Catherine Posted February 29 Report Share Posted February 29 This is a fun one! Deceased taxpayer has a couple thousand dollars' payment from a state for an unclaimed property payment. Per the state document, most of it is "stock proceeds" (which I believe means the state sold the stock and was just holding cash). From the tp's residence and knowing what I do about the client (hoping to get more info from executor tonight), my guess is that the claim was from the estate of tp's parent some years ago - but the whole process took long enough that the tp's estate got the funds. Property details listed by the state just give an ID # they assigned. Ordinary income for the lot of it? Capital gain income for the "stock proceeds" and ordinary for anything else? Other? What questions should I ask the executor aside from "what, if anything, do you know about this mess?" Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 29 Report Share Posted February 29 3 minutes ago, Catherine said: What questions should I ask the executor @Catherine Q1 - Do you have my retainer check? Q2 - can you give me a call when you have my retainer check? Seriously, I don't know where to start. Any paperwork at all? My first thought is not income, because if I lost something and someone returns it to me, I don't have a taxable event unless I took a deduction at some point for the loss. The state is saying "Hey, this belongs to you, we found it and are giving it to you". Not a gift, property that the state says you already own. Tom Longview, TX 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 29 Author Report Share Posted February 29 1 minute ago, BulldogTom said: My first thought is not income Depends on the character of the property. If it was a bank savings account, I'd agree. But wages are still wages, and includable as income if not claimed in the year earned (which might have been done). Stock proceeds sounds capital, with basis lost to the mists of time. Dividends is income. Quote Link to comment Share on other sites More sharing options...
Medlin Software, Dennis Posted February 29 Report Share Posted February 29 Escheat is never clean. I am trying to clean up some from a few years back. (Royalties from oil/gas via tribal rights.) The one thing I have learned is planning is poor, and those who may get left with the clean up need to be proactive, in advance, and those who do not have an estate plan are doing a HUGE disservice to their heirs. Likely just an asset with a balance, more money for the bank account, is the most reasonable, unless this is the miracle case where there are documents (not likely, hence the escheat). 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 29 Report Share Posted February 29 7 minutes ago, Catherine said: Depends on the character of the property. If it was a bank savings account, I'd agree. But wages are still wages, and includable as income if not claimed in the year earned (which might have been done). Stock proceeds sounds capital, with basis lost to the mists of time. Dividends is income. But if you don't know what it is, why would you assume it is of that character at the detriment of your client? Not saying you are wrong, but the state gave the estate cash, correct? Cash if inherited is tax free. Unless the IRS knows or has reason to know that there is some prior transaction where those funds escaped taxation, I think a distribution of lost cash is the base case unless your investigation turns up something to the contrary. Tom Longview, TX Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 29 Author Report Share Posted February 29 If my client inherited cash, yes, that's not taxable. If he inherited a stock that paid a dividend, the dividend would be taxable. If the claim says "dividend" then would not that be taxable? I suppose a case could be made that the deceased parent's last return should be amended to claim that income... but that would be a closed year anyway. What makes it so convoluted is that the original claim was made for someone deceased by someone else who is also now deceased. With no paperwork but gobbledygook from a state far away. I'll see what the executor has to say tonight. If there is no documentation anywhere, we'll call it assets. Which then probably means the state estate tax return needs to be amended... Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 29 Report Share Posted February 29 2 hours ago, BulldogTom said: Q1 - Do you have my retainer check? Q2 - can you give me a call when you have my retainer check? Gotta remember to ask those two questions more often! Although, I've started using the term Deposit to make it very clear that I will very likely ask for more before we're done. 2 Quote Link to comment Share on other sites More sharing options...
Medlin Software, Dennis Posted February 29 Report Share Posted February 29 And consider has the check cleared! 3 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 29 Author Report Share Posted February 29 Just finished talking to the executor. It was all from the deceased tp's deceased cousin who had no other heirs. Not items of income, but rather inheritance. And no estate tax implications because the total estate was under the estate limits by far more than the piddling couple thousand of the check. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 29 Author Report Share Posted February 29 Many thanks to all for their comments and thoughts. Quote Link to comment Share on other sites More sharing options...
Sara EA Posted March 1 Report Share Posted March 1 If the state is classifying the money as stock proceeds, to me that means the state sold the stock. Now they are passing the proceeds to your client. He must report on Sch D. If he knows the cousin's date of death, just look up the value on that date for basis. 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 2 Author Report Share Posted March 2 23 hours ago, Sara EA said: the state is classifying the money as stock proceeds But there is no indication of what stock it was. Just, "stock." Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted March 2 Report Share Posted March 2 On 2/29/2024 at 10:36 AM, Catherine said: couple thousand dollars' payment from a state for an unclaimed property payment. Per the state document, most of it is "stock proceeds" Does the estate have any other income to report? A couple thousand dollars of stock proceeds could easily be offset by attorney and PR fees; above any unknown basis. Quote Link to comment Share on other sites More sharing options...
Slippery Pencil Posted March 2 Report Share Posted March 2 On 2/29/2024 at 1:47 PM, Catherine said: Depends on the character of the property. If it was a bank savings account, I'd agree. But wages are still wages, and includable as income if not claimed in the year earned (which might have been done). Stock proceeds sounds capital, with basis lost to the mists of time. Dividends is income. This is a bank savings account. If stock was sold, it was sold years ago and the state has been holding the cash proceeds in a bank account. Wages would be reported on a W2 in the year paid and taxable that year. Dividends, interest, and stock proceeds would be reported on a 1099 in the year paid and be taxable in that year. Whatever transaction that cash came from, it happened years ago. This is not taxable in 2023. 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 2 Author Report Share Posted March 2 16 hours ago, DANRVAN said: Does the estate have any other income to report? Carry-forward capital losses will offset this amount almost completely, possibly completely-completely. Quote Link to comment Share on other sites More sharing options...
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