Tax on income received by an inherited account

[60Kmadness]

What is the name of your state? California

Hello,

I am a California resident.

My grandfather added my name to an investment account that was previously in his name only, though I did not know this until after he died. He gave me Joint tenancy with right of survivorship (JTWROS). I called the financial institution holding the account; they don't know when my grandfather added me, and may or may not be able to research that.

My grandfather died in 2006. In 2006 before he died, he sold some stocks in that account for a substantial profit. The account also continued to earn interest income through 2006 and for part of 2007 until I closed the account.

Am I responsible for taxes on the stock profit and/or interest income received by that account? Even before his death, or only after death, or only for the 2007 tax year and not 2006 tax year?

I suspect he made some estimated tax payments to cover these earnings, but I don't know how much. I'm not sure whether I should investigate (by asking the US Treasury or IRS about his estimated payments). The 2006 1099-INT and 1099-B forms indicate no Federal income tax withheld, and they use my grandfather's Social Security Number as the Tax Identification Number.

He left a last will, but it is not legally valid (has only one witness signature by a California notary public, but needs two witnesses in California). Weirder than that: all of his U.S. based assets besides this account had Designated Beneficiaries, so the last will would not have applied to any of his assets. He lived in Italy, so Italian law plus his Italian last will governed his personal property and other assets over there.

When I filed my 2006 federal and state tax returns, I ignored the 2006 1099-INT and 1099-B forms I received for this account. I did that based on advice I received from various sources, not neglect on my part, but I am now doubting that advice. I am wondering if I should file an amended 2006 tax return.

I have just received the 2007 1099-INT for this account.

What's worse is that the IRS might view my grandfather giving me JTWROS as a giant gift, because he did it while he was alive. If it's a gift, is the gift considered to be half or all of the account's value?

Thanks in advance for any guidance.

[tecate]

This is easier than you think.

Income actually received while he was alive is reportable on his return. Income actually received afterwards is reportable on yours.

There was no gift when he added your name to the account.

Have you cleared title to it yet?

[LdiJ]

Originally Posted by tecate

This is easier than you think.

Income actually received while he was alive is reportable on his return. Income actually received afterwards is reportable on yours.

There was no gift when he added your name to the account.

Have you cleared title to it yet?

He said that he closed the account, so he obviously gained title.

I agree that the income reported under his grandfather's social is not his problem, it was the problem of whoever was responsible for filing the grandfather's final tax return.