/section reference that Adam posted and referred to in the previous post actually has to do with the decedent's estate and the potential filing of a federal estate tax return, NOT with you as an heir to the estate and the selling of an inherited asset from it, and the reporting of that sale on your personal income tax return. If you want to be more technically correct, here is the accurate description and references to look at for additional info regarding the reporting of "stepped-up" tax basis from sales of inherited assets. This following is from the actual IRS website:


Basis and Recordkeeping
Basis is the amount of your investment in property for tax purposes. The basis of property you buy is usually its cost. There are special rules for certain kinds of property, such as inherited property. You need to know your basis to figure any gain or loss on the sale or other disposition of the property. You must keep accurate records that show the basis and, if applicable, adjusted basis of your property. Your records should show the purchase price, including commissions; increases to basis, such as the cost of improvements; and decreases to basis, such as depreciation, nondividend distributions on stock, and stock splits.

If you received a Schedule A to Form 8971 from an executor of an estate or other person required to file an estate tax return, you may be required to report a basis consistent with the estate tax value of the property.

For more information on consistent basis reporting and basis generally, see Column (e)—Cost or Other Basis in the Instructions for Form 8949, and the following publications.

Pub. 551, Basis of Assets.
Pub. 550, Investment Income and
Expenses.


This is a link to a copy of the ITS Form 8949:


https://www.irs.gov/pub/irs-pdf/f8949.pdf



The following is an excerpt from the IRS instructions in regard to Column (e) of Form 8949, as referenced and referred to above:

Column (e)—Cost or Other Basis
The basis of property you buy is usually its cost, including the purchase price and any costs of purchase, such as commissions. You may not be able to use the actual cost as the basis if you inherited the property, got it as a gift, or received it in a tax-free exchange or involuntary conversion or in connection with a “wash sale.” If you don't use the actual cost, attach an explanation of your basis.

The basis of property acquired by gift is generally the basis of the property in the hands of the donor. The basis of inherited property is generally the fair market value at the date of death. See Pub. 551 for details.

If you sold property that you inherited from someone who died in 2010 and the executor made the election to file Form 8939, see Pub. 4895.

If you elected to recognize gain on property held on January 1, 2001, your basis in the property is its closing market price or fair market value, whichever applies, on the date of the deemed sale and reacquisition, whether the deemed sale resulted in a gain or an unallowed loss.

Schedule A to Form 8971—Consistent basis reporting. If you received a Schedule A to Form 8971 from an executor of an estate or other person required to file an estate tax return and you are a beneficiary who receives (or is to receive) property from that estate, you will be required to report a basis consistent with the final estate tax value of the property if Part 2, column C, of the Schedule A you received indicates that the property increased the estate tax liability of the decedent. In this case, first use an amount that is equal to or less than the final estate tax value listed in Part 2, column E, of the Schedule A. This amount is your initial basis in the property. You then adjust your initial basis in the property, as described under Adjustments to basis, later. The resulting amount is entered in column (e) of Form 8949.
.
This is an Image: taxtip.gifIf you received a supplemental Schedule A to Form 8971, use the most recently dated supplemental Schedule A to determine your initial basis.
.

Penalties for inconsistent basis reporting. If you use an initial basis that is more than the amount listed in Part 2, column E, of the Schedule A to figure your basis in the property and Part 2, column C, of the Schedule A indicates that the property increased the estate tax liability of the decedent, you may be subject to a penalty equal to 20% of any resulting underpayment of tax because the basis reported isn’t consistent with the final estate tax value of the property.
For more details, see Pub. 551, Pub. 550, or the Instructions for Form 8971 and Schedule A, available at IRS.gov/Form8971.

Hope this helps.

[Peter_Spaeth]

Bob what if -- horrifying I know -- the decedent's estate tax return understates the value of the card, in an effort to avoid or minimize taxes? Is the heir really stuck with that?

[MikeGarcia]

Originally Posted by Peter_Spaeth

Bob what if -- horrifying I know -- the decedent's estate tax return understates the value of the card, in an effort to avoid or minimize taxes? Is the heir really stuck with that?

.; Aw , great . Now you've got all of on here afraid of dying.

..

