The Jarretts want to know how much income tax they will owe on the inherited funds, and how will subsequent years’ earnings be taxed. When she died last year Aunt Ami bequeathed the following to Erykah:

-Municipal bond which have a FMV at her death of $50,000 and a basis to Aunt Ami of $40,000

-Preferred stocks that had a FMV of $48,000 at Ami’s death and a basis to her of $50,000

-A nonqualified, single premium tax deferred annuity, which Aunt Ami purchased for $10,000 twenty years ago and which had a FMV at her death of $40,000

Erykha is married and her federal income tax bracket is 22%

Erykah has already assumed ownership of the following asset:  Roth IRA with a current FMV of $100,000. She opened the Roth IRA in 2003 and had contributed $25,000 in regular contributions and converted $25,000 from a traditional IRA to the Roth IRA four years ago. Erykah has opened an Inherited Roth IRA at a local bank leaving the beneficiary line blank. The account is currently invested in a money market demand deposit account.