Capital gains on living trust property

[maryandwes]

My mother-in-law, who recently passed away, was trustee for her living trust, in which she had several 30 year US T-Bonds whose market value is now more than their face value (cost). The trust agreement names her two daughters as beneficiaries at 50% each to all property in the trust upon her death. Questions: 1) At what point are capital gain taxes assessed on the bonds; 2) who is responsible for paying them? 3) What is the cost basis for the bonds when the daughters sell them?

Thanks in advance,
maryandwes

P.S. The estate will fall under the $650,000 estate tax exemption.

 

[loku]

T-bonds inherited

The basis to the daughters is the value of the bonds on the date of death. This is the basis to use when the daughters sell the bonds. If they sell at a gain, there will be a capital gains tax on that gain.

If the bonds are now held in joint tenancy, and the daughters split the proceeds when the bonds are sold, the daughters will be responsible for the taxable income at that time. If each daughter owns some of the bonds, then each daughter would be responsible for the taxable gain on any bonds that she sells.

 

[ELNbluemax2]

Bond interest

I've been cashing in old (40 yr) savings bonds
for the past 15 years. Since when is the
interest a "capital gain"?? Was I stupid to have
paid tax on it as "regular income"??
Bewildered,
Wanda