[Casey2296]

Originally Posted by Peter_Spaeth

Bob what if -- horrifying I know -- the decedent's estate tax return understates the value of the card, in an effort to avoid or minimize taxes? Is the heir really stuck with that?

Wouldn’t one get an appraised value at time of death on the assets in order to establish a new cost basis?

[BobC]

Originally Posted by Casey2296

Wouldn’t one get an appraised value at time of death on the assets in order to establish a new cost basis?

You would normally think so, but what I haven't really addressed and mentioned directly yet is that in regard to filing a federal estate tax return, every single U.S. taxpayer has a lifetime estate and gift tax exemption they get to use. What this means is that when a person passes on, whoever is in charge and responsible for the handling of the deceased's estate, they are charged with figuring the current net FMV of the estate. (You do get to deduct some expenses and outstanding debts, so it is a net estate value you get to use for federal estate tax purposes.) Then once you've calculated the decedent's net taxable estate value, you compare that net taxable estate value to the lifetime estate tax exemption amount they have available, and if the available exemption amounts exceeds the net taxable value of the estate, there is no federal estate tax due, and technically no federal estate tax return has to be filed.

Currently for 2022, the lifetime federal estate and gift tax exemption each person has in $12.06M. So if a person passing away this year only has say about $1M-$2M in net FMV of assets owned, including this one particular baseball card supposedly worth $50K, the executor/fiduciary of that decedent's estate knows they are nowhere close to ever being required to file a federal estate tax return for the deceased. So why would they ever bother going through all the time, effort, expense and so on to get all the decedent's assets formally appraised and valued. They really don't need it file anything.

So in that case, the heir who inherited the card probably can't count on the estate's executor/fiduciary having done any appraisal or valuation leg work, and will have to proceed on their own to come up with what the value should be to use for the card's "stepped-up" tax basis on their personal federal tax return. And also figure out how to document that value on their own to satisfy the IRS, should they ever come knocking and asking questions. And that is also why in the original post I made about this topic, I suggested the OP check with the estate's executor/fiduciary anyway to see what, if any, formal or informal appraisal/valuation work they may have done. And to then make sure what the OP ended up using for the card's "stepped-up" tax basis agreed to what the fiduciary/executor of the decedent's estate had come up with. That way should the IRS ever come back IRS ever come back on the heir/OP, they couldn't also go back to the estate and catch the OP/heir using inconsistent FMVs.

And FYI, that lifetime estate and gift tax exemption amount, at $12.06M under current law, changes annually each year due to inflation, and goes up slightly. However, if a person chooses to give gifts in any year that exceed the annual federal gift tax exclusion amount (currently at $16,000 per person for 2022), any excess annual gift to a single person over that $16K amount gets deducted from that person giving the gift's lifetime estate and gift tax exclusion exemption amount. So that gets deducted from what they then get to pass on to their heirs free from estate taxes when they die. In simple English, and using the OP's scenario as an example. If instead of inheriting the $50K card, the person gifted it to the OP this year, and then passed away later on before the year-end. In that case, the $50K gift exceeded the 2022 annual gift tax exclusion amount of $16K by $34K. So the gift isn't taxable to the person giving it, but they have to file a federal gift tax return (Form 706) for 2022, and the $34K excess gift gets deducted from their lifetime estate and gift tax exemption amount and reduces it to $12.026M ($12.06M - $34K). So whoever ends up handling that person's estate, after they pass away later this year, now only has $12.026 of the lifetime estate exemption left they can use to offset against the estate's net taxable value to determine if they even have to file a federal estate tax return, and pay and federal estate taxes due.

The kicker is that the government can change that lifetime estate and gift tax exemption amount whenever they want, if they can get enough votes. As it is, come 2025, that lifetime exemption amount will likely drop by $5M-$6M as part of the sunset provisions of the 2017 Tax Cuts and Jobs Act, along with a lot of the other tax laws and changes passed as part of that act from 2017. That will be a dramatic change that could end up affecting a lot more people's estates in the not too distant future. And the current government administration had already talked about making changes to various aspects of the federal estate laws, such as doing away with the "stepped-up" basis rule for inherited assets, dropping the lifetime estate and gift exemption amount even further, and so on. They haven't gone forward and changed anything....yet, but that could change at anytime. So you have to stay aware of changes to these rules and laws if you have a sizeable estate. Remember this for context, when Hillary was running against Trump, one of her key tax proposal points she kept pushing was to drop that lifetime estate and gift tax exemption amount down to $1M per person. Think about that. Add up the value of your house, 401K, some other savings and assets, and then toss your collection on top of that, and how many of you now may be having to think about owing federal estate taxes after all. A millionaire today is nothing like what one was back when I was a kid

