Due to death of a relative (death during the summer of 2021) I have inherited a non-retirement brokerage account, consisting of various common stocks and mutual fund shares, and also some settled cash that sits in a money market fund. I have waited more than a year, however, to contact the brokerage and establish my own account with them, and to receive the assets under my name. (It is now fall of 2022, but as of last week the assets are now mine.)

I have been reading IRS publications p550 and p551, wishing to take the correct steps with respect to these assets. I have also been reading posts here on personal finance & money under the tag . (For the benefit of other newbies, I paste below some of the more helpful snippets I came across.)

From IRS Pub. p551 I understand that I have a "Basis Other Than Cost", in particular "The Fair Market Value (FMV) of the property at the date of the individual's death." I am not, at the moment, in a hurry to liquidate these shares or to change anything. My question has to do with taxes owed on distributions in the 12+ months since the date of death. Clearly, I have no 1099-DIV form at all, so:

Do I need to go back and figure out the distributions made (dividends and capital gains) prior to 01/01/2022 (but after my relative's death), and file an update/correction to my 2021 Federal Income Tax Return, and possibly send the IRS some more money?

Appendix (selections from my reading):

"Regardless of whether you take the distributions as cash or re-invest in the fund, that money is taxable income to you." (https://money.stackexchange.com/a/41524)

"the mutual fund is also a collection of stocks, and the fund managers buy and sell stocks inside the fund. When they sell a stock that has increased in value, they realize a capital gain. This money that they gain is then distributed to the fund owners in a similar way to dividends. It is referred to as a capital gain distribution. You'll most likely receive this capital gain distribution along with your dividend. In the U.S., at tax time, the capital gain distribution will be called out on your 1099-DIV form. The short-term distributions will be included with the dividends on the form, and you will pay ordinary income tax on those. The long-term gains, however, will be subject to the lower capital gains tax rate." (https://money.stackexchange.com/a/88308)

"If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year." (https://money.stackexchange.com/a/13511)

"A dividend represents a portion of a company’s earnings and the amount that you receive depends on the payout rate and the number of shares that you own. A capital gain is the profit from purchasing a security at one price and selling it at a higher price. An area of confusion for some is when a mutual fund makes a capital gains distributions at the end of the year. Some think of it as a dividend but it is not. It is the result the fund's realized capital gains from trading and these gains must be passed along to its shareholders." (https://money.stackexchange.com/a/141183)

1 Answer 1


Do I need to go back and figure out the distributions made (dividends and capital gains) prior to 01/01/2022 (but after my relative's death), and file an update/correction to my 2021 Federal Income Tax Return, and possibly send the IRS some more money?

The executor of the estate should do it, filing the estate income tax return (form 1041), and may be pay taxes on the income. Since in 2021 it seems to not have been distributed to you, the estate may end up paying taxes on that income. For 2022 it was distributed to you, so it would be reported as such and you'll get a K-1 through which it will flow onto your tax return.

Income from the date that the shares were delivered to you is yours.

You should talk to the estate executor and their tax person.

  • The OP is a little unclear about when the estate transferred the assets to them, or the estate was unclear about how to do it properly. The estate may feel it transferred the account last summer, and the OP's delay in contacting the brokerage is on them.
    – Jon Custer
    Oct 27, 2022 at 13:23
  • I am actually not sure what you mean @JonCuster. In the will I was a designated beneficiary of the account, at a certain percentage. I contacted the brokerage (last week), and they were already aware of me. I don't think the estate ever transfered any asset to me.
    – 311411
    Oct 27, 2022 at 14:33
  • 1
    Well, yes, the estate (at the will's directions, or the beneficiaries on the account) transferred those assets to you. The question is what date that transfer occurred according to the brokerage. The brokerage needed to be informed of the death of the owner, and the disposition of the assets, and then transfers it into your name. You are then responsible from that date forward on any distributions. Of course, they should also have been informed, by the executor or you, of your address so statements and tax forms would reach you. You may need to refile last year's taxes.
    – Jon Custer
    Oct 27, 2022 at 14:45
  • I see. Thanks for explaining that in detail @JonCuster
    – 311411
    Oct 27, 2022 at 15:03
  • I just spoke with a brokerage representative, and was assured that from the firm's point of view, the assets were transferred to me as of last week. So it seems I need not worry about altering my 2021 (last year's) Federal Tax report. Thanks to both of you @JonCuster and littleadv
    – 311411
    Oct 28, 2022 at 20:12

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