cap gains and losses on inherited investments

[flip]

I am a dual U.S. and Canadian citizen who currently resides in Canada. I file taxes each year in both countries. I inherited a mutual fund investment from a U.S. estate recently. It was purchased ten years ago for approximately $5 per share US$. The cost per share of the fund on the date of death was $16.10 US$. My understanding is that $16.10 will now be my adjusted cost for this fund if I decide to sell it. Suppose I sell the fund 7 months after the date of death for $17.10, will this one dollar capital gain be treated as a short term or long term gain on my U.S. tax return?
Similarly, I inherited another investment with a date of death value of $23.30. This investment has declined approximately two dollars during the intervening 7 months. Can I claim this two dollar loss against capital gains that are available in my current portfolio on both my Canadian and U.S. tax returns?

[nelsona]

Generally, when you inherit something, it is considered 'sold' to you on that date, and thus any gain loss after that time is yours to report. As to US long/short gain, I'm not sure. For canada there is no such thing as short or long.

[flip]

Thanks for the reply nelsona. In case others are interested, after much searching, the only info I have been able to find relevant to the U.S. taxation of the inherited shares is the following quote from an article in a financial magazine. After describing how to determine the cost basis of the inherited shares, the author states: “OK, now you know the basis of your inherited shares, or at least how to figure it out. If your sale will result in a profit, it automatically qualifies for the 15% maximum rate on long-term capital gains, regardless of how long the inherited shares were actually owned by the decedent or you. If you sell at a loss, it will be a long-term capital loss. In filling out Schedule D, enter “inheritedâ€￾ in the space for the acquisition date of the shares. Don’t enter the date you actually received them, because that could make it look like your holding period was too short to qualify for long-term capital gain treatment.

If this is an accurate account, it seems unusually generous on the part of the government.

Flip

[nelsona]

This is correct, and is within the spirit of the long/short gain philosophy, which is to penalize 'traders' and reward long-term investment.

You as the inheritor are not 'flipping' investments when you dispose of inherited shares, so should not be penalized