Do you ever have to pay tax on inheritance money from a family member's death?

My father-in-law died in 2006 and we were given a portion of his inheritance (along with 3 other brothers) and I know the Executor of the will paid estate taxes. I have read that if you inherit $$ from a family member that it is not taxable, but if it is from a friend or aquaintance or a distant relative that a portion of it may be taxable. What if there was an investment distribution that was paid out and you get a 1099 form for it----how does that work as far as showing it was an inheritance or are you required to pay taxes on that portion?

The check we got from the estate was separate from the check we received from the investment company after his investments were liquidated.

If you got a 1099 form for it I am pretty sure you have to claim it as income, in one way or another. I would recommend talking with a tax preparer, it may cost you about $100.00 to have your taxes prepared, but they guarantee their work, and they have been trained in this stuff.

Don't you know everything in the US is TAXED! Expecially if you get a 1099 for it.

First the inheritance tax world. Some states - not many - have inheritance taxes based upon relationships as you mentioned. That tax - with any Federal Estate Tax - is paid from the estate before you get it. Now the income tax world. Inheritances are basically income tax free - except for an IRA when you get a 1099-R - and you may need a Form 1041 Schedule K-1 from the executor for your share of post death estate income.

all of the questions posed by you are all very important and valid. the person with whom they should be addressed to is the executor or personal representative of the decendent's estate as they would have all the pertinent and CORRECT answers to each and every one of your questions.

No - the recipient of the inheritance (even if not related) does not pay taxes on it (other rules may apply to inheriting 401ks). The estate pays the tax.