I inherited stock and sold it. Do I pay the capital gains at year end or do I need to send them the money now?

Question

I inherited stock and sold it. Do I pay the capital gains at year end or do I need to send them the money now?

Answer 1

You will pay capital gains tax only on the increase in value since the time you inherited the stock.  If this gain is large and your tax bracket is 25% or higher, causing your tax to be more than $1,000, you should send the tax in now as an estimated payment (Form 1040ES available at irs.gov).

Otherwise, settle when you do your taxes next year.  

Answer 2

Inherited stock is valued at its market value on the day you inherit same.  Any gain from the sale is classified as long term by the IRS, even if you sell it two days later.  This information goes on you tax return with a sch D when you file your taxes for 2008.  BTW in 08 the long term capital gain rate is zero if you are in the 15% bracket so happy days.