When it comes to thinking about how our collections may impact our families and our estates, it isn't something you necessarily can just do some simple research on, and then set it and forget it. You have to be aware of potential and constant changes to tax and estate laws, as well as changing values to what we have. Ask questions and have some trusted source(s) to got to for help and answers.

I think I have everything pretty much covered now. LOL

[Hondo]

Bob, thank you for taking the time to explain all this detail!
Much appreciated!

[BobC]

Originally Posted by Hondo

Bob, thank you for taking the time to explain all this detail!
Much appreciated!

No problem, hopefully it can be useful information to you and others.

Just remember though, it can, and often does, change dramatically over time. LOL

[BobC]

Originally Posted by Peter_Spaeth

Bob what if -- horrifying I know -- the decedent's estate tax return understates the value of the card, in an effort to avoid or minimize taxes? Is the heir really stuck with that?

Sorry, I was updating the post to add more info, and to cover what Adam said so that people would understand that what he posted actually referred to the decedent's estate, and not the personal tax return of an heir who was selling inherited property.

The two may be linked in some aspects, such as being sure to showing the same appraised value of the card for FMV and "stepped-up" basis purposes.

As for your specific question, that could be a real problem. If you look at the last section from my previous post, referring to instructions from IRS Form 8949 (the form on which the sale of the card would be reported) it very specifically spells out the potential for a 20% penalty of any underpaid tax the heir may have because he didn't use and report the same tax basis for the card on his return as it was reported on the decedent' estate tax return. The IRS will also tack on interest for any underpaid tax as well.

Unfortunately, the FMV and basis of the card is determined by the decedent's estate and the executor/fiduciary in charge of it, and is considered the de facto accurate figure(s) to then be used by the heirs. If an heir disagrees with the estate's valuation after the fact, the smartest thing to do would probably be to try and go back to and convince the executor/fiduciary to file an amended federal estate tax return (Form 709), and change the FMV of the card to what the heir believes is correct and accurate, assuming it can be supported and proven by an actual appraisal or valuation. That way the heir can file their personal federal income tax return using a "stepped-up" tax basis for the card that now agrees with the decedent's estate tax return.

However, by filing an amended federal estate tax return, depending on the size of the decedent's estate it is possible that could now result in the decedent's estate owing more federal estate tax (plus interest and penalty) instead. And now you have to remember and consider that the maximum federal estate tax rate under current law is at 40%, while for the heir, the maximum federal LTCG tax rate is only 20%. So in looking at keeping as much money in the family and away from the IRS as possible in this case, it may actually be better for the heir to swallow the mistake, and just use what was shown as the FMV on the originally filed decedent's estate tax return as the "stepped-up" tax basis for the card's sale as reported on the heir's personal federal tax return. The heir may only be getting hit with a 20% tax, whereas on the estate return it may cost the family up to 40% on the same card valuation difference.

In any event, it will end up being a PITA for everyone, and probably require the tax accountant(s) to go back through the heir's personal federal tax return and the decedent's federal estate tax return to figure out the actual tax, penalty and interest costs for the different ways to try and fix this, and see which one costs everyone involved the least amount of money. And that includes the potential added cost for the time and effort to file an amended estate tax return for the decedent's estate.

The one thing you absolutely do not want to do though is to have the heir ignore what may have been reported by the decedent's estate to the IRS in regard to the card's FMV for "stepped-up" tax basis purposes. Showing a different value that does not tie back to what was reported on the decedent's estate tax return will likely get both the executor/fiduciary of the estate, and the heir selling the card, a couple of love letters from the IRS with a few questions for both of them as to what the heck is going on. And the tax accountant(s) likely get(s) to charge both sides even more now to handle the IRS' audit inquiries. Sooooo much fun being a CPA/tax accountant!

