Tax treatment of foreign inheritance

I am a Us citizen, about to receive an inheritance from Switzerland, and need some guidance in handling the applicable US taxation. It took over a year from the date of death till the availability and release to me of the estate's funds.

In that interim, the holdings were in stocks, in the Swiss stock exchange, legally confined within the estate, and managed by a Swiss financial planner. I don't yet know all the financial details of that period, but know that estate expenses, including debts, Swiss taxes and fees have all been paid by now.

Now that the inheritance is available to me, the Swiss financial manager of the account gave me the choice of my receiving the stocks, or having them sold and sending me cash payment, converted into US dollars. I chose the latter, and that leads me to my questions.

Is the tax calculation here having to account for the change in value from date of death to date of sale of the stocks? Does it also have to account for the change in currency exchange rates (CHF to USD)between those dates?

Do I have to extract the history of stock transactions for that interim period, as well as all the details of dividends, fees and taxes, both for the stocks themselves and the estate related and death related fees and taxes? For example, debts left over from the estate would have been paid in that time period by sale of stock. This would have generated capital gain or loss. Is it my responsibility to resurrect all of those Swiss operations and report them as having US tax implications?

Am I making this more complicated than it has to be? Is it possible that, since the inheritance is made available to me now for the first time, and up to now has been managed totally within the Swiss system, that the clock for basis resets to the present time? And that the history of operations before the date of availability to me would not have tax relevance outside of Switzerland?

Thank you for any guidance here,

Stuart

Reply to
Stuart Lerner
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I don't deal with estates that much, but I believe the answers are: yes and yes.

Because the assets would have had a step up in basis on the date of death, it is likely that little gain would have been recognized on the liquidation of the assets to pay the estate's debts. You may need to make some assumptions. Taking a step back, the amount of income you should recognize is the difference between the net worth of the estate on the date of death (after estate taxes, if any), and the cash you receive.

Only a little.

No.

You should also be aware of Form 3520, Part IV on which you should report the inheritance. The penalty for failing to report it can be steep. There is also the possibility that you may need to file Form TD F 90-22.1. Again the penalties for failing to file this form can be large. I generally try to file this form when in doubt.

Reply to
jmail7

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