Do I Have To Pay Capital Gains Tax For Inherited Stocks?

Welcome to another episode of the Tax Tuesday show. Host Toby Mathis, Esq., joins our regular guest Eliot Thomas, Esq., Manager of Tax Advisors at Anderson Business Advisors, to help answer your questions. We send a big thank you to all our people online answering your questions today - Patty, Dana, Dutch, Jared, Kurt, Ross, Tanya, and Troy.

On today’s episode, Eliot and Toby answer listener questions including inquiries about wash sales, what taxes apply to inherited stocks and real estate and the appreciation on inherited real estate, buying vehicles and how much is deductible and when, and setting up a brokerage account for a charity so it can receive donations of stock.

If you have a tax-related question for us, submit it to taxtuesday@andersonadvisors.

Highlights/Topics:

• If I have a company and want to loan money to another company using a promissory note, but I don’t want to charge them interest to do so, are there any tax impacts to my company? What is the recommended way to do this if so? – if it’s over $10,000 we got to charge interest to what it boils down to.
• Do you need to pay both capital gain tax and estate tax for inherited stocks? – Well, typically, if you inherit something, you're not going to pay any tax because of the approximately $12 million lifetime exclusion. If the gift or inheritance was over $12 million, in this case, you're going to receive stocks at stepped-up basis.
• Does real estate appreciation restart for 30 years after inheritance? Will real estate appreciation be re-depreciated? – I think what they’re trying to get to here is will you be able to depreciate again at 27 and a half years if it’s a long-term rental and yes, you will.
• I have an IRA owned single-member LLC that has invested in three syndications. Two of the three have losses over the last several years, which means it’s just kicking down passive losses, it doesn’t mean you lost money. One was sold last year and has profit, which is fairly common. Do you use a 990T to report both losses and profits? I don’t have to report profits or losses on my 1040, correct? - You don’t have to report it on your 1040 because it’s all in your retirement plan.
• Does the holding period for real estate start on the acquired date or the place in-service date? If bought in November 2020 and placed in service, placed in service March 2021, sold December 2021, is this long-term or short-term capital gains? - It’s going to be long-term. We’re going to go from the date where you closed, that’s where the holding period starts.
• When will we recoup the loss from a wash-sale if we’re no longer investing? - We wouldn’t run into a wash-sale in this instance because you sold the stock, you take your loss, it’s only if you buy back stock or a similar security that you would run in a foul of the wash rule within 30 days of it.
• When bonus depreciation goes away, what will be the process for cost segregation? How is it calculated and how much will be allowed to be deducted at what time or intervals? - we still can do cost segregation which is just an alternative, We’re still going to deduct it. It’s just how much is going to go into that 5-year property pile, the 7, the 10, 27.5.
• I have a 501(c)(3) that I started with Anderson—Kareem and his team are killing it by the way. It is ridiculous. The average wait time to get a nonprofit exemption certificate approved by the IRS is right around seven to nine months. We’ve been getting them, in some cases, in a matter of days. I was wondering if you were to donate appreciated stock to the charity, how to donate that to the charity properly and how do you record it as a personal donation, with appreciation? Does the charity need to start a brokerage account to receive this stock? – We certainly want to set up a brokerage account in the charity because when it receives that stock, they’ll have a place to put it.
• Should I set up a C-Corp LLC for land flipping business even if I just started, no deals yet? Should I start with the pass-through first then change to a C-Corp once I get more volume? – I would set that C-Corp so you can start building up losses and expenses in that C-Corp. When you flip it and you have that gain come in, you're automatically offsetting against that gain.
• When you buy a bigger van for the business, do you depreciate it or show it as an expense on the year you buy? Where do I find a list of business expenses that are 100% deductible and other expenses are not? – Well first of all for the van itself, how you're going to depreciate depends of course on the size if it’s over 6,000 pounds, etcetera. You probably got bonus depreciation a lot more of it. It may not be 100% anymore, but we probably solved the 80% going on.
• Is there a maximum number of LLCs that I can use for the IRC-280A deduction? I have two LLCs and I was wondering if I can take the deduction for both? Also, I have a nonprofit and was wondering if I could also have meetings for a nonprofit and the fee for using the space would be a donation from my LLC? - Well, 280A is a provision, it actually comes under a section that is dedicated to not letting you deduct personal expenses in your house particularly. – if you donate $10,000 to your nonprofit, is that the nonprofit can use it for nonprofit purposes.
• How do adjusted gross income AGI levels affect capital gains? Is it true that AGI below $76,000 will pay no capital gains? - Actually, AGI doesn’t have anything to do with this. It’s taxable income when we talk about the brackets for capital gains. The $76,000 is an old number. It’s approximately $83,000 I think this year.
• I’m opening a new IRA that will be managed by an IRA with custody TD Ameritrade, it will be funding a new IRA from existing IRAs, so it sounds like a rollover from the same custodian. I have a Wyoming LLC Anderson just set up. Should I open the new IRA in the name of the LLC and will it be a problem moving funds from a personal IRA that is titled with my name? - You can roll one over into the other, but what caught my attention was this Wyoming LLC- you can't just have that connected to a retirement plan. Your IRA needs to set up its own LLC that it owns, and then it can transfer funds into that LLC and go do investing in real estate or what have you. But you do not want to take some other outside LLC that we set up for you and connect that with your IRA, we’re not allowed to do that.
• Rapid-fire chat questions answered at the end of the show

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