[Exhibitman]

I agree, Bob. I cited the regulation only to make clear that the appraisal doesn't have to jump through the same hoops as an appraisal for a charitable donation of an asset like a card. I also agree that the OP's first stop is the executor of the estate or the trustee of the trust (if the item was in a trust) to ask about whether an appraisal was done and whether an estate tax return was filed. The overwhelming majority of estates will not hit the threshold that requires a return (it is over $12 million right now), so odds are that there was nothing filed and no appraisal done. Which brings us to valuation. If the card is a slabbed mainstream card, odds are there are plenty of comparable sales around the time of death that the collector can rely on to make a case for FMV. If the item is esoteric, however, there may be a need for an appraisal from someone who has enough experience in the field to be able to qualify as an expert in court. As I recall, Heritage at one time actually offered that kind of service for a fee, so perhaps that is a place to start.

I guess I am fortunate that all the stuff I inherited from my parents was crap.

[Peter_Spaeth]

Originally Posted by BobC

Sorry, I was updating the post to add more info, and to cover what Adam said so that people would understand that what he posted actually referred to the decedent's estate, and not the personal tax return of an heir who was selling inherited property.

The two may be linked in some aspects, such as being sure to showing the same appraised value of the card for FMV and "stepped-up" basis purposes.

As for your specific question, that could be a real problem. If you look at the last section from my previous post, referring to instructions from IRS Form 8949 (the form on which the sale of the card would be reported) it very specifically spells out the potential for a 20% penalty of any underpaid tax the heir may have because he didn't use and report the same tax basis for the card on his return as it was reported on the decedent' estate tax return. The IRS will also tack on interest for any underpaid tax as well.

Unfortunately, the FMV and basis of the card is determined by the decedent's estate and the executor/fiduciary in charge of it, and is considered the de facto accurate figure(s) to then be used by the heirs. If an heir disagrees with the estate's valuation after the fact, the smartest thing to do would probably be to try and go back to and convince the executor/fiduciary to file an amended federal estate tax return (Form 709), and change the FMV of the card to what the heir believes is correct and accurate, assuming it can be supported and proven by an actual appraisal or valuation. That way the heir can file their personal federal income tax return using a "stepped-up" tax basis for the card that now agrees with the decedent's estate tax return.

However, by filing an amended federal estate tax return, depending on the size of the decedent's estate it is possible that could now result in the decedent's estate owing more federal estate tax (plus interest and penalty) instead. And now you have to remember and consider that the maximum federal estate tax rate under current law is at 40%, while for the heir, the maximum federal LTCG tax rate is only 20%. So in looking at keeping as much money in the family and away from the IRS as possible in this case, it may actually be better for the heir to swallow the mistake, and just use what was shown as the FMV on the originally filed decedent's estate tax return as the "stepped-up" tax basis for the card's sale as reported on the heir's personal federal tax return. The heir may only be getting hit with a 20% tax, whereas on the estate return it may cost the family up to 40% on the same card valuation difference.

In any event, it will end up being a PITA for everyone, and probably require the tax accountant(s) to go back through the heir's personal federal tax return and the decedent's federal estate tax return to figure out the actual tax, penalty and interest costs for the different ways to try and fix this, and see which one costs everyone involved the least amount of money. And that includes the potential added cost for the time and effort to file an amended estate tax return for the decedent's estate.

The one thing you absolutely do not want to do though is to have the heir ignore what may have been reported by the decedent's estate to the IRS in regard to the card's FMV for "stepped-up" tax basis purposes. Showing a different value that does not tie back to what was reported on the decedent's estate tax return will likely get both the executor/fiduciary of the estate, and the heir selling the card, a couple of love letters from the IRS with a few questions for both of them as to what the heck is going on. And the tax accountant(s) likely get(s) to charge both sides even more now to handle the IRS' audit inquiries. Sooooo much fun being a CPA/tax accountant!

I've had personal experience with an appraiser whose schtick clearly was to dramatically understate the value of household items amd antiques to keep down estate tax. Wink wink. It was a family situation and there wasn't much I could do about it and fortunately I had and have no interest in selling anything that came to me, but I wasn't at all happy about it.

