11.4 Gifts and Inheritances
Gifts and inheritances you receive are not taxable. However, distributions taken from an inherited traditional IRA (8.14), and distributions from inherited qualified plan accounts such as 401(k) and profit-sharing plan accounts (7.14), are taxable, except for amounts attributable to nondeductible contributions made by the deceased account owner.
Income earned from gift or inherited property after you receive it is taxable.
Describing a payment as a gift or inheritance will not necessarily shield it from tax if it is, in fact, a payment for your services. Treatment of gifts to employees is covered in Chapter 2 (2.4).
A sale of an expected inheritance from a living person is taxable as ordinary income.
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