Receiving inherited stock could potentially be a nice surprise for you. However, unless you understand the financial implications that come with it, you may not make the right decisions associated with it. Here are a few things to consider about inherited stock.

Inherited Stock

If you inherit shares of stock, you are given a distinct advantage over those that receive stock as a gift. When you receive stock as a gift, you will be required to track down the original purchase price of the stocks. This can be difficult and sometimes impossible. The difference between the original price of the stock and what you sell it for will determine how much you pay in taxes. However, if you inherit a stock, you can change the cost basis of the stock to the value of the stock on the original purchaser's death. This allows you to benefit substantially when it comes to paying taxes on this type of stock.

Investment Considerations

When you receive inherited stock, you will have to make a decision about whether to keep the stock or cash it in. By selling the stock, you can potentially make a nice profit without incurring much tax liability. However, if you hang onto the stock and it increases in price, you will have to pay more in taxes. Therefore, it may be to your advantage to cash out the stock.

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