[BobC]

Originally Posted by Peter_Spaeth

I've had personal experience with an appraiser whose schtick clearly was to dramatically understate the value of household items amd antiques to keep down estate tax. Wink wink. It was a family situation and there wasn't much I could do about it and fortunately I had and have no interest in selling anything that came to me, but I wasn't at all happy about it.

The value of household items, furnishings and stuff like that is one thing. IRS agents aren't all the pricks that many people make them out to be. At least they haven't been in the past. For things like that, as long as your valuations are somewhat reasonable, I don't think you'll get much of a hassle from them. However, a single $50K baseball card may stick out like a sore thumb to them, and could possibly trigger some inquiries.

Plus, don't forget that this recently passed Inflation Reduction Act, that is expected to shortly be signed by Biden, includes an $80 billion increase to the IRS' budget over the next decade or so. I've heard as part of this huge budget increase that they intend to hire tens of thousands of new IRS employees/agents as a result. So, how much anyone want to bet this is going to result in more audits and investigations of corporate and other high-income taxpayer returns in the near future? And along with going after the more "well-to-do" taxpayers, I can definitely see part of the IRS' expanded scrutiny focusing on estate taxes as well. Oh, and this is also just in time for the start of all the new 1099-K forms that are going to begin being sent out to people in early 2023 for their $600 or more in proceeds from sales using Paypal and other such third-party payment platform services.

And I've actually acted as an estate appraiser myself for a colleague a couple decades ago. Managing partner of a firm I was at had an unmarried dentist friend/client that passed, and he made my colleague the executor of his estate. My colleague knew I was a bit of a collector, so he asked me on company billable time to go through the deceased's collections for estate tax purposes, and figure out what they were worth Back then, Ohio had an estate tax as well, so even if we lucked out and the net value of the estate value came under the federal lifetime estate tax exemption amount, the estate was still going to get hit with Ohio estate taxes. The dentist had several things he collected. Animation cels, poker chips, a small gun collection (had a nice vintage WW II German luger), and baseball cards. The best of his collection was complete '40, '41 Playball sets, all raw and in binders. Was actually kind of fun to learn a bit about some of these other collectibles.

Peter, in your case, I think that the more time that passes, the more likely you are to be okay should you ever sell anything. It is just as hard, if not harder, for the IRS to go back and definitively prove an actual FMV of some somewhat obscure antiques and items from long ago. And don't forget, since the appraiser valued the items low, when you do sell them, the result is bigger gains, resulting in more taxes due. Assuming you even report the sales that is. LOL As I previously mentioned, as long as valuations seem to be at least somewhat reasonable, the IRS is unlikely to argue too much. Plus, the IRS has a three-year statute of limitation on estate tax returns, from the date they were originally filed. So, if these appraisal issues you mentioned were from longer ago than that, I wouldn't go worrying about it at all anymore.

[Peter_Spaeth]

Originally Posted by BobC

The value of household items, furnishings and stuff like that is one thing. IRS agents aren't all the pricks that many people make them out to be. At least they haven't been in the past. For things like that, as long as your valuations are somewhat reasonable, I don't think you'll get much of a hassle from them. However, a single $50K baseball card may stick out like a sore thumb to them, and could possibly trigger some inquiries.

Plus, don't forget that this recently passed Inflation Reduction Act, that is expected to shortly be signed by Biden, includes an $80 billion increase to the IRS' budget over the next decade or so. I've heard as part of this huge budget increase that they intend to hire tens of thousands of new IRS employees/agents as a result. So, how much anyone want to bet this is going to result in more audits and investigations of corporate and other high-income taxpayer returns in the near future? And along with going after the more "well-to-do" taxpayers, I can definitely see part of the IRS' expanded scrutiny focusing on estate taxes as well. Oh, and this is also just in time for the start of all the new 1099-K forms that are going to begin being sent out to people in early 2023 for their $600 or more in proceeds from sales using Paypal and other such third-party payment platform services.

