Neither the federal government nor the state of Virginia have an inheritance tax paid by the inheritor. Rather, there is an estate tax, paid by the estate of the deceased. (There is a federal exclusion amount of up to $5 million for 2011 that may apply.)

You will, however, have to pay income tax on any capital gains from the sale of the holdings. Your cost basis would be whatever your parents paid for it, and you would be taxed on the profits. This income would be reported on a Schedule D and your 1040 for the year in which the holdings are sold. Assuming that the combined holding period (the length of time your parents owned the securities added to the time you owned them before the sale) is greater than one year, the gains should be taxed at a maximum of 15%.

Your basis in these inherited items is *not* what your parents paid for them.

Well, not unless your parents died in 2010, left a large estate, and the Executor made the election to be taxed under the 2010 law. And even then, you want to talk to an accountant about it.

For most people, the basis of inherited property steps up to its value on the date it was inherited. So, if your parents bought a stock at $10/share, but it was valued at $17/share on the date of death, your basis would be the $17/share.

Any profit or loss would be calculated from that basis; it is possible to have a loss on inherited stocks and bonds. (Inherited real estate might have a different consideration.) Inherited property is considered to be held "long term" for taxes, you would use "Inherited" as the Date Acquired.