Q. Last year I inherited some money from my father's estate. I can't seem to find where it goes on my tax return. Can you please enlighten me?
A. Nothing but good news here. Inherited money is non-taxable to you. If the estate is really large, any tax owed is paid at the estate tax level by the executor of the estate. If funds are held for some time, they are usually put into a trust account, which by law (in many states) must be an interest bearing account. If this is the case, only the income generated by the trust account would be taxable to the beneficiary's and would be passed through to each beneficiary on a 1041-K1 form. Principal received is not taxed at the beneficiary level.