And I've actually acted as an estate appraiser myself for a colleague a couple decades ago. Managing partner of a firm I was at had an unmarried dentist friend/client that passed, and he made my colleague the executor of his estate. My colleague knew I was a bit of a collector, so he asked me on company billable time to go through the deceased's collections for estate tax purposes, and figure out what they were worth Back then, Ohio had an estate tax as well, so even if we lucked out and the net value of the estate value came under the federal lifetime estate tax exemption amount, the estate was still going to get hit with Ohio estate taxes. The dentist had several things he collected. Animation cels, poker chips, a small gun collection (had a nice vintage WW II German luger), and baseball cards. The best of his collection was complete '40, '41 Playball sets, all raw and in binders. Was actually kind of fun to learn a bit about some of these other collectibles.

Peter, in your case, I think that the more time that passes, the more likely you are to be okay should you ever sell anything. It is just as hard, if not harder, for the IRS to go back and definitively prove an actual FMV of some somewhat obscure antiques and items from long ago. And don't forget, since the appraiser valued the items low, when you do sell them, the result is bigger gains, resulting in more taxes due. Assuming you even report the sales that is. LOL As I previously mentioned, as long as valuations seem to be at least somewhat reasonable, the IRS is unlikely to argue too much. Plus, the IRS has a three-year statute of limitation on estate tax returns, from the date they were originally filed. So, if these appraisal issues you mentioned were from longer ago than that, I wouldn't go worrying about it at all anymore.

Bob, I know insurance appraisals are at the other end of the spectrum and tend to be inflated, but the disparity between the estate appraisal and previous insurance appraisals was, to say the least, remarkable. I found the whole thing offensive even if it saved some money. Yes, the SOL has passed so not worried about it from a liability standpoint.

[Fred]

Originally Posted by Rhotchkiss

No tax. At death, the basis becomes fair market value. If you then sell it for fair market value, no tax. But make sure you can prove that at death it was worth what you sold it for

So, this is kind of like stock. The price of the stock is set to the value when the person dies and the person that inherits it has to claim gains based on that amount. Is that right?

[swarmee]

Originally Posted by Fred

So, this is kind of like stock. The price of the stock is set to the value when the person dies and the person that inherits it has to claim gains based on that amount. Is that right?

This is correct. For any additional details, there are six walls of text above that clarify.

[insidethewrapper]

I'm sure most are sending their collections in to auction houses and no tax reporting is necessary. I really believe that is why there are so many current auctions ( daily ). Easy tax free money.

[Exhibitman]

Originally Posted by insidethewrapper

I'm sure most are sending their collections in to auction houses and no tax reporting is necessary. I really believe that is why there are so many current auctions ( daily ). Easy tax free money.

Not quite accurate. The AHs are not required (yet) to act as narcs and 1099 consignors (eBay is) BUT under existing law, the consignors are required to declare the income they receive from sales. If someone is receiving big consignment checks and declares nothing, and if that person is subsequently audited and the facts emerge, not only will there be a hefty penalty, there is a real chance of a criminal referral for tax evasion, and that is one of the most successful Federal prosecution categories. A person indicted for tax fraud is basically toast. The IRS reported a 91.2% conviction rate in 2019. Tax evasion isn't worth the risk.

[Hirbonzig]

Originally Posted by Exhibitman

Not quite accurate. The AHs are not required (yet) to act as narcs and 1099 consignors (eBay is) BUT under existing law, the consignors are required to declare the income they receive from sales. If someone is receiving big consignment checks and declares nothing, and if that person is subsequently audited and the facts emerge, not only will there be a hefty penalty, there is a real chance of a criminal referral for tax evasion, and that is one of the most successful Federal prosecution categories. A person indicted for tax fraud is basically toast. The IRS reported a 91.2% conviction rate in 2019. Tax evasion isn't worth the risk.

The IRS is about to hire up to 87,000 new agents, they’ll be poking their noses into a tax return near you. No time for playing games.

[Peter_Spaeth]

Originally Posted by Exhibitman

Not quite accurate. The AHs are not required (yet) to act as narcs and 1099 consignors (eBay is) BUT under existing law, the consignors are required to declare the income they receive from sales. If someone is receiving big consignment checks and declares nothing, and if that person is subsequently audited and the facts emerge, not only will there be a hefty penalty, there is a real chance of a criminal referral for tax evasion, and that is one of the most successful Federal prosecution categories. A person indicted for tax fraud is basically toast. The IRS reported a 91.2% conviction rate in 2019. Tax evasion isn't worth the risk.

Agree completely, the issue is your income, not what happens to get reported independently.