accrued interest upon death


taxpayer holds a note, with accrued interest. Upon his death, what happens?
1. is the accrued interest included in his estate tax return?
2. is the accrued, yet unpaid interest, taxable to the cash basis taxpayer
in the year of death?
3. is the accrued interest, once paid, taxable to the heirs in the year(s)
paid?
what else should we be asking??
thanks.
Reply to
Wallace
Yes.
Yes, assuming it was taxable to begin with had the decedent received it.
Yes, assuming it was taxable to begin with had the decedent received it.
As it is IRD, you should be asking how much estate tax was it subjected to. The formula for computation is in IRC Section 691(c).
Reply to
D. Stussy
Thanks for the reply. How can 2 and 3 both be yes? If the decedent pays income tax on accrued yet unpaid interest at the time of his death, how can the heirs be subject to income tax on that exact same accrued interest, once paid to them?
Thanks for the cite re IRD.
Reply to
Wallace
Because it can be paid only once. Taxable amounts paid to the decedent before he dies are taxed to him, and paid to the heirs after he dies are taxed to them.
Reply to
D. Stussy
In article ,
^^^^^^^^^^^^^^^^^^^
Had the decedent received it, it would have been taxable; but since it's accrued and unpaid, nobody has yet received it.
And it was specified that it was not paid to the decedent, yet you said it was taxable to him.
That is, for the current set of questions, 3 gets "Yes" and 2 gets "No".
Seth
Reply to
Seth
yeah, I got that Seth. Sometimes yes means no, for some folks. Thanks for clarifying for any others finding this thread in the future.
Reply to
Wallace

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